View Poll Results: Should merchants pay commission on Gift Cards?

Voters
62. You may not vote on this poll
  • Yes, only when PURCHASING a Gift Cards

    51 82.26%
  • Yes, only when REDEEMING a Gift Cards

    1 1.61%
  • Yes, when purchasing AND redeeming a Gift Card

    10 16.13%
  • No

    0 0%
Page 1 of 2 12 LastLast
Results 1 to 25 of 49
  1. #1
    Merchant & ABW Ambassador
    Join Date
    May 31st, 2006
    Location
    Houston TX
    Posts
    4,731
    Post Should merchants pay commission on Gift Cards?
    These is a discussion going on and I see threads popping up about merchants and gifts cards...

    So the question is, "Should merchants pay commission on Gift Cards?"

    If Yes, should it be during the purchase of gift cards or during the redemption or on both instances. Please be realistic and don't say Yes or No because I feel like it.

    Thanks

    Edit 1: just to be clear, my program does not have a gift card and this is geared towards helping merchants make a better jusgement and also affiliates.
    Edit 2: Poll created and I am not screaming. Just highlighting the text with UPPER case.
    Last edited by WyndhamVacationR-EricEwe; August 13th, 2007 at 09:04 PM. Reason: created poll

  2. #2
    Affiliate Manager Alan Hamilton's Avatar
    Join Date
    March 13th, 2006
    Location
    Colorado / Florida
    Posts
    4,411
    Eric,

    My feeling is that merchants (of course) should pay commissions on gift cards. Additionally, if the merchant is "right thinking" the commission should certainly be paid on the purchase of the gift card.

    If the merchant requires that the card actually be "used" before a commission is due, I would view it as a sidestepping of commission payment. We all know there is a lot of breakage (never used) in gift cards. The bottom line is that if the affiliate drives traffic that purchases gift cards, the commission should happily be paid on the purchase, just as it should on non gift card purchases.

    There's 2 1/2 cents for you!!
    Join the Spicy Aprons Affiliate program on ShareASale Visit us on Facebook www.facebook.com/spicyaprons Follow us on Twitter @Spicyaprons

  3. #3
    You are in, or you are out ... choose!
    Join Date
    January 18th, 2005
    Posts
    459
    Affiliates are in the business of marketing merchants' services/products.

    Merchants use affiliate marketing to ultimately increase profits.

    When a Gift Card is purchased, the Merchant receives the money for that card regardless of whether the card is ever redeemed or not.

    If the purchaser arrived at the merchant via an affiliate link then the subsequent purchase of the gift card should be treated the same as any other purchase and therefore commission should paid upon purchase.
    [url=http://www.dWoz.com/][b]dWoz[/b][/url] - serious webmaster tools & resources.

  4. #4
    The Seal of Aproval rematt's Avatar
    Join Date
    November 19th, 2006
    Location
    The Windy City
    Posts
    4,140
    Quote Originally Posted by Woz
    If the purchaser arrived at the merchant via an affiliate link then the subsequent purchase of the gift card should be treated the same as any other purchase and therefore commission should paid upon purchase.
    Amen.

    -rematt
    "I know that you believe you understand what you think I said, but I'm not sure you realize that what you heard is not what I meant." - Richard Nixon

  5. #5
    ABW Ambassador Snib's Avatar
    Join Date
    January 18th, 2005
    Location
    Virginia
    Posts
    5,303
    I think a commission should be granted upon purchase of the gift card. But I also think it's important to get commission if the card is redeemed and the customer spends more than the value of the card. So if somebody uses a $50 gift card and spends $150 then the commission should be on $100 ($150 - $50). That way the merchant doesn't pay commission on the $50 card twice but the total revenue is commissioned.

    - Scott
    Hatred stirs up strife, But love covers all transgressions.

  6. #6
    ABW Ambassador JudiMoore's Avatar
    Join Date
    January 18th, 2005
    Location
    In Razerback country.
    Posts
    1,911
    I agree with everything already said and I will add this:

    My job is to get the merchant a customer and maybe even keep them coming back. Sometimes with a "gift" site, the best I can do is sell the occasion and the idea of giving, but the specific gift that suits best is a gift card. My content is geared toward helping the customer choose this merchant as much as any specific product.

    I basically get screwed out of a commission when I help both sides get what they need. The merchants insist that gift cards are a "liability" they have to carry on the books as accounts payable until they are redeemed. Frankly, that is not my problem. The merchandise might be in your warehouse on credit for all I know and therefore it was also a "liability". The amount you owe the newspaper for the BIG ad is also an accounts payable.

