Amazon's 105 Percent Misleading Solution

Amazon.com this week jumped in with a clever gift card strategy that bordered on brilliant, a tactic that could simultaneously boost revenue and steal sales from multiple competitors. Even better, it was happening at a time that rumors—many of them false—were making consumers hesitant to buy gift cards from their rivals. (See related story how the changing gift card winds forced one major gift card site to lay off all employees this week.) Amazon could have made a good argument that consumers would be more comfortable buying from Amazon. So with such a wonderful plan, what would possess Amazon to put a statement that, at the most charitable, could be described as a phrasing so deceptive that even a New Jersey or Illinois politician would find it too over the top? (Note to readers: This is hardly the place, but a major news organization started asking the question this week whether Gov. Rod Blagojevich's arrest now catapulted Illinois as the nation's most corrupt state. As a longtime New Jersey reporter, I can only say, "Illinois wishes. In the game of corruption, New Jersey politicians play to win. Illinois is certainly doing well, but they're rank amateurs. Even their toxic waste is wimpy compared with ours. Sorry, Chicago. A consecutive pair of arrested governors shows good effort and all, but you have a long way to go.") Back to Amazon. This tale starts Monday (Dec. 8) when Amazon made its gift card announcement with a gift card exchange site called Plastic Jungle. The essence of the deal is that consumers could take any gift card and get either a check or, according to the Amazon joint statement, "consumers can opt for 105 percent of the cash value in the form of an Amazon.com Gift Card." The problem is their definition of cash value. To the average consumer, what do they consider the cash value of, let's say, a $100 Macys gift card? How about the above average consumer? How about any English-speaking lifeform in our galaxy? Amazon's definition is that the "cash value" is not, in that example, $100. It's closer to about $70, depending on how popular that particular gift card is, which puts the amount of that Amazon gift card to about $73.50. It's not a bad rate, but it's pretty bad if they've set expectations of consumers that they're going to be getting $105. Much lower down in their statement, Amazon suggests that consumers go to the Plastic Jungle site "to find out how much cash they can receive — or an Amazon.com Gift Card for a higher amount." We tried several and they were mostly in this range. A $100 Abercrombie & Fitch card came in at $65 and a $100 Costco card came in at $75, while Macys was exactly $70. Amusingly enough, we typed in Amazon itself and it reported that a $100 Amazon gift card had a value of $70 and then added "trade in for an Amazon.com gift card" and get $73.50. How tempting. The irony in all this is that if it had simply said "or consumers can opt for about 73 percent of the cash value in the form of an Amazon.com Gift Card," it still could have been an excellent deal. Maybe a little less exciting, but a lot more real. Gift cards today are a highly desired gift to give, but a less exciting one to receive as they tend to have short expiration dates and restrictions about online use. Chains may or may not last forever, but store closings are a definite reality and that could mean that there's no convenient local store for a particular chain. But Amazon, with its legitimate claim of millions of products for sale, can say that its longevity is not (for now) in question and that its online presence makes it immune to local store closings. Amazon's gift cards also have no expiration dates. For Amazon, the attraction is huge. Not only would this send sales—and customer information—from its retail rivals, but it's no secret that a $100 gift card will deliver sales well in excess of $100. So even if Amazon would have had to pay an extra $30 for each card, it's hard to imagine that it wouldn't have profited greatly from that. After all, who wouldn't seriously consider an offer to give up a $100 Sears, Home Depot or Costco card—not to mention a much less well-known brand—for a $105 Amazon gift card? Yes, it could have made this a powerful gift card move. But someone felt a compelling offer wasn't sufficient and that they needed to try to trick consumers into believing it was a lot more than it was.

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