USPS seeks slice of the gift card market
The US Postal Service is to test out the sale of gift cards at its retail branches from May 2011. It has filed for permission from federal regulators to carry out a two-year trial on the cards, which a National Retail Federation survey found to be the most requested gift among adults for the last four years.
The USPS said it believes offering gift cards at its retail locations would fit with the sale of greeting cards, offering increased revenues while further encouraging the sending of items through the mail.
“Gift cards have become highly popular gifts in recent years,” the USPS said in its request to the Postal Regulatory Commission, filed yesterday. “There is also a nexus between the use of gift cards for gifting purposes and the use of the mails for sending that gift.”
The USPS is planning to trial “open loop” gift cards, which could be used in any retail outlet. This would mean providing the cards in partnership with a bank or credit brand, for example American Express, Visa or Mastercard. Trials of “closed loop” gift cards – those specifically branded for use at certain retail outlets – could also be run in future, although there are no plans to do so at the moment.
In testing out customer response to the gift cards, the Postal Service would essentially act as a sales channel for the cards, adding its branding to the cards themselves, while all credit support for the cards would be provided by its partner.
From May 2011, the trials would be launched in 2,000 retail locations that currently sell greeting cards, expanding to 3,000 in October, ahead of the festive season.
Customers will be offered options to buy $25 or $50 cards, or put a specific amount on the card between $26 and $100.
As well as limits to the value of individual cards, there would be limits to the amount of cards that could be purchased by each customer, in order to guard against fraud.
The USPS would generate revenue through an activation fee on the gift cards, charging $3.95 for a $25 card, $4.95 for a $50 card and $5.95 for a variable card. Such activation fees are standard in the gift card industry, the USPS told the PRC, where fees “typically run between $2.95 and $7.95”.
However, with other forms of gift cards sold free of activation charges, for example for online retailers Amazon and iTunes, and for closed-loop gift cards in retail stores, the USPS may need to explore different pricing options for its gift cards.
“Throughout the market test, the Postal Service may test different fee points that are competitive with the range discussed above, in order to determine what fees are optimal,” the USPS said.
