Art of gifting under threat

It has been one casualty after another on the UK high street with Jessops, HMV and Blockbuster going into administration in the same month. As stores made their announcements, the subsequent furore over whether paid-for gift cards and vouchers would be accepted highlighted the issue of consumer protection.


It has been one casualty after another on the UK high street with Jessops, HMV and Blockbuster going into administration in the same month. As stores made their announcements, the subsequent furore over whether paid-for gift cards and vouchers would be accepted highlighted the issue of consumer protection.

Jessops’ 187 stores were closed down and administrator PwC took the decision not to honour gift cards. Consumers were left with an estimated £800,000 worth of unused cards from the camera retailer, which just one month before had launched an e-gift card to buy online.

The issue was pushed further when HMV announced its intention to file for administration in mid-January. Administrator Deloitte agreed to honour gift vouchers after assessing HMV’s financial position, having previously stated that it would not accept or issue vouchers, despite the retailer continuing to trade.

The UK Gift Card and Voucher Association (UKGCVA) is “concerned about the reputation of gift cards and vouchers” but adds that in the past five years, sales of vouchers and gift cards have increased year on year. The trade body has also been in talks with the Office of Fair Trading and HM Treasury about ways to protect consumer funds.

theatre tokens
Like-for-like sales of vouchers grew by 3.2 per cent in Q4 2012

Andrew Johnson, director general of UKGCVA, says: “Gift cards and vouchers are a bit of a victim here on the basis that the retailer is no longer in control when it comes to the pot of money in unredeemed vouchers, the administrator makes the decision on what to do with that money.”
Blockbuster went under two days after HMV but it took the decision to accept gift vouchers as part-payment. This decision was made because “it was felt to be in the best interest of creditors as a whole,” according to a spokesperson for the movie rental company. The gift vouchers and credit are being allowed as part payment, so the voucher or store credit can be used to pay for up to 50 per cent of the total purchase price.

This ensures that vouchers are worth something to the consumer and cash is going into the business.

But Richard Lloyd, executive director of consumer group Which?, says that consumers will now be wary of trusting brands when buying vouchers. “With the increasing number of high street retailers going bust, consumers need to be aware of their rights, particularly regarding warranties and gift vouchers. Although many groups can lose out when a company goes into administration, it is outrageous that consumers are left out of pocket when a retailer refuses to honour gift vouchers.”

Lloyd says Which? wants the rules on gift vouchers and insolvency to be reviewed so that consumers are protected. The UKGCVA’s talks with the Office of Fair Trading are ongoing, but as Johnson points out, once a brand goes into administration the company is at the hands of the administrators which will make decisions, rather than the brand itself.

At the same time as retailers deciding whether to accept gift cards as payment, affiliated and unaffiliated brands and shops have been offering to take them. Tesco took the decision to accept Jessops vouchers that were bought at its store, and online gift store, a supplier of HMV, offered to honour HMV vouchers.

According to Which?, Tesco, Asda and Boots say that, for a limited time, gift vouchers can be exchanged for the retailers’ own gift cards, at face value. Restaurants, bars and nightclubs also waded in with special offers including exchanging vouchers for a free cocktail and 50 per cent off food bills.

So although the reputation of some individual retailer’s vouchers as an option for gifting has been dented, marketers can still include them in their plans, for example by choosing to use multi-retailer gift vouchers which reduce the risk of becoming worthless compared to choosing single brand vouchers.

The Post Office One4all gift card is one of many multi-retailer gift vouchers that are emoney-regulated products, which ensure consumers’ funds are secure. The gift card offers a choice of 17,000 retailers and sales were up by 40 per cent over Christmas 2012 compared to 2011, suggesting a move to this type of gift.

Declan Byrne, managing director of One4all, says: “We’re seeing a shift in consumer attitudes. People want to give gift cards as presents but they are nervous about which retailer to choose. Unfortunately, with a series of high-profile retail closures, consumers are understandably worried about who might be next.”

hmv giftcard
The UKGCVA is in talks with the OFT about ways to protect consumers

Consumers are not just affected when they buy from retailers directly. Administration decisions also affect consumer promotions when gift cards are used as prizes. Choosing the right brand to partner with in a promotion can be tricky. Promotion verification specialist PromoVeritas sites an example for its client, wine brand Campo Viejo, which ran an on-pack competition to win a £10,000 Habitat gift card for a home makeover.

But during the life of the promotion, Habitat went into administration and Campo Viejo was concerned about its investment and the prize. After negotiating with Habitat’s new owners, the promotion continued with the agreed terms but made the promotions industry aware of the risks of using retailer specific cards.

Big ticket vouchers can also be a risky purchase in today’s economic climate. Gillian Edwards at ABTA, the UK travel trade association for tour operators and travel agents, says: “Holiday vouchers can make a great present or gift, however, people should be aware that it is holidays that
are financially protected and not the vouchers themselves.”

Edwards advises consumers who have these vouchers to redeem them as soon as possible. Once someone has redeemed the voucher and has a receipt for a holiday, they count as a part payment and are more likely to be financially protected.

