For the fourth year, Culture Clash, a Toledo, Ohio store that sells CDs and records, is accepting gift cards of other retailers on a dollar-for-dollar basis, according to the Toledo Blade. At the same time, Toledo's Appliance Center has begun accepting gift cards, at 50 percent of their value, from Circuit City, which filed for Chapter 11 bankruptcy in November.
Both chains believe the move will help them win new customers.
"We feel it's a good way to initiate the public into buying local," said Pat O'Connor, Culture Clash owner. While acceptance has some limits, Mr. O'Connor told the newspaper that about 40 customers have brought in cards this holiday season to exchange from Best Buy, Target and Barnes & Noble. The exchangers are usually looking to buy vinyl records or music those chains do not carry, he added.
Mr. O'Conner said he redeems the cards himself and sometimes "gets stuck with them."
At Appliance Center, Jim Grzywinski, general manager, told the Toledo Blade that about a dozen customers have brought in Circuit City gift cards so far despite getting only half their value.
"It's started to work out. Since they've filed Chapter 11, a lot of people have told us if they don't use 'em they know they'll be able to get something from us," said Mr. Grzywinski. "Everybody's looking for new business, so by doing this people who maybe don't shop with us normally will give us a chance."
Circuit City, which has announced plans to close 155 stores nationwide, has said it intends to continue honoring its gift cards. But Kathy Grannis, a spokesperson for the National Retail Federation, said customers are worried that retailers landing in bankruptcy court will not honor gift card commitments. On Monday, KB Toys, which announced plans to liquidate on December 22, announced plans to stop honoring its gift cards on January 11.
The last notable case when a retailer somewhat accepted a competitor's gift cards was when Sharper Image filed for bankruptcy in February 2008 and suspended the acceptance of its gift cards. Competitor Brookstone soon offered customers a 25 discount on any purchase for a consumer bringing in their worthless Sharper Image gift card.
Discussion Questions: Should retailers explore accepting a competitor's gift cards as a marketing ploy? If so, how generous should stores be in accepting competitors' cards, particularly in bankruptcy cases where their value becomes questionable or worthless?