Tapadera

As I'm writing this post, it's November, and the Christmas shopping season is starting to gear up.  Every year, one of the most popular gift items is the store gift card.  In many ways they're a great gift.  They're quick and easy to buy.  And you can be sure that the recipient will get something they love from a store where they enjoy shopping.

But before you run down to the mall and hand over your money, you might want to do a little research.  It's no secret that a lot of brick and mortar stores have been hit hard by what's been called the "retail apocalypse" in recent years.  Since 2010 over 12,000 physical stores have closed down for various reasons.  Many other retailers are on shaky ground, hoping that this Christmas season will make up for the dismal quarterly profit reports they've received the rest of the year.  They won't know what their status is until the final tallies from sales and post-Christmas returns become available in January.  As has become the new norm, the first few months of the new year will bring a slate of bankruptcy and store closing announcements.

What happens to gift cards when a store declares bankruptcy?

Quite often, when a store declares bankruptcy, they will cease to honour their gift cards.  If a store is hoping to restructure and work their way through bankruptcy, they may ask the courts to allow them to continue to redeem gift cards for a limited time as a gesture of good will towards their customers.  But they don't have to do this.  Also, the courts have the final say in whether or not the store can continue redeeming gift cards.  Sometimes a store may be purchased by a new owner and remain in business.  However, the new owner may decide not to redeem old gift cards.

There are other problems as well.  Even if the retailer may stay in business during the bankruptcy and continue to redeem gift cards, they may decide to close your local store early if they can't work out a deal with the landlord.  And when you go in to redeem your card, you may find that there is little merchandise left and no new stock coming in, you may not be able to complete a collection of items you want, and the store may no longer have any means to transfer merchandise between stores to fulfill customer orders.

How do I avoid losing money on gift cards?

You might be tempted to ask store staff if it's safe to purchase a gift card, but don't.  Quite often front line retail employees are told nothing about the company's financial woes, and many times bankruptcies and store closings will come as a complete shock to them.  Even if they do have an inkling, saying anything about a store's financial situation to customers could be grounds for immediate termination.  And no one needs to be out of a job right before Christmas.  Don't do that to them.  Don't put them on that spot.

But fortunately, since you're reading this blog post, you have the power of the internet to find the information you need yourself.  You usually don't have to dig deeper than a few Google searches.  First just try searching the name of the store.  Do they have a parent company?  Do a search on that, too.  Check out Google News.  What kinds of press releases are they putting out?  What are other people saying about them?  Try searching the company name and the word "stock."  That will give you more information about how well they are performing financially.

There are some very common red-flags to look for in your search.  For example, has the store gone through several CEOs and/or CFOs in the past couple of years?  Excessive movement in the C-suite indicates that shareholders are not happy with the company's performance and are trying to find the right combination of people to save their investment.  Do financial analysts say things like, "slow to adapt to new technologies," "out-of-touch with consumers," or simply "avoid investing?"  Do charts of their stock prices show a steady decline?  If you're seeing indicators like these, keep your money in your wallet, and don't buy the gift card.

Another search you can do on Google is "stores closing in 2020" or whatever the new year will be when you're reading this.  Several news publications regularly publish articles with lists of stores that will be declaring bankruptcy, or closing stores in various locations.  Check to see if the store you're shopping at is on one of those lists.

So what should I do?

Now that you've done your research and the store where you were thinking of purchasing a gift card doesn't look like such a good option anymore.  What other options are there?

1. Instead of purchasing a gift card, find out what your recipient like to buy from that store, and consider buying that as a gift.  If she likes a lot of little things from that store, ask the staff to help you put together a gift basket.
    
2. If you're really not sure what she wants, but she really likes the store, maybe buy her a gift card, but give it to her before Christmas.  Make sure she knows that the company may be in trouble and that she should spend it as soon as possible while there is still stock and selection left.  As I said above, Christmas is the make and break season for many retailers, and they are still doing business as usual so they still can do what is necessary to bring in what she wants if it's not currently in stock.
    
3. If gift cards from other stores are an option, then you should probably go that route, particularly if you think that your recipient might not be able to get out and spend their gift card right away.
    
4. Or, forgo the gift card idea completely.  Spend some time with your recipient.  Find out what she or he really likes, needs or wants, and just buy that for her or him.  As a bonus, you'll end up spending quality time with that person, and perhaps in the process make some memories that will be treasured long after any gift has been forgotten.

Help!  I've just received a gift card, and I think the store might be heading for bankruptcy.  What should I do?

If you receive a gift card for a company that is on shaky ground, then my advice is spend it as soon as possible, and spend every last penny available on the card.  If they don't have anything that you want for yourself personally, do they have anything that you might be able to use as a gift for an upcoming birthday, shower, wedding, graduation, or anniversary?  If that's not really an option, then what about buying a really cool item that you can then turn around and sell on Craigslist, or Kijiji?

If you're stuck with a gift card and the company has already gone out of business, then you might be able to put in a claim, because a gift card is really just an unsecured loan of money to a store.  However, it may take months, and you'll be behind a long line of other creditors who are also waiting to get paid, and what you might get back could be just pennies on the dollar.  But another option could be if the purchaser of the gift card bought it on a credit card, their credit card may have a purchase protection program that would allow them to refund the purchaser's money.

Anyway, I've given you lots to think about this holiday shopping season.  So do your research.  Spend any gift cards you may currently hold in your possession, because you never know, and the selection in stores right now is really good.

Happy shopping!