The biggest volume gift card reselling platform Raise’s GCX, which incidentally via a broker is where most manufactured spender’s gift cards end up, recently made moves that seem to effectively push all but the top three or four sellers into insolvency unless they have a stable of private buyers or a mostly non-existent big alternative. Based on discussions with several anonymous brokers, the new normal is:
- New tiers (that sound like Delta status levels) based on quarterly sales volume:
- <= $19,999 for Bronze
- $20,000+ for Silver
- $100,000+ for Gold
- $500,000+ for Platinum
- $1,000,000+ for Diamond
- $10,000,000+ for
Delta 360Diamond Plus
- Platform selling fees ranging based on tier level from 15% to 6%-ish (that means if you sell BestBuy at 98.50% of face, you’ll take-home 83.5% after fees as a Bronze member, maybe up to 45 days later)
- Penalties for cards that don’t sell quickly enough
- Increased penalties for debited transactions (when a buyer says the card doesn’t work)
- No more grace period for bad quarters, immediate tier demotion
- Longer holding times before payout for many gift cards
If you want to sell on Raise / GCX and compete with the big three current sellers that are paying approximately 6-7% in fees, you’re going to have pay around $40,000 in extra commissions on your way to that tier too. That means:
- Raise’s changes are forming an oligopoly of gift card resellers
- Smaller resellers are going to drop out (I’ve heard of three already)
- The bar to entry to be an effective bulk competitor is higher than ever
- Competition for manufactured spenders selling gift cards to brokers will fall
- Manufactured spenders will see decreased profits as competition falls
- The existing oligopoly will see increased profits as competition falls
Raise is likely to have a simpler business and a smaller support staff with these changes, but they’re also leaving themselves vulnerable to a new marketplace competitor with lower fees and a penchant for marketing that could take over as the new de-facto gift card resale platform. Watch for turbulent times in the short term, and (hopefully) a new reseller focused marketplace in the medium term.
Oh, and since we haven’t talked about Pepper for a while, let’s take a tangent from the main topic to mention Pepper’s weekend: they were offering 20% back in Pepper Coins for Best Buy purchases, and 25% back for Target purchases. Completely auspicious right?
Happy Monday!
GCX/Raise’s totally original status program elite bag tag.