Update 1 (5/20 12:26 PST): SaveYa has dropped their Target GC buy price down to 89.5%, ABCGiftCards is still at 90%, but it probably won’t last.
Update 2 (5/20 12:30 PST): ABCGiftCards has dropped their buy price to 85%, always check the actually website before trusting Gift Card Granny
Target gift cards have popped up a few different times recently and the news seems to go along with a recent trend I’ve been noticing. If you buy and sell a lot of gift cards like myself, you probably have a pretty good handle on what most of the cards sell for. Big grocery stores and gas stations are around 90%, electronics and hardware stores are in the 80s, while most clothing stores and restaurants fall in the mid to high 70s. There are exceptions to this generalization, but for the most part it holds true. It all makes sense because the higher valued gift cards can be used for life’s essentials like groceries and gas, while the lower valued ones are for more luxury items that have a limited audience of people looking for them. Anyway, I want to talk about Target specifically because it’s trending into some new territory in the gift card reselling world and I don’t know what’s going to happen next.
Why Target Is Special
As I mentioned above, the value of a gift card generally correlates with how much of the population has a use for the card and what kind of items are purchasable with the card. For Target, both of these things hit the correct end of the value spectrum. Not only does Target sell life’s necessities like groceries, they also sell all kinds of general merchandise from electronics to furniture, AND they are also located all over the place! That means there exists a huge audience of people that would benefit from buying Target gift cards at a discount. As you would expect, this means the gift card exchanges pay a premium to get the cards (~90%), and are able to sell them at fairly high rates (~95%). This works fine until something upsets the balance in the gift card world and I think that very thing may have happened recently.
Extra Note: Target also offers a debit, credit, and prepaid version of their “Redcard” which I’m sure a lot of you are familiar with. These cards allow you to get 5% off all of the time! For that reason, I’m constantly baffled that people go out of their way to buy Target gift cards at less than a 5% discount because they would probably be better served to simply get a Redcard instead. This is another thing that makes Target unique versus other brands.
What Changed?
The biggest thing that changed recently is the appearance of Target gift cards on ebay. Hat tip to Doctor of Credit for first bringing my attention to it. Not only does ebay always offer 2% back via ebay bucks, you can always get at least 1% back from shopping portals, AND with a little creativity, you can also get 5x back on a credit card by buying ebay gift cards from bonus category locations like grocery and office supply stores! If you’re following along, that means at any point during the year, you can get 8% or MORE back from ebay purchases. Not to mention ebay frequently sells discount ebay gift cards and increases the ebay bucks rebate up to 10% back! They are physical cards that come with a shipping cost, but if you buy in bulk that reduces to ~1% of the purchase price, so my point still stands. That means Target gift cards can now be purchased at 93% or less all of the time, and will be frequently available for purchase at well under the 90% they currently resell for.
Not only that, but Card Cash recently dropped their sell price on Target gift cards to 91.5% and they still have a lot of inventory that hasn’t been purchased.
You don’t have to be an expert gift card reseller to see the potential arbitrage opportunities here, but I don’t think I’ll be buying them up until this plays out a bit longer. Let me explain why.
Anything Can Happen At This Point
Much like trying to predict the price of a particular stock, I keep going back and forth on what’s going to happen. One part of me says there is no possible way the gift card exchanges can keep buying cards at the 90% mark because it’s too easy to get them below that price and the market will flood. On the other hand, Target gift cards are gold to people that shop there regularly and they will happily scoop them up at a 5-6% discount. I think the true battle here comes down to marketing of gift card exchanges versus people performing gift card arbitrage. Those of us looking to buy low and sell at 90% will be able to do so rapidly and in very large numbers for Target via ebay. The gift card exchanges should easily be able to move a ton of volume though if they can somehow inform the general public that Target gift cards can be bought at 6% off. I pick 6% as the sweet spot because of the availability of Redcards that I mentioned earlier. Right now, gift card resellers are pushing much harder though and the volume of Target available is going up along with the discount % offered. Gift Card Granny has a couple useful charts that illustrate this quite well:
If this continues, we should see the resell value of Target gift cards plummet really soon, especially if more people jump into gift card reselling. As I mentioned before though, I can picture a world where 90% buy prices remain. Despite the recent deals on Target gift cards, the buy prices haven’t budged with any of the major exchanges yet. I think the reason for this is the true value of Target money to the general consumer, it’s just worth that much for as long as Target sells things that everybody needs.
