Lesson 3: Analyzing your gift card opportunity

I dabble in real estate a little, and have done well enough to generate enough passive income to allow my family to be the traveling homeschoolers.

One of the biggest lessons I learned in that business was that you make your money when you BUY the property, rather than when you sell.

The research you put into each opportunity will determine whether it is worth buying in the first place. Then, the analysis will tell you what price to offer, so that you can turn a profit later.

I’ve found the same to be true with reselling gift cards – except that researching the profitability of a gift card is much simpler and less like finding a needle in a haystack.

Sure, you don’t always HAVE to do research.

If you have been gifted a card, and just want to get some cash for it, researching the marketplace might be overkill if you are ok with losing 15-25% of the value.

Similarly, if you are selling to a bulk buyer like Norma does, market research might not be as crucial since what cards to buy, and what the prices are, would have been done for you.

But if you are trying to meet minimum spend and make as much beer money as possible, you might want to sell directly to a marketplace.

And in gift card marketplaces, research is KEY. You do not want to commit your money into something that is hard to sell quickly, even if you are getting a generous discount.

So, if you are selling to a marketplace, check out what the supply is like.

To get you started, let’s check out what the market is looking like on Raise. If you haven’t already, sign up for a Raise account using this link and get a free $5.

No, really, go ahead and get that account set up. We’re going to need it throughout this course.

Ready? Great! Let’s get started with checking out the competition.

Scoping Out the Competition

Let’s say you have an opportunity to buy several $50 Jiffy Lube gift cards at 20% off. Sounds like a great deal! Before you pull the trigger on those, let’s make sure you’re going to be able to unload them.

So let’s jump into Raise to find out:

  • How much a Jiffy Lube gift card is selling for?
  • How many are on sale?

Go ahead and click on “Buy Gift Cards”, then type in “Jiffy…”. It should pop up right away.

The default filter setting will show the highest discounts, and the associated price. This is the competition that you need to match, and preferably, beat.

Bear in mind that every marketplace charges a fee, and Raise’s is 12% to start with, which is similar to other marketplaces. The fee comes down if you sell a lot and get approved as a bulk seller.

You’ll see that, at the time I was doing the research at the end of 2016 (below), most sellers of Jiffy Lube gift cards were offering a 5% discount at $47.50. I generally prefer marketplaces that let me set prices because I like to manage things like these.

When this course was being written, there were only 12 Jiffy Lube cards for sale, which was neat, because it is right where we want it to be.

Let the machine do the math for ya

One of the neat things about most marketplaces is that they do the math for you. So let’s see what a $50 Jiffy Lube might earn us if we buy it at $40, and list it for $46.

Since Raise’s standard fee is 12%, your $40 Jiffy Lube card will get you $40.48 if you list (and the card sells) at $46.

Your profit would be:

  • 48 cents ($40.48 – $40.00), which is a profit of 1.2% (which beats the COST of prepaying some bills with a credit card ).
  • Any miles or points you earn towards meeting minimum spend.
  • Any other rebates or credit card offers you were able to stack before buying the card, and after selling it.

If this is your first sale and you use the promo code “SELLAF10” at Raise, you would actually get a lower fee. Which is great, since you’ll earn a little more.

This is a case where the research checked out, and I would buy enough to maybe churn $500, but not so much that I am stuck with the cards if the sales price drops.

The $500 number is a number that works for me, based on how much I am okay with being invested in gift cards. Your number may be different.

Out of stock cards: Sweet Spot or Red Flag?

Sometimes, a gift card may be out of stock. Assuming there is demand for it, this could be a potential sweet spot, like when I stumbled upon an offer on Staples for $50 Aeropostale gift cards going for $40.

The challenge with out-of-stock gift cards is that we don’t know if they are sold out due to overwhelming demand, or due to the fact that they are unpopular.

I decided to jump in on the Aeropostale opportunity with both feet, but not before some research and a small market test. Turns out, it was a sweet spot! We’ll discuss how I did this in a later lesson.

Cards to avoid

As you do your research, you will sometimes find cards where the discount is so high, you can’t break even at all. For instance, I found an offer on Sam’s Club to buy Cold Stone Creamery cards at 20% off. But when I did the research, I found the below.

If I offered a discount of 26% (to beat the other sellers), and assuming a Raise fee of 12%, I would only get $16.28 for the card. That’s a loss of $3.72 ($20 – $16.28). Yeah, thanks, but no thanks.

Prohibited cards are another group to avoid.

Raise makes its “Do Not Buy” list public, while others like SaveYa will decline you if you try to list a card they can’t sell.

You cannot assume that just because a brand is still being sold on a marketplace, your card will be accepted. I bought some HSN cards once because I saw them on Raise. But when I tried to list mine, the system rejected them.

If I had checked the Do Not Buy list, I could have avoided the pain. I would also have saved myself the effort of buying stuff I didn’t need on HSN!

Some brands are an absolute no, such as AirBnb. But the screenshot above will show that are exceptions, such as:

  • Face Value limits: Raise will not accept any AMC gift cards that is worth more than $50.
  • Evidence required: for Aaron Brothers, evidence of a recent gift card purchase must be verified by Raise before a listing can go live.
  • Travel: All travel-related cards will have to sit on the bench for 45 days before it goes live.

Hopefully, the 10 minutes you’ve invested to research the deal will pay off. If so, now it’s time to buy that card!

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