Breakage

I was just over at the Chapters/Indigo web site buying Ruby In A Nutshell and The End of Faith. Yes, my taste in books is somewhat eclectic. But that isn't the point of this post. I just wanted to use the word eclectic. Now Chapters/Indigo isn't my favourite place to shop for books online. Amazon is. Especially now that they have a Canadian site. Amazon is just better. For example, on the Amazon page for Ruby In A Nutshell, the cover picture actually shows Ruby In A Nutshell, as opposed to the Chapters/Indigo page, which shows the cover of Ruby Essentials¹. I wonder what book I'll get.

Now don't get me wrong. Chapters is one of my favourite bricks-and-mortar bookstores. I think of them as the Barnes & Noble of Canada. Or maybe the Borders of Canada. Whatever. You take my point. But today I had a couple of books to buy and I had a Chapters gift card lying around, so I figured it made sense to use that. So I did. And in trying to do that, I ran across some brokenness that I just had to share with you.

During checkout process I was given the opportunity to discuss methods of payment with the web site. There were two options that I thought might apply to me: 'Transfer a Gift Card' and 'Deposit a Gift Certificate'. It wasn't immediately clear which was the right one. Eventually I grokked the 'Card' vs. 'Certificate' distinction and chose the first one. From there, I could transfer money from my gift card to my online account, or vice versa. But I didn't know how much was on my gift card and there was no obvious way to check the balance. This was beginning to lose. I was pretty sure I had between $40 and $50 on the gift card, so I split the difference and tried to transfer $45. It worked, and nicely informed me that my transfer had succeeded and that the remaining balance on my card was $1.35. Cool! Since I thought $45 would be more than enough to cover my purchases, I decided to leave the $1.35 on the card and transfer whatever was left over from my purchase back to the card when I was done.

Of course I was wrong. My total after shipping and taxes was actually $46.94. Well if that wouldn't rot your socks! So then I decided I should empty the card, and cover the remaining $0.59 with my credit card. I was briefly impressed when I was able to get to the transfer option directly from the page I was on, rather than having to go back several pages to where I had done it before. But when I tried to transfer the remaining $1.35 from my card, I was informed that the minimum transfer was $5. And suddenly I was less impressed.

What did I do? Well, I was in luck, because I still had $45 in my online account. I transferred $5 from my account to the gift card, and then I transferred $6.35 back from the gift card to my account. And while I was doing this, I was thinking: Why would there be a $5 minimum? There must be an incremental cost per transfer, or something. I guess anything less than $5 doesn't justify the cost. Suckers! I just used two transactions! I've gotten around your silly restrictions and it cost you more than if you hadn't tried to stop me. Fools! You can never stop me! Bwahahahaha...! And then I came to my senses, and I realized that it's really, really unlikely that there's any incremental cost for a transfer. Because if there were, I would bet you dollars to doughnuts² that they would pass it along to the customer and that you would lose $0.50 every time you did a transfer.

Then the realization dawned. There's only one reason I can think of for the restriction and that's to increase breakage. Breakage is the term used for, among other things³, money left on gift cards that is never used. It's the $20 gift card that you got for your birthday and lost. It's the one with $0.74 left on it that you threw out because the wallet-space it was taking up was worth more to you than the net present value of $0.74 in six months. I don't know what the actual numbers are for Chapters/Indigo, but by way of example, if they sold $1 million worth of gift cards last year, and $900,000 worth have been or eventually will be used for purchases, then the remaining $100,000 that won't ever get used is breakage. Sometimes it's expressed as a percentage, so I could also have said that the breakage for that year was 10%. Unless there's an expiry date, I'll never know for sure exactly what the final breakage was, since there's always a chance someone might still use one of those gift cards. But these things tend to average out over time, so places like Chapters/Indigo have a pretty good idea of what the overall breakage is on their gift cards.

I guess it was lucky, after a fashion, that my total for this order was over $45. If it had been $42 then I would have been even more upset because then I wouldn't have been able to transfer my $3 back to the gift card. And there wouldn't have been a whole lot I could have done about it. Except to complain about it on my blog, of course. I would have been stuck with $3 on my web account. There's no telling when I might have used that. And with $1.35 on my gift card, that I could really only use in the store. And I'm not likely to remember to do that for the sake of $1.35.

Which apparently suits Chapters/Indigo just fine. I can only imagine what sort of short-sighted manager or committee -- it was probably a committee -- decided that it should be impossible for me to consolidate the balance of my online account and my gift card when they're both under $5 so that Chapters/Indigo can keep more of my money from unredeemed gift cards. And it isn't as though they don't make money when I use the gift card. They do. But if I don't use it, then they make even more. But having discovered this little 'feature' of the web site, try to imagine whether I'm more or less likely to choose them next time.

So, Chapters/Indigo, is it worth it? You're telling your customers that you prefer to purposefully inconvenience them in the hope of keeping a few dollars, which they (rightly) think of as theirs, rather than allowing them to conveniently spend it with you. I think that's pretty bad. But that's just me. I'm sure most of your customers don't mind.

Final Note: I haven't tried to transfer or consolidate balances for gift cards on any other sites. I have no idea whether Chapters/Indigo is better or worse than anyone else. But it doesn't matter. This kind of thing is a bad way to treat your customers. If everyone does it, then everyone is treating their customers badly.

1. I thought Ruby Essentials was a real book, but I can't find any mention of it at O'Reilly.
2. I sometimes wonder how much longer it will be before a doughnut sells for more than a dollar, and that phrase reverses its meaning.
3. I Googled 'breakage' to find a good definition explaining the term as it relates to gift cards. The first sponsored link used the term in an entirely different sense: the one related to prophylactics.