With the future of the high street looking lacklustre, consumer confidence could be affected by the issues around vouchers when retailers go bust.

UKGCVA’s Johnson says: “We are disappointed that gift cards and vouchers are getting negative press at the moment. Hopefully the faith that the public have in gift cards will continue and that this is just a small blip.”

A troubled timeline

November 2012

Comet collapsed in early November 2012 and having previously announced that it could not accept gift cards, said it would be accepting vouchers two days later.

9 January 2013

Jessops, the first casualty of the high street this year, did not honour gift vouchers or accept customer returns, leaving one customer with a worthless £500 voucher.

15 January 2013

HMV announced that it was no longer accepting gift cards and vouchers when the entertainment retailer announced its collapse. This caused outrage, particularly among those who had received them as gifts for Christmas. However, after administrators assessed the finances a U-turn was made on this decision a week later.


17 January 2013

Blockbuster went into administration and continued to trade as normal while administrators searched for a buyer, accepting gift cards and credit acquired through the rental shop’s trade-in scheme.


Industry in talks with HM Treasury and the Office of Fair Trading, expected to announce the outcome very soon.

Figure Focus

Like-for-like voucher sales grew by 3.2 per cent in Q4 2012. Consumer sales of vouchers went up by 1.6 per cent as some shoppers inevitably turned to vouchers for Christmas presents. Notably though, sales growth of consumer vouchers is considerably down on the peaks seen in the past over the Christmas season, reflecting shoppers’ limited spending power this year.

Sales of vouchers by retailers are up by 6.5 per cent with growth coming from both corporate and consumer sales this quarter. The business-to-business sector grew by 6 per cent. Retailer consumer sales growth improved in Q4 compared to the rest of 2012, increasing by 1.1 per cent.

Sales of vouchers by channel shows the high street was the most popular place for consumers to buy vouchers in the run up to Christmas. Direct sales to consumers via stores are up by 1.1 per cent but consumer online sales of vouchers are down by 7.5 per cent.

Figures released in 2012 show that consumers waste an estimated £250m per year on unspent gift cards. The waste includes expired cards and those with change left on the balance of the card.

Source: UKGCVA


andrew johnson

Andrew Johnson
Director general

Marketing Week (MW): Should administrators wait until they are clear on the financial situation of the business before announcing whether to accept vouchers?

Andrew Johnson (AJ): Arguably maybe that’s why there was a delay in the administrators opening up HMV to take gift cards and vouchers because it’s taken them this long to get a handle on the true financial situation. Certainly with Comet there was a 24-hour delay. But the situation with HMV was unusual as it was still trading, the doors of the retailer were open but not accepting gift cards, it didn’t make sense.

Each administrator has different rules and there are different circumstances for when a retailer goes into administration so in some respects, gift cards and vouchers are a bit of a victim on the basis that the retailer is no longer in control; the administrator makes the decision on what to do with the pot of money in unredeemed vouchers.

Fortunately, what we have seen in some cases is that there is a period of time during which the administrator will accept vouchers. With HMV that has begun.

MW: Should companies that are at risk stop selling gift cards?

AJ: I think it depends on the definition of ‘at risk’. I’m sure the directors of HMV prior to Christmas were looking at lots of ways the company would continue to trade. So they probably didn’t see themselves at risk because there were several options that were being investigated.

MW: What effect overall do you think this has had on the retail voucher industry?

AJ: There has been a lot of negative press so we are concerned about the reputation of gift cards and vouchers. But in the past five years sales of vouchers and gift cards have increased year-on-year, compared to the rest of the retail market, which has been fairly stagnant during that period.

Hopefully, the faith that the public have in gift cards will continue and that this is just a small blip.

MW: Can anything be done to protect consumers in the future?

AJ: That is something that as an industry we need to have a good look at. We have been in discussion for the past few years with the Office of Fair Trading and HM Treasury about different ways we can protect consumer funds and have also been discussing this with our members. We hope to come to a resolution very soon so that we can ensure the industry can continue at the success rate that it has been.

More than 50 per cent of the market is sales and gift cards in b2b, which includes use in marketing promotions and we want to be sure that businesses continue to use it as part of their incentive and reward

Who decides whether vouchers can be accepted?

A brand loses control over its business decisions if it goes into administration. Where money should be awarded is up to the administrators, although consumers will still associate it with the retailer.

The terms and conditions on vouchers and gift cards are also no longer valid and administrators can decide on the new terms. This could range from fully honouring gift cards, agreeing that they can be used as a part payment – for example for a voucher worth £20 the consumer must spend the same amount or more – placing voucher acceptance under a time limit or time period or not accepting them.

At the point of administration, the consumers become a creditor in a long list along with staff, suppliers, banks and the administrators themselves, which charge a fee. The only law protecting consumers at present is section 75 of the Consumer Credit Act, which says the card firm is jointly liable with a retailer if something goes wrong with a purchase as long as the item is bought with a credit card and cost more than £100.



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