Recently a mandatory change has been made within the NSW government that is forcing businesses to change their gift card expiry dates to a minimum of 3 years. Being mandated in NSW, many would assume that this legislation would only affect businesses physically trading in NSW, but the sneaky way that the legislation has been written means that businesses that issue gift cards across Australia need to pay attention to the change.
As of 31st March 2018, businesses that issue gift cards or vouchers to individuals who live in NSW at the time of purchase, need to include a 3 year expiry date from the date of issue. This is where the legislation has broadened the coverage to be national rather than just NSW. As it has been written based on an individual’s address, not the place where the gift card or voucher is issued, all businesses need to consider how this legislation affects them. It
This is a big change for many businesses and doesn’t only affect large retailers but any business that issues a gift card or voucher for services or products, whether in store or online. It also affects businesses within Australia and also internationally.
Now, if you are a multi-site retailer that uses a gift card service to manage your program, you can probably breathe easy. Many of the gift card system operators (if not all) are mandating this change and rolling all of their gift cards to be a 3 year expiry from 31st March 2018. That’s going to make it a lot easier with the only challenge that you need to focus on is the communication and the retrieval of all old gift cards so that they aren’t accidentally issued past the 30 March 2018. I would make sure that you are having a conversation with your supplier and asking for them to detail the transition so that you can ensure you are well covered and don’t have any risk. Once you’ve worked that out though, it should be business as usual.
For other smaller businesses who are likely to produce gift card or vouchers manually into the NSW market, this change can pose some challenges to your business and certainly a change in the way that you issue these. This would predominantly affect businesses that operate online or are in border towns such as Coolangatta and Wodonga, where customers can easily come from NSW.
With such a short lead time until implementation, it’s important that all businesses understand what this change means to them. There are some options that you can look at but you need to seriously consider the risk and ensuring that you are receiving accurate information from customers.
Thoughts on how you can manage the change
Depending on how you issue your vouchers, you have some choices but need to really understand what the risks and challenges are in processing and managing.
In considering the right option for you, you need to review the information that you obtain at the point of sale of the gift card, whether online or in-store. There are 4 obvious scenarios:
Online gift cards issued, no residential address captured
With the increase in email being a primary address, some businesses will fall in to this category where the fulfilment of gift cards is completed 100% online and the cards emailed. No residential address is required. If your business falls into this category, it would be wise that you update all of your gift cards to have a 3 year expiry. In reviewing the legislation they are recommending that in the instance of no address being captured, you need to issue a 3 year expiry.
Online gift cards issued, residential address captured
If this is your business, you have the option of changing the expiry date for customers who provide a NSW address. The challenge with this is that you need to ensure you have adequate record keeping to easily identify 3 versus other expiry terms so that you can clearly identify cards that need to remain open for 3 years. This is a consideration that you would need to weight up against whether it’s just easier to issue all gift cards with a 3 year expiry. The labour required to maintain this, systems and auditing needs may potentially outweigh the benefits of keeping some cards at a shorter expiry term. You also need to make sure that you can confidently confirm that people are from within NSW or other areas. If you have any flaws in your system (and let’s face it – if there is manual intervention required then this is possible) or process, you simply don’t want to risk having to face penalties for a simple mistake.
In-store gift cards issued, no residential address captured
Many in-store transactions are still being completed without the need to capture personal information. Most gift card issuing systems don’t even require you to capture any contact details for a transaction to be completed. The ability to complete the transaction without a physical address places your business at risk of not complying. By not capturing address details, and not enforcing this through your systems and processes, you are now at risk of issuing gift cards to people in NSW without the correct expiry. As per option 1, a 3 year expiry is required where no address is provided.
In-store gift cards issued, residential address captured
If you are capturing a residential address (not just postcode) during the sale transaction, you are probably in the best position to have both 3 year expiry and standard expiry dates which you can automate through POS. Although this may appear ideal for cash flow and business management purposes, the challenge that you may face is that this type of process can become labour intensive post the transaction. You would need to keep well maintained records segregating 3 year gift vouchers from others ad you will have to ensure that the customer sales process isn’t impacted. Many people will get upset if they find that there is a 3 year express option and, just because of where they live, they don’t get as much time to complete the purchase.
