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Gift Card Debacle Tarnishes Retail's Image

Clouds form over the darling of holiday gift giving as retail bankruptcy filings mount.

By Marita Thomas | Updated on March 10, 2008

When the Sharper Image announced that it was suspending gift card redemption as it began its reorganization under Chapter 11 bankruptcy protection, it ignited a fuse that cast a cloud over gift cards, which have rapidly risen to the top of the holiday gift giving hit parade. Consumers bought $26.3 billion in gift cards over the past holiday season, according to the National Retail Federation.

Each year for the past several holiday seasons, consumers have ratcheted up not only their overall expenditure on gift cards, but also the per-card value. Consumers love to give and receive them, and retailers have little to complain about.

They get paid before the card is redeemed. Cards drive traffic after the season, giving stores another chance to grab additional sales or simply pocket the dollars left on the table by those who never redeem the cards.

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