Expiry dates gift vouchers/credit notes

Today, gift cards are commonly used by all forms of enterprise, from small businesses to large corporate entities.

The expiry dates caused some confusion yesterday with one of our clients. After talking to several of his customers, he decided to scrap card expiry dates. I have my doubts about whether this is wise. Removing expiry dates implies that this liability will remain till when? It raises questions of whose responsible for that debt if the business is closed or sold? It will increase the administrative costs indefinitely.
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You sold $20,000 worth of gift cards over the past year. About 10% to 19% of gift cards are unredeemed at any given time. So somewhere $2,000 to $3,000 is outstanding. If you sell the business, you must pay the new owner the liability owing on those cards. What hurts is that much of that liability will never be redeemed by your customers. If you close the business down, the situation is unclear. 

If you do this for many years, the problem gets worse as about 3% to 6% of gift cards are never redeemed. So every year, this debt grows by $600 to $1,200, do this for ten years, and you have a $6,000 to $12,000 obligation. 

Our understanding of the law and we are not lawyers and not qualified to give legal advice is that you must provide at least an expiry period of three years from the date you sold it. The expiry details must be displayed on the gift card (see red arrow above)

There are some exceptions, and this rule does not apply to some types of gift cards, click here for more details. What caused the initial problem here is that our client issued it out of his customer loyalty program, in which case we believe this does not apply at all. 

However, check first before doing anything about this. If you get a legal opinion please let me know.

According to research, a typical person who has a gift card will buy nearly 38% higher than the value on the gift card. It is pretty hard to get the exact amount on the gift card, so most people spend more. Plus, since items can be specified, these people tend to buy things with good margins.

Even better for the retailer on a gift card sale is that users are rarely existing customers; they are new customers.

Thus, what many retailers do is offer some discounts for their gift cards to get more sales.

I have a better idea. Instead of selling $100 at a 2.5% discount, sell two gift cards. One for the proposed beneficiary at $100 and the other for the gift card buyer for $2.50 as a thank you.

Here, you might get two customers, the beneficiary of the gift card and the buyer.

You will find here that only are gift cards a great tool for spreading the word about your business. They also bring two customers through the door with increased basket size with two separate sales transactions. 

Next month the new laws on gift cards come into effect in Australia. The new laws are I think similar to what is already in place in South Australia and NSW. So our software AS IS should be alright although some of the settings may need changing for people in other states. 

All your existing gift cards, that are out there are okay as they are on the old system but from Nov 1, 2020 the main point, I think that retailers should be aware of is that Australian gift cards *that are paid for* must have a minimum three-year expiry date from date of purchase.

This date must be prominently displayed on the gift card itself. 

For more details please click here.

Rather then sending out help sheets, we will be sending out an automatic update to our software.