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More retail bankruptcies mean more worthless gift cards…

This week’s announcement of bankruptcy by Borders Book Stores is another in an ever-growing list of retailers who have left consumers holding the bag, or more appropriately an empty bag, as their gift cards will be rendered worthless.

What surprised me is the depth and breadth of retail organizations that are either on their way out or likely to fail in the next twelve months. An article on the investment site www.investinganswers.com this month lists more than twenty large, nationwide retail companies that are at an elevated risk of failure. The assortment includes such gift-card staples as Macy’s, Cabela’s, RiteAid, Zales Jewelers, Talbots, and seventeen more. I have reprinted the graphic from their article below.

Source: http://tinyurl.com/3pbfy5t

These companies, most of which have had long histories in serving consumer needs nationally, join an impressive group of other departed retailers, all of whom left a legacy of valueless gift cards along a trail of broken dreams and empty promises. Remember Circuit City, Sharper Image, Bombay Company, Wilson Leather, Blockbuster, or Ultimate Electronics?

Many other retailers who hang on the thread of bankruptcy are closing stores left and right, making their gift cards increasingly difficult to use (as well as risky to hold). Major closings have been ongoing among Sears, K-Mart, Foot Locker, Pier One, Harry & David, CompUSA, and many others.

The impact of big boxes like Wal-Mart, Target, Best-Buy and Home Depot, coupled with the power of Amazon to set price levels, makes it all the more likely that consolidation (failures) will be unabated for the forseeable future.

To those who have the misfortune of having to decide which gift card they want to bet will survive, I wish you luck. One can only hope that consumers will wake up and realize that when you give an interest-free loan to a retailer (which is what you do when you buy a gift card), there is a growing likelihood that you may never get anything of value back in kind.

Caveat emptor, baby.

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