NSW introduces three-year minimum expiry for gift cards but reforms ‘just the start’

RETAILERS are not happy about new three-year minimum expiry rules on gift cards. But here’s why you still need to be careful.

SHOPPERS are being warned to keep an eye on gift card expiry dates this Christmas despite moves to force retailers to extend minimum limits.

Last month, the NSW government introduced a minimum three-year expiry date, sparking angry reaction from retail groups and a warning from RedBalloon founder Naomi Simson that it could harm small business.

At the time, NSW Fair Trading Minister Matt Kean said the reforms, which take effect from March 31, 2018, would put up to $60 million a year back into the hands of shoppers in the state.

“It’s a very frustrating experience to present a gift card only to find it’s expired, and the money has gone down the drain,” he said. “Over the past five years NSW Fair Trading has had more than 1300 complaints about gift cards about expiry periods and undisclosed terms and conditions.”

There are an estimated 34 million gift cards sold every year about $2.5 billion, with an average spend per card of $56.

Most gift cards such as those sold by Westfield and Woolworths expire after one year, while others including Myer and Coles are valid for two years and some offer as little as six months.

Overseas research suggests up to 27 per cent of gift cards go unredeemed, but the Australian Retailers Association says 97 per cent of cards issued by its members — accounting for three-quarters of all cards — are redeemed before the expiry date.

In a statement, ARA executive director Russell Zimmerman said the NSW changes placed an “unnecessary regulatory burden and significant additional administrative costs on small, medium and large businesses”.

“It is unreasonable to expect small retailers and family businesses to amend their administrative practices and incur extra liabilities on their books simply to respond to unnecessary regulation,” he said.

While RedBalloon opted to get ahead of the reforms and offer three-year expiry on all vouchers and gift cards nationally, backdated to October 18, Ms Simson warned of the potential impact on smaller suppliers.

“We’re making this change because we think it offers great value to our customers,” she said. “The toughest conversations we have with customers are about voucher expiry — this now goes away.

“We are delighted to be able to do it for every voucher we deliver, but equally concerned about the impact on small suppliers, which is why we’re not asking our suppliers to hold their prices or types of experiences for three years.

“We are protecting our suppliers by managing the financial burden of carrying customer credit for an additional 24 months, so that our customers have a longer time frame in which to use their vouchers.”

Queensland University of Technology marketing expert Dr Gary Mortimer said gift cards were an increasingly popular way for people to avoid giving unwanted presents at Christmas.

“Shoppers need to be aware of the expiry date,” he said. “Obviously NSW is pushing those out to three years, but there’s still no national standard on expiry dates. I’ve seen gift cards, particularly in small independent retailers, with expiry dates as low as six months.

“It’s an accounting issue. Retailers receive $50 cash into their books, they need to account that at some point $50 worth of inventory will come off their books, but they don’t know what category, it could come out of cosmetics, toys, menswear.”

Writing on The Conversation, Dr Nicole Ibbett of Western Sydney University’s school of business, said minimum expiry dates were just the start of necessary reforms to gift cards.

“Research from the US, which has a five-year minimum expiry date, shows an extended expiry term only slightly improves the problem of unredeemed cards,” she said.

“In fact, it’s possible gift cards with shorter expiry dates have higher redemption rates. The shorter time frame forces customers to use the cards fast, meaning customers are less likely to lose or forget to use the cards.

“Regulating expiry dates is one step towards attempting to have consistency between gift cards, but could also cause more confusion if expiry dates are different in various states of Australia.”

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