Are Your Gift Cards Completely Worthless?

By Pamela Mortimer

Sharper Image is just one of many retailers that are facing serious financial woes. As the trendy company undergoes Chapter 11 bankruptcy, its shoppers will find that they have woes of their own – their gift cards have become useless. Although Sharper Image claims that the cards will be valid again sometime in the future, they’re not saying when. Potential customers are asked to check the company’s website for updates.

Obviously, shoppers and those who shelled out cash for the gift cards are not happy.

"If I knew this was going to happen, I would have used them right away," said Jon Tapper, a public relations executive from Boston who recently received two Sharper Image cards as gifts. "I love gift cards, but now this makes me think twice."

For busy gift givers, gift cards are a godsend. If you don’t know what to buy for a colleague or loved one, a gift card is a great way to give. Grandma can buy her own jewelry and junior can pick out the hottest video game. The trend has also grown wildly since many people choose to shop online.

According to a report released by the National Retail Federation, consumers spent an estimated $26.3 billion in gift cards at retailers during the last holiday season, up from $24.8 billion in 2006 and $18.48 billion in 2005. These numbers show that with imminent bankruptcy in store for some retailers, Sharper Image isn’t the only company with these concerns. With the downturn in retail economy, more than $75 million in gift cards are at risk of becoming worthless.

Sharper Image's competitor, Brookstone Inc., is capitalizing on the situation. The New Hampshire based company announced last week that it would exchange Sharper Image gift cards for 25 percent off any purchase, regardless of the amount of the gift card or the cost of the item.

"We thought it would be a great way of acquiring new customers," said Brookstone spokesman Robert Padgett. "We are here for the long haul, and thought it would be good to let them know."

Ricki Gard, a manager of the Saks Fifth Avenue's Premier Salon in New York, said that the salon has been able to attract new clients from high-end spa Georgette Klinger, which abruptly closed its doors a week before Christmas.

The Saks Salon has been offering Georgette Klinger customers 30 percent discounts on first-time services. However, the gesture was only a small comfort to those who had thousands of dollars accumulated on their prepaid cards.

Long Beach, N.Y., resident Carol Ann Razza was a Georgette Klinger customer for 18 years. She reportedly lost several hundred dollars when the salon closed its doors.

"You really feel like you were robbed," said Razza.

C. Britt Beemer, Chairman of America's Research Group, says "you will see a lot of frustration among customers. You basically stole (money) out of the customers' pocket. They will never forgive you."