OPINION | Giant Retailers Use Consumers' Gift Card Money as Another Advantage Over Small Businesses

by Luis Rodriguez

Running a small neighborhood business is incredibly rewarding. We live and work in our neighborhood, we know our customers by first name and what they like to eat and drink, and we are deeply involved in our community. But small retail and food business owners know the challenges to keeping our doors open are numerous. Retaining talented staff, street closures, construction, small margins, and unpredictable events like the pandemic, to name just a few.

Being in the shadow of much larger corporate businesses competing for the same customers is a given. Companies like Starbucks have the name recognition, marketing power, real estate, and other advantages to clobber us in sales, no matter how loyal our customer base is. But there's another factor that contributes to an unlevel playing field that works to their advantage.

Some of the biggest companies in the country that happen to be incorporated in Washington have an advantage over the rest of us — the scale to sell hundreds of millions of dollars worth of gift cards, and to keep the unspent balances from those sales of cards for no goods provided to consumers in return. While it might seem small on an individual level — $10 here, $20 there — in fact, gift card revenue has grown to hundreds of millions of dollars each year for some corporations, which they can keep as revenue to pad profits. Last year, just two of Washington's biggest retailers, Starbucks and Nordstrom, reported $255 million in unspent gift card money pocketed from consumers. This money is essentially an interest-free loan from its own customers that can be used to drive out small-business competitors. All because these same companies got themselves a loophole 20 years ago in the rules that govern gift cards in Washington.

State lawmakers have the opportunity to right this wrong, to do the right thing for both consumers and small businesses. The Gift Card Accountability bill (HB 2095 and SB 5988) would require these retailers to turn over that unspent gift card money to the state for reimbursement to consumers and investment in public goods instead of corporate profits. Small- and medium-sized businesses with revenues under $100 million per year are exempt. If lawmakers allow this special-interest loophole to remain, they are only protecting the bottom lines of about 100 large retail and service businesses that may sell gift cards, at the expense of the rest of us.

Of course, big-business lobbyists are fighting this common-sense measure. But lawmakers need to do the right thing for consumers and the neighborhood businesses that are core to our communities and our state's economy.

Under the proposed change, consumers who buy gift cards or load money on a payment app can register gift cards with the seller, but they are not required to. After three years, if consumers don't use all of their balance, the corporations send the unspent money to the state's unclaimed property program. Gift cards in our state have no expiration date, so if the consumer redeems the balance after three years, businesses can get their money back from the state. Gift cards not claimed by consumers, an estimated $1 billion over 10 years, would go to Washington's education, housing, health care, and other public services instead of executive bonuses.

We hope our area lawmakers, Sen. Rebecca Saldaa and Reps. Sharon Tomiko Santos and Chipalo Street, pass this common-sense consumer protection on gift cards, and remove this unfair advantage giant retail corporations have over small community-minded businesses like ours.

The South Seattle Emerald is committed to holding space for a variety of viewpoints within our community, with the understanding that differing perspectives do not negate mutual respect amongst community members.

The opinions, beliefs, and viewpoints expressed by the contributors on this website do not necessarily reflect the opinions, beliefs, and viewpoints of the Emerald or official policies of the Emerald.

Luis Rodriguez owns and operates The Station Coffee in Seattle's Beacon Hill neighborhood.

📸 Featured Image: Photo via ms.nen/Shutterstock.com