October 30, 2007
GiftCardLab.com: New Twist on an Old Strategy
Back in September, we began to hear buzz around GiftCardLab.com through RSS feeds and blogs. We initially thought the buzz was part of a coordinated viral campaign to increase brand awareness. Today BusinessWeek, a major weekly business publication, picked up on the buzz and published an informative piece about them. The article is definitely worth reading as it provides insight into what GiftCardLab.com is about. It also reiterates a lot of the same things we’ve been warning about, pitfalls with prepaid bank gift cards. What GiftCardLab.com is offering is basically an old strategy with a new twist.
The old strategy is to offer personalization and customization as a differentiator from competitors. Hopefully, this strategy translates to higher user adoption and greater revenue. The new twist is simply that it is Visa gift cards without the requirement of having to purchase in bulk. Consumers can buy just one or many, but GiftCardLab.com is hoping people will purchase more than one prepaid gift card per order.
One good point worth mentioning is that the user interface to upload images and design custom gift cards is user friendly. Even people who are technologically challenged should not have trouble designing and making purchases. Furthermore, GiftCardLab.com is running a design competition with a grand prize up to $5,000 for the best holiday design. It seems a lot of the participants miss the point that the theme of the competition is “Holiday”. Instead there are submissions ranging from pictures of the space shuttle to individuals in swimsuits.
Unfortunately, GiftCardLab.com does a poor good job of disclosing all the fees associated with their product and service. The only fees that is publicly disclosed is a processing fee of $5.95 per card. There is no mention of shipping or handling charges or the typical fees associated with Visa gift cards, such as a monthly maintenance fee, replacement fee, etc. The only reference to fees in their FAQ refers to a “Cardholder Agreement” that is provided with the Visa Gift Card, issued by Marshall BankFirst. But we could not locate an actual link to the “Cardholder Agreement” on their website.
Another important consideration to make before using this service is that the gift cards will expire one year from the print date and be charged an “account closure fee” before the balance is refunded in about three months. If this upsets you, don’t be. Sadly, this is a common policy practiced by banks that issue Visa gift cards. Instead, consider getting a customized Walmart gift card for only $0.88 per card. The best thing about it is that Walmart gift cards are “fee free”.
∙ Gift Cards with a Personal Touch [BusinessWeek]
Readers' Comment (6) | Posted by Alex | Filed under: Analysis
Just a couple comments to your post. The reason the fees are not disclosed is because we have not launched the program/site yet. Once the program goes live, our fees will be properly disclosed and presented.
There will be no shipping or handling charges in addition to the $5.95 but there will be monthly fees that will start after 6 months, just like other open-loop gift cards in the market. I wish we didn’t have to charge this fee but it is a must in the business because we cannot take on the burden of trying to return money to people if they do not use it.
Unlike our competition (www.giftcards.com) who only offers a limited amount of card designs, we do not charge a fee for each point-of-sale transaction http://www.giftcards.com/company/terms_conditions.html#
I appreciate your commentary about the giftcard business and I agree that our program is not right for everyone. Our program is a unique program that will certainly have its audience of consumers who are looking to have a Visa Gift Card that works everywhere Visa is accapted and with a picture of their child or pet on it. We are not embarrassed of our fees and do not try to mislead consumers. We provide a premium product at a price similar in nature to non-customized Visa Gift Cards. I can assure you that the profit margins we are creating on our cards are far lower than the margins experienced by retailers as a whole.
Have a wonderful holiday!
Dave
CEO
CardLab, Inc.
http://www.GiftCardLab.com
blog: http://www.choresandallowances.com
Posted by: David S. Jones on November 5th, 2007 at 9:38 am
Giftcardlab.com’s service is the worst! The Christmas gift cards haven’t arrived YET (12/29/07) even though they were promised by a supervisor for before Christmas delivery, my refund also hasn’t arrived (promised by yet another supervisor by yesterday). This was about 20 gift cards; not a little order! I feel like I’m dealing with a coupla kids in a garage, spraypainting pix onto cards…
Posted by: Anthony on December 29th, 2007 at 9:40 am
I was in for a surprise when I received my card along with the label that reads Monthly maintenence fee of $4.95 applicable after 6 months. everyone offers gift cards, and you can’t force the recipients to spend the entire amount of the card in 6 months to avoid the $5 fee! that’s ridiculous!
I am not too happy with the product either…
ofcourse, the card looks good…but packaging sucks!
