New gift card laws in New Jersey makes the offering less appealing to retailers
Gift cards have been a huge boon for the retail industry over the past few years. According to the National Retail Federation, approximately eight in 10 Americans gave gift cards as presents over the 2011 holiday season, with shoppers spending $155.43 on the gift type. Overall, more than $27.8 billion was estimated to be spent on gift cards last year, hitting pre-recession levels.
Gift cards are particularly popular among retailers for two reasons. First, few people spend the exact amount on their gift cards and frequently will spend more than the allotted amount. Secondly, if shoppers don't spend the specified value, that's essentially free money for the retailer.
However, retailers in New Jersey are being forced to contend with new legislation that is discouraging many from even offering gift cards in the state. As New Jersey 101.5 notes, the bill states that after two years, instead of leftover gift card balances going to the company, the state will collect the remaining value. This means retailers need to go through a quagmire of red tape to collect this money, which adds several administrative costs that wouldn't make the process worth it.
Retailers would also need to begin collecting shoppers' ZIP code information to keep track of which buyers are from New Jersey to help the state collect the money, another administrative obstacle course that makes the sales of such products more difficult.
While the bill is two years old, the state just recently began acting on it, collecting millions of dollars in balances in 2011 alone. Rather than deal with the issue, many retail brands and third-party gift card networks are simply pulling their products out of local stores. American Express has stopped selling gift cards in the state, and many retailers are considering doing away with their own gift card programs.
"We're fearful that this could be just the tip of the iceberg," John Holub, president of the New Jersey Retail Merchants Association, told the news source. "That many more retailers and gift card issuers could also decide that they can no longer operate in the state."
Holub believes the widespread abandonment of gift cards could have a negative impact on the retail sector – no longer will consumers head into store with a gift card and spend a few extra dollars as well.
