Targeting $1.7B in unredeemed card value

Coinstar is testing Alula, a kiosk that gives shoppers an easy way to redeem their gift cards for cash.

Aiming to cash in on the proliferation of gift cards, Coinstar is testing Alula, a kiosk that gives shoppers an easy way to redeem their gift cards for cash. It has placed kiosks at 21 Giant Eagle stores in central Ohio. Coinstar makes their money from the difference between what it pays redeemers and what it gets for card resale in the secondary market. Giant Eagle, and presumably any other retailers that follow, benefit from shopping done by incremental store visitors—and possibly a placement fee for each kiosk plus a percentage of the volume redeemed. No doubt, This concept could be a moneymaker for supermarkets in this economy, where many people have greater need for food on the table than discretionary purchases. According to new CEB TowerGroup research, 2012 annual sales of gift cards in the United States exceed $110 billion, and spillage (the unspent portion) is $1.7 billion. The spillage figure—the target of Alula and websites already in this space such as plasticjungle.com, cardpool.com and giftcardrescue.com—is actually down 20% from a year earlier because 30% of people who receive gift cards spend $25 more than the value of the card, CEB TowerGroup reports. Alula offers redeemers between 60% and 85% of a card’s face value, issued in a voucher cashable at the supermarket check lane or customer service desk. Let’s see that means a shopper loses somewhere between 40 and 15% of the card value. This is a cool electronic version of, say, check-cashing or going to a pawn broker, but it is vulnerable. plasticjungle.com and cardpool.com pay up to 92% of a card’s value, and giftcardrescue.com pays up to 90%. All offer free shipping. The Alula pay rates leave room for Kroger, Safeway’s Blackhawk, or other established gift-card programs to undercut this kiosk plan, pay customers more generously, and generate additional volume. Retailers could also build more goodwill by offering gift-card redeemers sharper prices on store brands.