1. Dual gift card processes – supporting manual voucher system
If you run a manual voucher system and are capturing customer address (or can easily add this), you may be able to run off a dual process where you issue vouchers with 3 year expiry dates to customers who provide a NSW address, and standard dates to others elsewhere.
A couple of challenges including maintaining accurate records by voucher of when they expire and also ensuring that you are adequately capturing the right customer information at the point of sale (whether in-store or online) to confirm that the purchaser is based in NSW or elsewhere. If you have staff who assist in the processing of gift cards, this could pose a risk as it’s another step that staff have to remember and some staff find engagement with customers difficult and confronting. If you are confident in your staff then this will minimise the challenge and risk but it still needs to be closely policed.
Based on this also, I would like to also flag that there is a potential customer experience and satisfaction risk with this change. Imagine if you are a customer purchasing from a business and, just because of where you live, you only get a 1 year expiry versus people in NSW who get 3 years. I would expect that this would leave a sour taste with many customers and you need to seriously consider implications of this as part of your review.
2. Changing all gift cards and vouchers to 3 years expiry
From a processing and sales perspective this is certainly the simplest approach and one that you can easily implement from 31 March 2018 if you issue manual gift cards. There is some financial implications to this, one that you probably should chat with your accountant and do some sums for. For example, if your business currently operates a 1 year expiry on your cards and vouchers, if they aren’t redeemed at the completion of the 13th month, that voucher money becomes yours. Some businesses do rely on this unrealised income and this change will mean that you need to wait a further 2 years until the income can be retrieved. As a issuer of gift cards, you need to ensure that your financials support the number of gift cards in circulation in the market at any time. Make sure that you meet with your accountant and understand how many gift cards or vouchers you issue over 3 years and what security may be required. This is more prevalent when it comes to businesses that sell products rather than services – products you have to pay for where services are offered based on time. It’s easier for you to manage your own time costs than the costs of products and services.
Other things you might need to consider
There is no doubt that gift cards and vouchers are a strong and valuable marketing tool for all types of businesses. You are essentially securing sales for the future.
As mentioned earlier, with a 3 year expiry, you need to be prepared to hold security against outstanding gift cards for a much longer period. Many large card processing companies require money to be held in “trust” until the gift card expires. There is now a requirement for this money to be held for a longer period – resulting in potential cash flow challenges for smaller businesses. This is a risk that businesses need to be aware of and talk through with their accountant.
The challenge is, if you are a business that offers gift cards or gift vouchers to your customers, you must abide by this change and you have to respond to it quickly. If you are a business that could potentially have customers in NSW or purchaser in NSW (remember gift cards are predominantly designed for the purpose of gifts) then you need to move to 3 year expiry by 31 March.
Whether you are a multi-site retailer, beautician, butcher, massage therapist, landscaper, every business that issues gift cards needs to be aware of this change and very quickly identify the way that you are going to implement the change. It doesn’t matter whether you have proper cards that can be transacted at POS, gift vouchers printed out in store or professionally, hand processed as required, or if you have e-vouchers emailed to customers, all are affected by this legislation change. There are some exclusions but these are more for charity and reward programs, not for the sale of gift cards for the purpose of future purchase of your products or services.
If you transact online and don’t have restrictions on where a purchaser lives, you need to seriously consider the implications of this change and how you can quickly secure your business so that you don’t risk failing the legislation. The maximum penalty that can be issued if this legislation is breached is $5,500 so, for a small business, it’s too high simply put it aside and hope that i doesn’t affect you.
As businesses move forward in online and start building relationships with customers nationally and internationally, this simple change demonstrates how important it is to keep close to all legislative changes – whether within your direct market or not.
Good Luck!
The Marketing Elf
© February 2018
The Marketing Elf 