I wonder what the average gift certificate/gift card utilization rate is? I'm sure it varies by store, but I bet that gift certificates are pretty profitable. I keep pretty good track of things, and I know that I've got a fistful of gift certificates that I haven't used. Does anyone have any hard data? I bet that the percentage of gift certificate value used is less than 80%, which makes the sale of such certificates very profitable. (And even moreso, since the value of the certificates don't adjust for inflation.)
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When I worked for the restaurant industry there was an instant write-off of 25% of gift cert. income knowing they would not be redeemed. Usually the trend was closer to 35% especially for holiday g.c. sales.
"the value of the certificates doesn't adjust for inflation"
Well, right, but neither does the value of a 20-dollar bill... If you see the gift certificate as representing a certain amount of dollars rather than a certain amount of value, then it's all right that it's not adjusted with inflation.
I've always thought of gift certificates as valuable because they force you to spend at least that much money in the store, otherwise you're wasting the certificate. (If I get a twenty-dollar certificate and walk into a store, I'm not spending any less than $20). Since people don't usually get me gift certificates and (when they do) usually spend them right away, it had never occurred to me that such "wasting" might actually happen pretty often and account for some good fraction of the profits generated by gift certificates. Interesting.
About 10% won't get used as you can learn here http://seattlepi.nwsource.com/business/260931_giftcards27.html. I've seen similar numbers elsewhere. I was actually surprised to see the utilization so high.