Cash for Cards
Chances are your customers received a gift card this past holiday season; according to a 2012 survey by online gift card merchant GiftCard.com, 49.6% of shoppers planned to purchase at least one. But what if it didn’t fit their lifestyle?
The phrase “use it or lose it” need no longer apply to gift cards, thanks to a new kiosk developed by Bellevue, WA-based Coinstar Inc., the parent company of Coinstar coin-counting kiosks, and Redbox movie and video game rental kiosks. Called Alula, the self-serve machine exchanges unwanted gift cards for cash.
“There are approximately $30 billion in unused gift cards, an average of $300 per household, likely sitting in kitchen and sock drawers,” says Alula spokesperson Martha Belden. “That is $30 billion that won’t otherwise be spent with retailers, and it’s growing by nearly $8 billion per year, according to Deloitte and Touche.
“Alula allows our [store] partners to surprise and delight their customers, offer a new and innovative service, and attract new customers into their store,” says Belden.
How it works
Alula accepts more than 150 cards from a variety of popular retailers such as Home Depot, Target, and Starbucks. Customers simply scan or swipe the gift card at the kiosk. Alula is able to retrieve the card balance and makes the customer an offer, depending on the card’s resale value.The amount paid for a card is typically between 60-85% of the face value. If the customer accepts the offer, he or she prints a voucher, which can be redeemed at the store’s customer service counter for cash. At this time, all Alula kiosks are located inside grocery stores. To protect against fraud, the company limits the number of gift cards a person can redeem each day (Alula didn’t share this exact number with us). The kiosk also verifies the customer’s identity with a driver’s license or credit card. Cards with a value of less than $20 aren’t accepted because their resale value is too low.
Alula then sells the cards to a secondary market. It does not offer cards for sale directly to consumers.
Locations and competition
Approximately 50 Alula kiosks are currently in the pilot-testing phase in Columbus, Ohio, Chicago and Phoenix grocery store locations.
“At this time, Alula kiosks are being piloted only in grocery stores,” says Belden. “The pilot process enables us to learn a lot about what solutions make the most sense for our retailer partners and their customers. We have not finalized the product offering or approach.”
If it passes the test phase, distribution could be rapid. Coinstar Inc. operates more than 19,000 of its coin-counting kiosks, and about 34,600 Redbox kiosks in the U.S. and Canada.
“There are numerous secondary gift card markets, but they primarily exist online,” says Belden. “Online markets typically require consumers to print postage, go to the post office and mail in their gift cards, then wait one to two weeks to receive a check in the mail. Alula is the only in-store, self-service kiosk that pays consumers instant cash.”
If you’re wondering about the name, which is pronounced “ah-loo-luh,” it comes from the term for the thumb portion of a bird’s wing. Belden says the thought behind the name is that Alula helps gift cards “fly home to a store.”
Coinstar Inc. reported annual revenue of more than $2 billion in 2012. In a statement to investors, CEO Paul Davis said his company is committed to creating value for its consumers, partners and shareholders. In 2012, Coinstar Inc. also launched Redbox Instant by Verizon, the Redbox Tickets pilot, and Rubi coffee kiosks.
For more information, visit alula.com.