    In my world as an advertising publisher, I am already at the low end of the cost / benefit equation because I only get paid if they buy something! The newspaper, the radio, the TV, the billboard, the Chamber of Commerce - they ALL get paid before they perform and even if it's your Bankruptcy Sale.

    I deserve to get paid a commission for every single nickle spent by the customer I sent to your store, regardless of whether you sell them something below cost or profitable to you, and regardless of how they pay for it.

  7. #7
    Super Dawg Member Phil Kaufman aka AffiliateHound's Avatar
    Join Date
    January 22nd, 2007
    Location
    West Covina, CA
    Posts
    8,443
    I agree with all that has been said. Consider this scenerio: Someone finds my site when searching for a specific product they want to send as a gift, but when they click through to the merchant, they find that it's out of stock, so they buy a gift card intending to send it with a note saying "The espresso maker I know you want is out of stock, but use this gift card to buy it next month".

    Same amount spent with the merchant, eventually the same product is purchased as would have been originally, but no commission for the gift card purchase? Totally unfair.
    Since June 10, 2012 a vegan aarf but still writing the Hound Dawg Sports Blog
    "If you don't have time to do it right, when will you have time to do it over?" -John Wooden;
    "Raj, there’s no place for truth on the internet." -Howard Wolowitz[/SIZE]

  8. #8
    ABW Ambassador
    Join Date
    January 18th, 2005
    Location
    Nunya, Business
    Posts
    23,684
    I co-sign every comment so far and any further comments starting with Yes, they should pay.

  9. #9
    The slot machine that IS paid! Billy Kay's Avatar
    Join Date
    January 18th, 2005
    Location
    Small Town in Tennessee
    Posts
    5,226
    If yet to figure out the logic for NOT paying on a Giftcard.

    It's a product like any other product they sell.

  10. #10
    You are in, or you are out ... choose!
    Join Date
    January 18th, 2005
    Posts
    459
    >commission ~ redeemed and the customer spends more than the value of the card.

    Hmmm, good point. Hadn't considered that one, although it does raise the ugly head of cookie durations for the ultimate purchase.
    [url=http://www.dWoz.com/][b]dWoz[/b][/url] - serious webmaster tools & resources.

  11. #11
    The Seal of Aproval rematt's Avatar
    Join Date
    November 19th, 2006
    Location
    The Windy City
    Posts
    4,140
    Quote Originally Posted by Billy Kay
    If yet to figure out the logic for NOT paying on a Giftcard.

    It's a product like any other product they sell.
    $$ PURE GREED $$.

    There's no other logical reason. Even if the merchant carries it as a liability for some period of time it is still a sale that they are guaranteed. If they carry it as a liability until expiration it's 100% profit. Motley Fool estimates that 12%-14% of gift cards are never redeemed. No wonder merchants love them, if they can screw the affiliate out of a commission at the same time that's just more for them.

    Some merchants (like Starbucks) charge a monthly fee against the card for every month it isn't used until the expiration of the card (which I believe is 12 months).

    Gift cards are the most profitable way that a merchant can do business, they have a guaranteed sale, there is a large abandonment rate and shoppers hardly ever make a purchase for the exact value of the card. They either apply the card towards a more expensive purchase or they leave money on the table because their purchase was less than the cards value.

    -rematt
    "I know that you believe you understand what you think I said, but I'm not sure you realize that what you heard is not what I meant." - Richard Nixon

  12. #12
    Beachy Bill's Avatar
    Join Date
    November 20th, 2005
    Posts
    8,266
    Commissions should be paid by a merchant to the source of their cash flow. That happens to be the affiliate who sent the customer to purchase the gift card.

    Just my 2-cents (cause that's all I have left this week...)
    Bill / Marketing Blog @ 12PM - Current project: Resurrecting my "baby" at South Baltimore..
    Cute Personal Checks and Business Checks
    If you are too busy to laugh you are too busy.

  13. #13
    Super Dawg Member Phil Kaufman aka AffiliateHound's Avatar
    Join Date
    January 22nd, 2007
    Location
    West Covina, CA
    Posts
    8,443
    Quote Originally Posted by rematt
    ...If they carry it as a liability until expiration it's 100% profit.
    ...Some merchants (like Starbucks) charge a monthly fee against the card for every month it isn't used until the expiration of the card (which I believe is 12 months)
    Many states prohibit gift cards from expiring, and many states also prohibit service charges or other fees from reducing the cards' value. There is a state-by-state chart here.
    Since June 10, 2012 a vegan aarf but still writing the Hound Dawg Sports Blog
    "If you don't have time to do it right, when will you have time to do it over?" -John Wooden;
    "Raj, there’s no place for truth on the internet." -Howard Wolowitz[/SIZE]

  14. #14
    The Seal of Aproval rematt's Avatar
    Join Date
    November 19th, 2006
    Location
    The Windy City
    Posts
    4,140
    Quote Originally Posted by AffiliateHound
    Many states prohibit gift cards from expiring, and many states also prohibit service charges or other fees from reducing the cards' value. There is a state-by-state chart here.
    Cool. But people keep giving me Starbucks cards and unfortunately, Illinois allows both expiration and service fees.

