Marketplace business models and stocks

[Jurgis]

https://www.raise.com

 

If this is legit, it's a great find for the cheapo bastards like me. I might buy some of these discounted puppies.

 

Anyone used this? What's your experience?

 

Edit: a lot of discounts are pretty narrow. And then you see something like TJ Maxx at 19% discount - wow... for cards that are at $280-300 face value. I wonder what's the reason. Some kind of wholesale dumping? I don't think tons of people buy $300 TJ Maxx gift cards... so seems either fake or some kind of non-retail dumping.

[Pelagic]

https://www.raise.com

 

If this is legit, it's a great find for the cheapo bastards like me. I might buy some of these discounted puppies.

 

Anyone used this? What's your experience?

 

Edit: a lot of discounts are pretty narrow. And then you see something like TJ Maxx at 19% discount - wow... for cards that are at $280-300 face value. I wonder what's the reason. Some kind of wholesale dumping? I don't think tons of people buy $300 TJ Maxx gift cards... so seems either fake or some kind of non-retail dumping.

 

So... I'm probably about 15 minutes ahead of you in reading up on the gift card market.

 

There are "power buyers" who buy using a CC with cash back and then can resell the gift cards for close to fair value or at least what they paid for. They will bundle gift cards and make the market so to speak.

 

As far as whether it's legit or not, it seems like it is, https://www.raise.com/return-policy

 

It is a peer to peer marketplace so you're dealing with other members of their community but I suspect a higher value gift card is going to warrant a larger spread since the market for buyers and sellers is limited.

 

I'm sure arbitrage opportunities abound in the gift card market if you want to spend some time getting to know it as many sellers probably receive them as gifts and just want cash for some other purchase.

[oddballstocks]

Let me go second level on you guys.. do these spreads indicate the popularity of an establishment?  I.e. can the spread be used as an investment indicator?

 

Home Depot and Lowes have tiny spreads.  1-800 Flowers is 50% off.  Anyone use 1-800 Flowers recently?  Crickets.. thought so.  Huge discounts at Applebees, you'd need to give me dinner for free, plus some Tums and a bit of a cash incentive on the side to eat there.  Again, big spreads.

 

Physical cards have a bigger spread compared to virtual cards.  There's a Five Guys card at $20 worth $25.  Not a horrible deal.  That barely covers a family dinner for us there, we'd save $5, is it worth it?  Probably.

 

On the most popular ones the spread is about equal to the credit card reward.  Delta gift cards are going for 1.5%, Amazon for 1%. 

 

If you buy these with a credit card you get points as well right?  Spreads appear tight at places that sell Visa/Mastercard cards, that's the logical "out" with these.  You use a gift card to buy another more flexible gift card and in essence turn it into cash.  If you were to buy a Sears card you get a 6% discount, plus say 1.5% on your credit card for points, essentially you're buying $1 for 92.5 cents.

 

I wonder how scalable this is?  Can you move a few grand, or $10k into this?  Seems nice to save a few bucks here and there, but the real opportunity is moving 10s of thousand of dollars through this quickly and earning that spread.

 

This has the wheels turning.  Thinking aloud you could buy Delta refundable flights then cancel the flight and get your 1.5% back.  I'm sure there are some other maneuvers here.

[Jurgis]

Oddball,

 

TJX has been a great business and a great investment in the past and I believe they are doing great still. I doubt that 19% discount on their cards indicates some kind of business issue or loss of traffic/business in stores. That's why I was wondering if there were other reasons like some kind of bulk buyer dumping.

[Pelagic]

I've thought about looking at them as a proxy for business health and while it works in a general sense, I don't think you're going to glean much from it that you wouldn't be able to figure out just by walking into a couple retail locations.

 

As far as whether it's scalable, they have a bulk buyer program. https://www.raise.com/bulk-buy-gift-cards

 

You might find yourself becoming the market though and having a London Whale style blowout  8)

 

Companies usually cite a figure around 50% of gift cards go unredeemed, will a liquid marketplace for gift cards this change that?

 

Jurgis,

 

I think the higher TJX discount is reflective of the card's value and rather unsophisticated sellers. If you look at the spreads they're all over the board (bidding on these might be a neat feature to add) where some sellers saw a large card going for 19% off and marked their cards to correspond to that discount without realizing that it might not be warranted.

 

 

 

 

 

 

 

[Jurgis]

Yeah. Might be. Illiquid markets with unsophisticated or forced sellers could do that.

 

I also thought that perhaps TJX gives/gave these cards as bonus for their employees. Not sure if that happens and if it's legal. These would be forced sellers, since they probably already have more TJX merchandise than they want. :)

[Jurgis]

Just an update: got couple TJX cards from Raise. Worked fine so far. One caveat: they guarantee the value when card arrives, but the card has the "confidential" numbers/pin open before it arrives. So one risk is that if you don't use the card quickly while it's covered by guarantee, the seller could potentially use the numbers/pin online and empty the card. Possibly not a big risk.

