In the last two weeks, I’ve had the opportunity to play around with Raise as being a bulk seller. What I’ve previously said about Raise being prohibitively expensive at a 15% commission is only applicable when you are a non bulk seller. As a bulk seller, your rates will vary. Stay tuned for a further analysis of Raise as a platform. I wanted to share my initial thoughts.
During this time of exploration on Raise, it has been quite an interesting experience. Here’s the breakdown of pricing:
- Raise charges a % commission to list your gift card. The % varies on the brand of gift card
- You determine the discount %
This is akin to eBay’s fee structure.
So far, I’ve listed 3 brands (proprietary knowledge) of gift cards. Between the commission and discount, I purposely build the discount to be fairly low. Of the three brands, one has been slow to move. The problem is, the high percentage of gift cards available on the marketplace with a deeper discount than mine. The other brands have little to none available to buy.
Gift Card Cartel
This leads me to the thoughts of a cartel, colluding on the gift card resale market. From Investopedia a cartel is:
DEFINITION OF ‘CARTEL’
An organization created from a formal agreement between a group of producers of a good or service, to regulate supply in an effort to regulate or manipulate prices. A cartel is a collection of businesses or countries that act together as a single producer and agree to influence prices for certain goods and services by controlling production and marketing. A cartel has less command over an industry than a monopoly – a situation where a single group or company owns all or nearly all of a given product or service’s market. In the United States, cartels are illegal; however, the Organization of Petroleum Exporting Countries (OPEC) – the world’s largest cartel – is protected by U.S. foreign trade laws.
So if a group of gift card churners were to band together and sell gift cards and price together on the “hot gift card brands” you could boost your profit margins. Because Raise gives you the opportunity to set the discount percentage, that group could collectively set the discount to some low discount rate just to move the brand. However, as with any cartels and the monopolies will crash and burn from competition.
Any smart customer who sees the discount as being too low, will go to competing exchanges like Giftcard Zen, Cardpool, and the likes for a cheaper gift card. Just know that cartels are illegal and protects consumers under the Sherman Act. You won’t see me partaking in any price fixing like this because I’m on the straight and narrow. I’d rather take a bigger loss than to get caught up with something serious like an antitrust law.
I’m not advocating what you’re discussing, but I am going to call BS on the whole anti-trust idea.
There has to be some degree of harm involved and as long as you’re not planning to charge people more than the face value of the gift cards, I just can’t see any prosecutor (or any retailer for that matter) caring that you are profiting by small percentage when you are still selling the cards at a discount.
Not to mention that the whole notion of scalability is relative. In the gc resales world, with this model, you’re talking maybe hundreds of thousands in profit a year. In many industries that would be a daily number and real harm to the consumers.
I was positing where every bulk seller agrees on a discount % selling say Starbucks gift cards. On Raise, as the seller, you control the discount, right? So if every seller banded together and instead of the current 8% to 2% people may continue to buy it. It wouldn’t be very fair for the customer looking for a discounted gift card, but other sites like Giftcard Zen or Cardpool would offer a higher discount rate and people would go there instead because the discounts would be higher
I think he knows what you’re positing, but I think it would be real stretch that you could be prosecuted under the Sherman Act. As you brought up Raise is not the entire gift card resale market place. Even if they were then I think they would be the most liable because they are the ones that gave the “cartel” lower rates than the rest of the competition. I know for a fact that certain bulk resellers have better rates than even the bulk listed prices for certain brands. This may be why you’re having trouble competing on one of your brands. So Raise is hardly creating a fair market place in the first place.
IF I was going trying to keep gift card prices at a certain price I would offer to buy out my competitors at a slightly higher rate than they would get competing with each other. The absolute free market people would tell you that that wouldn’t work long term because your competitors could just go by more gift cards. Fortunately for the cartel many gift card sales only go for a week or even 1 day so there’s a finite supply until the next deal which could be months away.
BTW many Raise customers are dumb and don’t seem to be aware of other sites or don’t feel comfortable buying from them. Raise is the only site that actually has professional corporate looking interface. They also spam slickdeals (or slickdeals spams them for affiliate fees) while offering $5 off to new customers and take5 (5% off) deals off select brands every weekend that can make a bad buy a good buy.
Thanks for the great comment Kyle –
I had very similar thoughts that I needed to put together after posting. Been playing with them the last two weeks as a bulk seller.
How is bulk selling experience going so far? I am stuck up with “playstation Network” gift cards and for that I thought of becoming a bulk seller, but I am never comfortable with GC resellers that ask for SSN. So currently giftcard.com is enjoying a lot of cards from me.
If you create a business and register for an EIN, both Cardpool and GiftCard Zen makes it easy to enter that. Not sure if they would require an SSN number if you go that route. I plan to do that in the near future (likely for 2016)
Just a friendly reminder that Raise will send you a 1099 at the end of the year if you sell at least 200 cards AND $20,000 worth where Zen and Cardcash did not send 1099s.
Thanks Kyle, this is very good to know, I did not know they did that – I’ll ask my sales manager for additional details
Raise will send 1099 if you sell 200 cards and $20,000 which is why they want SSN.
I personally do not like their rates and I hope another company enters with a similar business model and with less overhead. For example bulk rate on Red Robin or Dominos is still 13% commission. You can still get better net rates many times, but remember you’re floating all those funds until they sell unlike the other sites where you’ll get paid within a week. If you buy $20,000 in Sears hoping to sell at 9% off and some other guy does the same thing then you have a problem. Most likely he’ll move his 9.1%. At that point you either wait out his inventory or move yours to 9.1-9.2% knowing he may move farther. So the extra profits don’t come without extra risk.
Another thing to note is that after you sell some cards you have to click the cash out button on your account otherwise it just sits in there. Then it takes them 3 business days to process the ACH payment. Their cut off is 2pm Central time.
Personally I hope that a better market place comes out with like a flat 5-7% commission which I think could still be profitable. Their business model doesn’t really take much startup capital as cardpool or gift card zen model where you have to buy all the cards up front. Hopefully some churner reads this and starts such a company to help his fellow churners out.
Thanks Kyle, this was confirmed from Raise that they do send out 1099’s
Did they confirm the same amount? $20000 or 200 cards?
Is it only for Bulk Sellers or for anyone? As I have been selling to them as regular seller, but they never asked my SSN yet..
Just asked my sales manager, will find out for you
Today was my first ACH and I saw it’s only 1 withdrawal/day. Agreed with the rates, I was playing with it yesterday and had to pull a sale after I saw the numbers
Did you find out if $20000 & 200 cards is for bulk seller or regular seller too?
I have been selling them and I have already reached 145 cards sell in this year. Although, I am no where near $20,000 thanks to so many small amount cards I sold.
I am really not keeping track of purchase receipts so I really want to avoid 1099. I will appreciate if you can verify with them if this limit is for bulk seller or anyone else.
Its funny, They don’t have my SSN at all, so I am curious if its for everyone, they may ask for SSN when I reach or cross their limit
KP, I did, thanks for reminding me. Both bulk sellers and individuals will receive a 1099 when they exceed 200 cards & 20k
Interesting idea, but the whole idea of a cartel is to be able to control supply. At any time, as you pointed out, competition can come in and flood the market. Unless you’re minting cards, what you’re describing is more of a buying group.
For Raise, there are a few vendors that sell like hot cakes, and if all the suppliers control the price at say 2% or 1% discount, the supplier profits more until the competition comes in or the customers just say forget it and go to GiftCard Zen or Cardpool