    -rematt
    "I know that you believe you understand what you think I said, but I'm not sure you realize that what you heard is not what I meant." - Richard Nixon

  15. #15
    Super Dawg Member Phil Kaufman aka AffiliateHound's Avatar
    Join Date
    January 22nd, 2007
    Location
    West Covina, CA
    Posts
    8,443
    Quote Originally Posted by rematt
    Cool. But people keep giving me Starbucks cards and unfortunately, Illinois allows both expiration and service fees.

    -rematt
    Move?

    But seriously, what if you buy a gift card in one state over the internet from a company in another state, to be used by a person in a third state. Unless it is stated on the card, it would be a serious Conflict of Laws question as to which state's laws would apply. I just checked a Starbuck's card I have, and there is no mention of applicable state law, or of an expiration date or service charge.
    Since June 10, 2012 a vegan aarf but still writing the Hound Dawg Sports Blog
    "If you don't have time to do it right, when will you have time to do it over?" -John Wooden;
    "Raj, there’s no place for truth on the internet." -Howard Wolowitz[/SIZE]

  16. #16
    ABW Ambassador newestuser's Avatar
    Join Date
    February 14th, 2007
    Posts
    505
    Quote Originally Posted by rematt
    Cool. But people keep giving me Starbucks cards and unfortunately, Illinois allows both expiration and service fees.

    -rematt
    maybe sell them to people (ebay, maybe?) in states where it doesn't expire.

  17. #17
    Newbie
    Join Date
    June 14th, 2007
    Posts
    25
    Paying on both the purchase and the redemption opens up a big issue regarding fraud. If an affiliate gets paid 5% on goods, they can get a $100 gift card for $95, and when they spend the gift card (through their aff link) they'll get another $5. That means the 5% commission is now 10%.

    Gift cards should be treated as coupons - commissions should not be paid on the redemption, but commissions should be paid on the purchase of the card.

  18. #18
    The Seal of Aproval rematt's Avatar
    Join Date
    November 19th, 2006
    Location
    The Windy City
    Posts
    4,140
    Quote Originally Posted by newestuser
    maybe sell them to people (ebay, maybe?) in states where it doesn't expire.
    In all fairness Starbucks let me combine several cards into one so that I wasn't charged multiple fees. I probably should have just spent it all at once, but at the time I just didn't need $140 worth of coffee.

    -rematt
    "I know that you believe you understand what you think I said, but I'm not sure you realize that what you heard is not what I meant." - Richard Nixon

  19. #19
    ABW Ambassador JudiMoore's Avatar
    Join Date
    January 18th, 2005
    Location
    In Razerback country.
    Posts
    1,911
    That means the 5% commission is now 10%.
    Oh My! 10% commission on a high margin item. How WILL they survive?

    [/sarcasm]

  20. #20
    Classic Rocker Mack's Avatar
    Join Date
    January 27th, 2007
    Location
    Lower Left Coast
    Posts
    1,167
    I can only add $0.01 and agree with everyone else. Commission should be paid when the card is purchased. There are some merchants that put gift cards in their datafeeds, I remove them.

    (I'd add more but I'd have to take out a loan.)

  21. #21
    .
    Join Date
    January 18th, 2005
    Posts
    2,973
    Pay Commission on Purchase of Gift Card, then on Excess Purchase Above Card Value
    Once someone receives a gift card, they already know about the merchant, and the merchant doesn't receive any benefit from the redemption of the gift card -- unless the consumer pays extra.

    Clearly, the affiliate who refers the customer to buy a gift card should get the commission on the value of the gift card.

    However, if I have a $50 gift card for Best Buy, and I see an affiliate link for an HD TV somewhere and click on it and then spend $2,349 ($2,399 price minus $50 gift card), then I think that affiliate should get a slice of the transaction. I do recognize that the "original affiliate" who triggered the gift card sale deserves "some credit" for the later transaction, but I'm not sure how it could be apportioned.

    As others have noted, there is an extra complication because some states require that gift certificates and gift cards be refundable for cash AND/OR prohibit expiration dates (but not "fees" that drain an unused card's value and effectively "expire" unused cards) -- and as others note, this could create serious "conflict of laws" issues. If a consumer receives a cash refund, I would expect that the original commission could be reversed, but it could be a nightmare to deal with refund requests that happen 3 or 6 months after purchase.