 

Also likely not worth buying if you go to specific store only once a year and don't spend much. There might not be inactivity fees, but also possibly no recourse if you find out that the card is not working for whatever reason two years later.

[DavidVY]

Ha, giftcardgranny has an even better marketplace than raise...

 

I bought about 9k of apple products then converted it until store credit and slowly been selling it off....

 

I got the discover 22% cashback towards the end of last year w/apple pay!!!!

 

I am selling it off on average for 89%. So pocketed around 1k tax free...amazing hourly!

 

Nice little hustle/arbitrage.

 

I also do this w/amex blue everyday 6% cash back to buy shell giftcards, which gives me gaspoints (20c/gallon), and also the 20c off is off the debit card price (another 10c cent saving). Using this method, Im saving about 18% on gas...

[fareastwarriors]

I use cardpool.com and giftcardrescue.com exclusively.  I "saved" over like 30/40k over the last few years.

[Jurgis]

I "saved" over like 30/40k over the last few years.

 

The more you buy, the more you save.  8)

 

I'm actually a bit afraid to think of how much you buy if you save 30K. ;)

 

 

Thanks for the links guys.

[SharperDingaan]

You might want to rehearse your lines, before Homeland Security pays you a visit.

As a drug dealer I buy a Home Depot card for $100 - with dirty money; & resell it for $97 of clean money. The cost to money launder was just 3%, Homeland roughs YOU up - not me, & you have no idea who I am.

 

SD

[nodnub]

You might want to rehearse your lines, before Homeland Security pays you a visit.

As a drug dealer I buy a Home Depot card for $100 - with dirty money; & resell it for $97 of clean money. The cost to money launder was just 3%, Homeland roughs YOU up - not me, & you have no idea who I am.

 

SD

 

I don't understand what you are saying here. What you described doesnt seem to offer any laundering or protection for an illegal user. If you are found with a bunch of cash after selling these cards the Police would still question the source of income used to purchase the cards. Real money laundering would provide plausible, legal, original source for your cash.  (i.e. inflated sales revenue from a car wash that didn't actually wash as many cars as reported.  Or money run through slot machine winnings, which has been written about in the newspapers).

 

The way these cards are used for illegal purposes is talked about here.  http://www.theglobeandmail.com/report-on-business/not-just-a-stocking-stuffer-gift-cards-a-money-laundering-loophole/article22194461/

 

I learned today that the gift cards and prepaid credit cards do not need to be declared when crossing borders and are not subject to the $10,000 reporting threshold when entering US or Canada.  That's another way these are being used to transport money illegally.

 

Interesting subject and another example of how laws and enforcement always lag far behind new technology.

[fareastwarriors]

You might want to rehearse your lines, before Homeland Security pays you a visit.

As a drug dealer I buy a Home Depot card for $100 - with dirty money; & resell it for $97 of clean money. The cost to money launder was just 3%, Homeland roughs YOU up - not me, & you have no idea who I am.

 

SD

 

The majority of the cards are store credits so I have no doubt some merchandise were stolen and then returned with no receipt for store credit. How big is the percentage of actual customers vs thieves/launders? I have no idea.

 

I also buy gift cards from grocery stores using my 5% cash back on groceries credit card like what DavidVY does. I'm planning to get the Amex blue cash pref soon.

[SharperDingaan]

You might want to rehearse your lines, before Homeland Security pays you a visit.

As a drug dealer I buy a Home Depot card for $100 - with dirty money; & resell it for $97 of clean money. The cost to money launder was just 3%, Homeland roughs YOU up - not me, & you have no idea who I am.

 

SD

 

I don't understand what you are saying here. What you described doesnt seem to offer any laundering or protection for an illegal user. If you are found with a bunch of cash after selling these cards the Police would still question the source of income used to purchase the cards. Real money laundering would provide plausible, legal, original source for your cash.  (i.e. inflated sales revenue from a car wash that didn't actually wash as many cars as reported.  Or money run through slot machine winnings, which has been written about in the newspapers).

 

The way these cards are used for illegal purposes is talked about here.  http://www.theglobeandmail.com/report-on-business/not-just-a-stocking-stuffer-gift-cards-a-money-laundering-loophole/article22194461/

 

I learned today that the gift cards and prepaid credit cards do not need to be declared when crossing borders and are not subject to the $10,000 reporting threshold when entering US or Canada.  That's another way these are being used to transport money illegally.

 

Interesting subject and another example of how laws and enforcement always lag far behind new technology.

 

 

Money laundering is a 3 step process; placement, layering, integration. This is layering, the intent is to launder through a wash transaction, & the more transactions the abetters (coy's providing the cards) can pass through their (re-selling) sites - the more they earn. A larger version is the simultaneous buy & sell of the same security, on different exchanges; it could of course, just be just high frequency trading arbitrage - but when it looks the same as layering - its hard to tell the difference.

 

The 'gain' being enjoyed - is not coming for free.

 

SD