Books written by Ray Sullivan

Tuesday, 17 January 2012

Amazon Gift Certificates - Should They Carry a Wealth Warning?

Like many organisations, Amazon provide a facility to buy someone a gift certificate.  Being a savvy tech company they also let you buy it online and print it off on your own printer, which is a pretty smart move - they suck the value of the gift certificate from your credit card account and let it earn them interest until it's spent.

And of course a lot of these gift certificates will have been bought before Christmas Day to accompany a Kindle gift - either by the giver of the Kindle or other family members helping the recipient to get the most out of the new toy as soon as possible.  In a fair world the value of the certificate will be used up in short order - so many books, so little time.  But in reality gift certificates can have the opposite effect - there's various psychological pressures at play, but in simple terms the recipients may not use up the value except for what they consider 'worthy' purchases.  Or they may not want to use up the value, full stop - sort of 'when it's gone, it's gone; so I'll eke it out.'  Or they may just have a surplus of books to read initially and then forget about buying more.

And this is a bit of a problem twelve months on as Amazon wipes any residual value from the certificate at that point (this may not be true in the US - the UK site just says they do this in territories that permit it, but doesn't actually indicate where these territories actually are).  A few years ago, in simpler times, I would have said that was rough, but in a perverse way, reasonable.  Because for all the time the credit exists on their books it's also a liability, a debt they have to account for on the annual ledger.  In accounting terms, this can be seen as a bad thing, despite it's actually someone else's money they are holding onto.

But, as I've said, most certificates will be used up relatively quickly, and the remaining few probably don't have a lot of the residual value left.  But I'm willing to bet that every year lots of these small amounts are being written off - or trousered to defray operating costs, in the technical parlance.  So Amazon will have earned interest for twelve months, then taken any unspent cash for no other reason than they can.

Now the odd thing is, if your credit card is about to expire, Amazon manage to email you to let you know. It would be interesting to see if they email you to advise that the cash they've been holding on your behalf, earning them interest for twelve months, is about to be absorbed into the corporate ledger.

So, unless you know the recipient of an Amazon gift card will absolutely use it all up well within a year, or there isn't an alternative way of funding their Amazon account (they have no credit card account, for example), then either keep the value very low - perhaps topping up as they use the certificate - or give them cash.  Sure, they might blow the cash on stuff other than eBooks - but then they could with the gift certificate anyway - Amazon sells an awfully large range of goods.

And if you have sent someone a gift certificate this Christmas, set your phone diary to remind them in November to finish spending it - Amazon are doing fine, they don't need your charity!


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