Originally Posted by
Mr. BoH
True! But most of the gift cards they sell are branded. In other words, they are able to buy gift cards in bulk from, say, Chipotle at a significant discount and then sell to consumers at face value to make a profit even after promotions and mileage referral costs. Chipotle does this as a marketing expenditure to get more people to buy burritos from them. So this is sustainable, at least in theory.
Visa gift cards are very different. Visa isn’t promoting a “product” so they aren’t going to sell gc.com visa giftcards at a discount; in fact they would typically sell at a modest fee. It is the Visa gc piece I am saying is unsustainable in a vacuum.
But they push the Visa and Mastercard GCs harder than anything else. They are right at the top of the page.
Selling them at a 10% discount obviously is not sustainable but that's a sale with a very limited quantity, that "sold out" after a couple of days despite the sale period being advertised a being about 10 days. It's just a marketing expense.
I'm sure that they get the cards at a slight discount to face value, and there is an activation fee on top of that, so I have no doubt that these are profitable for them.
The branded gift cards are probably more profitable, but I doubt that they make up a large portion of their sales. Most people know that you can get branded GCs at a steep discount (particularly for restaurants). I just recently bought 2x$50 for Red Robin for $75 from Costco (regular price is $80 but there was a $5 discount for a couple of days). And Costco is still making profit from that ... I can't imagine what their cost is. Half of face value?