RetailMeNot, Inc., the Austin-based coupon site, announced late Thursday it has entered the secondary gift card market by acquiring GiftCard Zen, Inc. for $22 million in cash.
A 2014 CardHub study found American consumers sat on $44 billion worth of unused gift cards between 2008 and 2014. More than 70 percent of respondents to a Google consumer survey RetailMeNot released this month said they would gladly sell their unused cards — even at a discount — to free up their value in cash.
“We’re always looking at opportunities across what we do: One-stop savings destination for consumers,” said RetailMeNot CFO J. Scott Di Valerio (pictured above), who explained that RetailMeNot’s foray into primary gift card sales on behalf of retail clients late last year allowed the company to study the market from the inside.
“We thought GiftCard Zen was a great opportunity for what we’re trying to deliver to our consumers and retail partners over the next two to five years, plus building a deeper moat around our business.”
Part of the appeal of GiftCard Zen, which built its business up to 4,000 gift cards from more than 700 retailers in only three and a half years without any marketing, was its success in cultivating a business market separate from its consumer users. One example Di Valerio provided is construction contractors, who can lower their project costs by using the service to buy $10,000 worth of Home Depot gift cards for $9,000.
In the press release announcing the acquisition, RetailMeNot also released first quarter preliminary results indicating revenues in the range of $54 million, meeting or even exceeding projections by a margin of up to $5.5 million.
The company also expects total net revenues for 2016 to modestly meet or beat expectations, ranging from $228 million to $241 million.
Phoenix-based GiftCard Zen is a major player among gift card resale sites, which have grown substantially since 2010, when the FTC enacted rules prohibiting expiration dates sooner than five years from the time the cards are purchased. Inactivity fees are also prohibited for one year from the last purchase or value reload.
Other entrants include Raise in Chicago, San-Francisco-based Cardpool and even Coinstar, the company known for kiosks in grocery stores that collect customers’ loose change in exchange for cash or gift cards.
RetailMeNot has acquired 14 other companies, starting with RetailMeNot.com when the company was still known as Whaleshark Media, but GiftCard Zen is the only one involved in gift card resale.
“We really are focused on being the savings destination,” Di Valerio. "That means moving consumers to interact with our sites throughout the shopping process. [Currently] most of our business is nearly last click. ‘I’m about to buy something, let me see if there’s a coupon,’ or ‘I’ll choose a retailer based on who has a coupon.’ ￼￼￼￼￼￼￼￼￼ We want to move up the funnel, so people think, ‘I want to buy a Samsung TV — I’ll go to RetailMeNot to get the best price.’
We’ll continue to buy and build out product that delivers that to our consumers."
Photo courtesy of RetailMeNot, Inc.