I have a ton of family birthdays this month, so I headed out to Best Buy (NYSE: BBY) to see whether inspiration would strike. I was striking out until I saw some gift cards that looked a little bulkier than the usual planks of plastic. Is that a headphone jack? Is this a miniature speaker? Yes, Best Buy just rolled out gift cards that keep their value even after they're redeemed.
I scooped up three, asked the cashier to bless each one with $25 of in-store credit, and only had to pay $75. In other words, the portable speakers -- complete with jacks to go right into your Apple (Nasdaq: AAPL) iPod, or any other portable media player -- come at no additional cost.
Who would buy an old-school gift card when the new breed is actually useful? Best Buy's not the only company raising the stakes in this regard. This holiday season, Target (NYSE: TGT) gift cards are now available with USB flash memory drives in the shape of the cheap-chic discounter's signature dog. Sure, the 64MB storage capacity is paltry, but who's complaining?
In a stroke of genius, the "I couldn't think of anything to get you, so I got you a gift card" concession is actually thoughtful again.
I pity any laggard retailers banking on flat plastic gift cards or paper gift certificates to save the holidays. If they don't have a response to Best Buy or Target, they're going to be toast this season. Until now, Amazon.com (Nasdaq: AMZN) gift cards have always seemed like great values, with free shipping on cards that never expire. But where's the swag, Jeff Bezos?
From a cash flow perspective, this is no less of a brilliant move for Best Buy and Target. Ringing up sales in November for holiday gift cards that won't be gifted until the end of next month is just the beginning. If you you're too busy using the card as a speaker or a flash drive, you may never get around to actually using the credit on it.
From an accounting perspective, that won't necessarily help Target or Best Buy. Gift card sales are recorded on the income statement only after they are redeemed. However, between now and then, the companies still have the money to play with. Eat your heart out, Warren Buffett!
Hard-goods retailers aren't the only companies trying to up the ante over the holidays. Papa John's (Nasdaq: PZZA) just introduced a promotion that gives you a voucher for a free pizza with every $25 gift-certificate purchase.
Consumers never had it this good, as desperate companies try harder than ever to win their gift-card dollars. And investors never had it this easy, since the novel and useful cards make it a breeze to identify which companies will be big winners in gift card sales this season.
(Hint: It's Target and Best Buy.)
More tips for gift-card shopping:
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