Here’s a Crazy Idea
This would work especially well for a newer exchange trying to gain brand recognition, but the idea can be applied to just about any exchange. Gift card exchanges work by finding a nice balance between obtaining gift cards at low prices and selling them to consumers at slightly higher prices. The business model works only as long as the two sides of the equation balance out, but what if you could crank up both sides of the equation to 11?
- Step 1: Start buying Target gift cards at 91%
- This is the exact opposite of what many people expect to happen, so anyone who’s ever considered reselling gift cards will hop on the bandwagon and you should be able to buy HUGE quantities.
- Step 2: Accumulate Target gift cards until you have a comfortably large amount (let’s say millions)
- Step 3: Launch a huge ad campaign for your website with the focus of the campaign being on the availability of Target gift cards at 6% off.
- If the general population catches wind of this, everyone and their mother will visit the website to buy discount Target cards because saving 6% on groceries would be HUGE for most people.
- Not only will the brand new customers buy Target cards to start unloading the huge amount you purchased to start with, but they’ll also realize they can buy a ton of other discounted gift cards and sales across the website will skyrocket.
- Step 4: Count your money
- Don’t forget to send some my way for giving you the idea 😉
Like I said, crazy idea, but the curiosity in me wants to see someone try it. SaveYa will start accumulating volume rapidly if they keep their buy rate at 90.5%. You could say Card Cash tried to get some customers by offering 8.5% off on Target cards, but if this is the first time you’re hearing about it, then I’m not sure you could call the campaign a success. Sending out emails to people that have already discovered your website probably isn’t going to bring in many more customers.
Closing Thoughts
I’m torn on Target gift cards and couldn’t tell you what’s going to happen to the market for them. Inventory and average discount have been climbing, so something has to give. If I had to bet, I’d say the buy prices are going to fall in the short term, but it could also give on the other side of the equation if the availability of discount Target gift cards “goes viral” and a new customer base starts buying up the cheap cards from the exchanges. You and I know how to turn a deal on ebay with credit cards and shopping portals, but the average person just isn’t going to do it, so the potential is there.
Just like I don’t gamble with my investments, I don’t plan on gambling with Target gift card arbitrage in the near future. I’m sure some of you will come out ahead with a nice profit, but others will be stuck with a large amount of Target gift cards and no way to unload them without taking a loss. The real winner here is someone who knows how to work ebay deals and shops a lot at Target. 10% off a huge part of the average family’s budget? That’s free money!
What do you think will happen?
I should have mentioned this in the article, but here’s a bonus for everyone who made it to the comments. I’ve read that it’s currently possible to buy things at target.com with gift cards AND still get the 5% back via a linked Redcard. We’re now up to savings of 15%+ for everything they sell online, but I don’t think there’s any way to make this work in the store. I also wouldn’t be surprised if they fixed this little “feature” soon given their new gift card campaign, so enjoy it while it’s there.
Spoken like a true capitalist, Noah, and I like it a lot. Supply and demand is, has been, and always will be the single most determining factor of how prices of a product will develop. The idea you’ve laid out would moist likely work for all the reselling sites but I see one problem: they might not want to jeopardize their margins just to get more customers. It seems to be a fickle bitch with those guys. They’re always complaining about 2 things: high expenses and low turnover. Well, the way I see it both can be remedied by shaving of a number X of bps from their profit margins. Try it and you’ll see what happens. In this game and the volume we’re talking I dare to say even half a % makes a huge difference.
Nice post. I was also wondering how the market would change with this addition. It’s a somewhat complex game, especially when you factor in ship time when buying physical cards online. It’s very possible that this could have a permanent effect on the GC market. In other instances where there is a deal that saturates the market, you could try to wait it out until the market normalizes and then resell.
As of this morning, Cardcash is down to 16 Target GCs, of which 15 are physical.
They had 600 yesterday and 1000+ the day before.
I see 75 right now, but a lot are very large (>$500) and your point is still correct. They have been successful in moving their inventory, but at the low margin they probably got, I’m not sure it worked as the “loss leader” they hoped it would if most of them went to resellers. At the speed it’s possible to flip digital cards, I’m sure a lot of people ended up taking that ~1% margin and didn’t actually remove them from the overall discount gift card marketplace (but rather just shifted them around). It will be interesting to see how this plays out.
If you haven’t already seen the news on why Target G/C dropped in value, they shot themselves in the foot in an attempt to stop the retail arbitrage crowd. Lots of folks were stuck with G/C inventory that suddenly became less valuable in the marketplace. I saw cards for sale at 11% discounts!