    I'm sure we all recognize that one of the key benefits to merchants from selling gift cards (or gift certificates) is the "non-redemption" rate, which may range from 5% to 50%, depending on the card value and retailer, and depending on whether an expiration date or value-draining fee applies. If the merchant experiences a 15% non-redemption rate, then that's an extra 15% profit for the merchant. This helps explain why a handful of merchants pay higher commissions on gift-certificate sales than on some other product sales.

    Naturally, there is also the risk that the merchant may go bankrupt or close the business before a gift certificate is redeemed, which is why I've never bought ANY gift card except my stepdaughter's annual purchase of a Starbuck's gift card for her mom. My wife did spend $450 on a "local spa" gift certificate for her mom, and since I'm cynical and ic, I worried for weeks that the spa might close, until her mom reported that she'd redeemed the certificate.

    Finally, another problem arises when a consumer buys a gift certificate from a company that offers different affiliate-commission rates for different categories of products (for example, 2% on electronics, 4% on DVDs, 8% on books -- the merchant may prefer to pay the lowest rate, yet a low-value gift certificate is more likely to be redeemed for a high-margin product).

  22. #22
    Super Dawg Member Phil Kaufman aka AffiliateHound's Avatar
    Join Date
    January 22nd, 2007
    Location
    West Covina, CA
    Posts
    8,443
    There is also more value to the merchant in a gift certificate than just the actual profit they make on the price of the gift certificate (less cost of merchandise and incidental costs). In Mark's example of a customer using a $50 gift certificate to purchase a $2,399 HDTV at Best Buy, the fact that the customer had a small gift certificate from Best Buy in no little part influenced the customer to buy the HDTV from Best Buy rather than from some other merchant, thus in part assisting Best Buy profit from a $2,399 sale.

    It seems that only a small percentage of gift certificates would be redeemed for their exact face value. If the purchase made is less, then the difference is pure profit for the merchant, and if it is more than the face value, as previously described, then the merchant profits from what is in effect, a "second sale".

    All this further supports the position that merchants should pay commissions for gift certificates, as they benefit from such sales in many different ways.
    Since June 10, 2012 a vegan aarf but still writing the Hound Dawg Sports Blog
    "If you don't have time to do it right, when will you have time to do it over?" -John Wooden;
    "Raj, there’s no place for truth on the internet." -Howard Wolowitz[/SIZE]

  23. #23
    Resident Genius and Staunch Capitalist Leader's Avatar
    Join Date
    January 18th, 2005
    Location
    Florida
    Posts
    12,817
    Yes they should pay for the purchase of the gift card.

    As for the redemption, I can see how it could be a technical PITA to implement, but the fairest thing would be to pay on amounts spent above the value of the gift card. To pay for cards both coming and going would be effectively double-paying.


    Quote Originally Posted by jmoore
    Oh My! 10% commission on a high margin item. How WILL they survive?
    I don't have much sympathy for the less-than-10%ers either.

    But--1) not every item is a high-margin item, and 2) a lot of merchants are already paying 10%, so if they double-pay, that would make it 20%. This can indeed delete the profit for some items.
    There is no knowledge that is not power. ~Hemingway

  24. #24
    AM Navigator Geno Prussakov's Avatar
    Join Date
    May 10th, 2005
    Location
    Washington D.C. Metro Area
    Posts
    11,798
    Yes, I think, they should. I have seen affiliates that do not have the traffic for the merchant's product still promoting this merchant's gift cards. So you definitely want to keep them interested...

    And I like Leader's suggestion on paying commissions "on amounts spent above the value of the gift card".

    Geno

  25. #25
    Affiliate Manager PetsWarehouse.com's Avatar
    Join Date
    January 17th, 2005
    Location
    Long Island, New York
    Posts
    1,616
    Quote Originally Posted by Mack
    There are some merchants that put gift cards in their datafeeds, I remove them.
    Why?
    Bob Pets Warehouse
    Worlds Largest Pet Supply DataBase
    Join our Share-A-Sale Program [since 2003] Twitter



+ Reply to Thread
Page 1 of 2 12 LastLast

Similar Threads

  1. List Of Merchants Paying On Gift Cards
    By Trust in forum Google Affiliate Network - GAN
    Replies: 7
    Last Post: November 6th, 2007, 03:24 PM
  2. GSI merchants not paying on gift cards
    By jackson992 in forum Midnight Cafe'
    Replies: 2
    Last Post: October 1st, 2007, 06:43 PM

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •