The weekly newsletter for everyone interested in barter--the world's most versatile business tool!
January 7, 2003
Written by Bob Meyer, Editor of BarterNews
Retailers Use Their Scrip (Gift Certificates & Gift Cards) To Boost Profits
Retailers, who painted themselves in the corner in recent years by discounting earlier and earlier around the holidays, have found another way to profit...sell the harried shoppers on the idea of providing a gift certificate to a loved one, then let the recipient do the selecting of gifts.
That's exactly what's happening, according to a Bain & Company study which shows that retailers are increasingly pushing the use of their own scrip, i.e. gift certificates and gift cards, on shoppers.
Bain reports the use of these certificates grew almost 20% this year to about $36 billion, as hundreds of smaller retail and restaurant chains moved in this profitable direction by installing the necessary transaction systems for their first holiday season with these offerings.
These figures are more impressive considering that gift certificate sales are recorded only after the recipient redeems them--which is an accounting rule that all retailers agreed to go by in 2000.
Certificates Aid Profits
Retailers report between 60% to 75% of gift cards and/or certificates are redeemed within a month, and the value is spent on frivolous, full-priced items. (And of course, breakage will occur.)
So, bottomline, the so-called "Week After" which was once rather bleak for retailers because of returns and deep discounts is changing. They're now capitalizing on the week-after (post Christmas) mall traffic, and the gift card/certificate craze looks to make this week one of their most profitable.
Outlook: How long will it take for the trend to grow substantially, as entrepreneurs everywhere see the value of promoting and selling their gift certificates or scrip? Not only for cash during the holidays, but utilizing scrip with valued employees, as well as with selected vendors and suppliers.
Trade exchange owners can duplicate this growing trend as well, by providing sub-accounts to the members (who would open a separate account for a valued employee or vendor), thus increasing trade activity.
Offsets Prevalent In Central and East Europe
A week ago Poland decided to purchase 48 F-16 Falcons from Lockheed Martin Corporation--an American defense contractor. The $3.5 billion purchase included a massive offset program, i.e. purchases from Polish manufacturers that more than erased the costs of the deal in foreign exchange.
(Offsets that include co-production, licensing, subcontracting and joint ventures, are not uncommon in the defense industry.)
According to numerous studies, barter-like arrangements (known throughout the region as "compensation") constitute between 20% and 40% of all transactions in the economies of the former Soviet bloc. Corporate debts to suppliers, payments for goods and services, even taxes, all have a non-cash component or are entirely demonetized.
Product Placement To Be Values Same As Commercials
A new company, iTVX, intends to put dollar signs on product placements in much the same way that commercials are valued.
They have developed a scale of product exposure levels. The lowest level, level 1, is simply a clear product logo in the back-ground of a shot or a scene. A level 3 would be a "background plus a close-up" that includes the product.
Level 6 would include not only a product close-up but also a "hands-on" interaction by one of the actors. Level 9 adds a verbal mention to the hands-on interaction. And at Level 10, the ultimate in product placement, a show's entire episode is written around a product.
iTVX will offer clients information on placements in any show on the six broadcast networks as well as on HBO, Lifetime and Discovery. According to Frank Zazza, the 20-year placement veteran who heads iTVX, "You now have the ability for a network and a marketer to do business together. And you can pay by performance, after the placement appears, just like a commercial." For more information: www.iTVX.com.
Ambitious Out-of-Home Advertising Slated For New York Subways
Clear Channel Communications plans on installing 100 digital screens, 3 feet high by 5 feet wide, at the entrances to Manhattan subway stations. The cost of the screens will be around $45,000 each. (Digital LED displays cost up to 10 times the cost of static versions).
A major advantage of digital screens is that messages can be changed instantly from a central control point, and multiple advertisers can be signed up since the display cycles through several messages.
Advertising rates have not been set yet.
Here's A Way To Guarantee Advertising Revenue!
The Sinclair Broadcast Group is investing $20 million in Summa Holdings Ltd., a car dealership holding-company controlled by Sinclair CEO David Smith.
Sinclair won't be involved in Summa's day-to-day management or operations but will take a board seat. Summa expects to use proceeds from the investment to acquire automobile dealerships. And they will maintain a certain amount of advertising with Sinclair's television stations.
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