Gaming the gift card system

Any given week Target’s circular is filled with various offers of free gift cards designed to incent shoppers to purchase key items. Some of the offers can be quite generous, as was the case this week with a $50 gift card available to those who purchase an Xbox 360 bundle or a $20 gift card with the purchase of KitchenAid appliances priced at $99.99. The most common gift card denomination is $5, and it tends to be offered on multiple items from the same manufacturer or brand family such as two Gillette razors or three Dial products.

Aside from enticing shoppers to purchase specific items the other benefit of the promotional effort is to generate repeat shopper traffic, as the gift cards are given to shoppers after they complete their transaction. However, savvy shoppers looking to redeem the cards immediately can simply break up their purchases into multiple transactions. By paying for the featured items first, the gift card the shoppers receives, say $50 for the Xbox, can then be immediately applied to the subsequent transaction. Shoppers who take this approach defeat one element of the promotional tactic because they avoid returning to the store to redeem the gift card.

Toys“R”Us has developed a unique approach to counter this shopper strategy by delaying activation of the gift cards it offers. The toy retailer’s 80-page holiday toy book that hit the street over the weekend features free $10 gift cards for purchases of $75 or more or for purchases of three Duracell items costing more than $13.99 or AT&T or T-Mobile phones coasting more than $50. The catch is the gift cards don’t become active until six hours after the transaction is completed. Shoppers used to gaming the gift card system at Target, if it can be called that, are likely to be annoyed if they try the same thing at Toys“R”Us.