Posted by: XYZ on June 17th, 2008 at 7:05 pm
Great idea, unfortunately really bad customer service
I requested a card over one month ago, to be delivered “within 13-15 business days” the card never arrived its intended destination.
I was told “it got lost in the post, and its not our fault” which may or may not be true, but I can deal with it.
However when I requested that the least they could do was to expedite my order (having already waited for more than a month plus the extra 15 business days that I would have to wait) and they say no way.
This is not a crazy request, is the least most respectable internet sites will do when a shipment gets messed up.
But not to gift card lab.
Sad thing is actually recommended them to our company HR (between 100-200 gift cards per year through recruiting and interns gifts) because of being such a great idea. I can assure you they will not be getting that business any time soon.
Posted by: Adrian Monsalve on August 20th, 2008 at 9:03 am
_ !Wow!
_ ‘ ‘ ‘ What beautiful crocodile tears ‘ ‘ ‘
_ ‘ ‘ ‘
I received a ‘GiftCard’ in the mail.
The amount embossed on it was 25USD.
There was a Title printed on the front:
” SoftServe
__Ability, Agility Advantage”
_
I do not know who or what SoftServe is.
Nor am I willing to accept any responsibility to SoftServe or to the card issuer!!!
_
I think that cautiously I used it once or twice early on.
But I never received any Account statement.
_
Thereafter, reasonable prudence dictated that the risk of overcharge or other fees was possibly too great for further usage.
_
I came across it today and, according to instructions on the back of the card, visited http://www.giftcardlab.com to ‘check the balance for free’.
_
Clicking the ‘Check balance’ menu item on top, I was presented with an Account Login. Not being aware of any such Account in my name, I looked at the CardHolder Agreemeent.
_
It was chock full of restrictions, fees, and obligations of the CardHolder — and open-ended for any others that the Issuer might add. In contrast there were very few, if nay, responsibilities or obligations on the Issuer, Visa, or ‘purchaser’.
_
Indeed, the Issuer could refuse any transaction at will. But even if the Card did not have funds available for a requested purchase (at time- and Point-of-Service), the Issuer was not required to refuse the transaction. No option for the CardHolder — only the resulting burden.
_
Note that account termination (by User, or upon Expiration) applies a large fee against the Account balance. By the wording of the AGREEMENT, fees and other CardHolder obligations are not eliminated upon termination of the Account. — So, if upon expiration the Account balance does not fully cover the termination fee, the Issuer may still have the right forever (including at some later date to demand collection thereof) to recover the remainder of the fee from the CardHolder.
_
Because of the ambiguity of the AGREEMENT, the ‘Enrollment fee’ may have been extracted from the Gift Card’s initial balance.
_
The Issuer makes the Account statement available online for free during the month of a purchase. But the CardHolder gets no notice of any charge (valid or not) unless he/she requests it each time. Note that a requested statement is not necessarily free except during the month of a purchase.
_
The GiftCardLab’s spokesperson claimed to be well-meaning. But there is nothing in the AGREEMENT to keep future malefactors — whether management, merger partners, or cleverly-established creditor – from making a real killing on the potential value of such hidden resources. They might even apply penalty interest rates to such revived balance-due artifacts, notifying former CardHolders without indicating that they themselves were thus indebted. What a gold mine.
_
The possibility of such abuse may seem hard to believe.
But so would have been debt-interest rates of over 8.5% APR, just a few decades ago.
_
In those days, that was the province of loan-sharks — along with uncomfortable jail-terms for the sharks.
_
For Oprah, $5/mo ($60/yr) doesn’t sound like much.
Of course, for modest gifts of $500 or more, there might be something left — for refund upon request after expiration.
_
But for gifts of $10 – $50, that becomes nearly the whole ball of wax.
_
Moreover, the FAQs and CardHolder Agreement are so one-sided in their specificity: To the recipient, the Gift Card is more of a threat than a gift.
_
Who needs threats and burdens like that in perpetuity!!!
Posted by: Robby B on February 28th, 2010 at 3:40 pm
[...] 12.GiftCardLab.com: New Twist on an Old Strategy Tips, trends and insights into all things gift cards. … This is not a crazy request, is the least most respectable internet sites will do when a shipment gets messed up. But not to gift card lab. http://www.allthingsgiftcard.com/2007/10/giftcardlabcom-new-twist-on-an-old-strategy/ [...]
Posted by: visa webs » Gift Card Lab on August 18th, 2010 at 10:51 am