iTunes Giftcards Could Benefit from a Little More Flexibility
You can tell that we've moved from the Halloween to Christmas shopping season as soon as the $29.99 animatronic skeleton that sings a horrible version of Monster Mash is marked down to a cool $15. At the same time as that warbly, non-scary ghoul is being marked down, the aisles at your local superstore begin to burst with the colors, sounds, and sadly, the animatronics of Christmas. Will Santa ever get down that chimney?
Once the Christmas shopping season is thrust upon you, never you mind that Thanksgiving is almost skipped entirely because the markup on a turkey can't match the markup on icicle lights, you have to start thinking about buying presents. It's harder than you might expect. Sure you can give kids just about anything with Lego on it and they'll be happy but what about the spouse? The Dad?
This is the moment when some empathy is necessary, while you're stressed over what to get your Mom for Christmas somewhere someone is stressing over what to get you. Since you're reading Applematters there's a good chance you're a Mac fan. Since you are breathing there is a good chance that you're an iPod user. This gives those giving you gifts and easy option: the iTunes gift card.
Said gift card is fantastic, but not as flexible as it could be. You've got to buy something from the iTunes store. You can always find something at the iTunes store but what if you really need a new magic mouse or want to put an assemblage of iTunes gift cards towards the cost of a new Mac. Apple will tell you, "No way."
There are bound to be objections to this. People will point out that iTunes gift cards are sold at places like Target and Walmart and the retailers will take a cut. Thus were Apple to allow you to use iTunes gift cards to buy Apple hardware the profits margin would be shattered. This seems like a good argument on the surface but it falls apart pretty quickly when looked at closely.
When the iTunes store was first introduced, Apple maintained that it was a break even concept at best. A full 70% of the price goes to the publisher and the rest of the revenue generated is eaten up by bandwidth and management costs. The bandwidth probably doesn't cost nearly as much as it did when the store was first unveiled, but a 30% margin on a product is a bit on the light side for Apple.
Not only do the numbers not favor the notion that iTunes cards couldn't be used to purchase an equivalent amount of hardware from an Apple Store when looked at in the simplest terms there is also something called spoilage to consider. Spoilage is what happens when a gift cad is purchased and never redeemed. Yes, the word may sound like something you associate with the slowly liquefying head of lettuce in the vegetable crisper but in the corporate world spoilage is the equivalent of money for nothing.
Apple is fine from a purely financial perspective, but if it is a break even game, that is to say there is no advantage to letting people use iTunes gift cards for Apple hardware, then why bother with the change? There must be an upside for Apple for the company to be willing to make the change. And there is. Imagine a teen who gets $300 in iTunes cards for Christmas (he's popular). He can go to the iTunes store and buy $300 worth of Jay-Z songs, but if iTunes cards were more flexible, he could put that three hundred on a new Mac or towards an iPhone. Apple would gain a long term user instead of just the rush of selling a few more songs.
This Christmas, I hope Apple has a policy change to bring a little holiday cheer to Apple fans everywhere.
del.icio.us
Digg
Facebook
Slashdot
StumbleUpon
Comments
I doubt the economics.
I actually think the shops probably get the gift cards at 75% cost. That’s why there are discounts on the cards so often. Apple still makes a profit, but a very small one.
If so… that would be a massive loss for Apple
But I don’t know the truth of the costings. Do you? How much does a reseller pay for a $20 gift card?
You can go to your local supermarket and buy gift cards from just about every retailer on the planet. Starbucks, Macys, Toys R Us*. Near as I can tell, Toys R Us is not being done in by gift cards being sold at Kroger. And unlike Toys R Us, Apple is legendary for its profit margins on their products. It seems illogical to me that one can both brag about how much money they pocket off the saps who buy their hardware and then argue that they’d suffer massive losses at the hands of a slightly marked-up gift card.
But I find that, historically, the reasons people ascribe to why Apple does or does not do something are usually dead wrong. It’s very unlikely that profits have anything to do with why Apple would want to lock you down to the iTunes store with a gift card, considering Apple’s default position on anything is to lock you down.
*I realize that this is an international readership, so my apologizes if you are unfamiliar with these retail names.
That’s a good example Beeblebrox. And worth considering.
My #1 concern is that in Australia, some reseller is discounting iTunes gift cards by 25% almost constantly. Since that started a year or 2 ago I always buy gift cards instead of using my regular credit card.
Do shops do that in the US or other countries?
#2 is that we know that the iTunes gift cards have been ‘cracked’, resulting in stolen songs. This crack would grow a whole lot larger if people could buy Apple hardware.
#3 I use a local Mac reseller named MacCentric who have been brilliant. Their latest store upgrades look like the smaller Apple stores and they offer free training etc. Would people be discouraged from using resellers and JUST use Apple stores?
Anyway, perhaps Apple could enable iTunes gift cards to count towards 1/4 of an Apple purchase - or something similar. I LIKE the concept, just not sure it can work for Apple.
#1. I’ve never seen discounted gift cards. Usually what you see is what you get. That’s not to say there aren’t any, but they aren’t common. And it’s not likely that the discounts cost Apple anything at all, since the retailers get them wholesale anyway.
#2. If fraud were that much of a problem, they’d simply stop selling them altogether. They can no more afford the loss on songs than they can on hardware, considering the long-held view that they make virtually no money on songs as it is.
#3. This is actually a good argument for why profit margins are not the reason they don’t sell gift cards for hardware. If that were a concern, they wouldn’t allow 3rd party resellers. Since resellers often sell for the same price or less than an Apple store or online, then Apple is clearly making less profits on every bit of hardware not sold by them directly (this is assuming of course that the resellers are themselves allowed to make a profit and aren’t just doing it for the glory and love of Apple).
Pure and simple: Apple loves spoilage. Any corp. wants gift cards to be forgotten or lost and all that money to remain in their coffers. You can simply buy Apple gift cards up to $2500 if you want to give the gift of Apple hardware/software. Same with the iPhone: iPhone gift cards are available as well.
Beeblebrox - on my #1… If Apple really sells the gift cards to resellers for 75% of their price, do you really think that’s a good thing for them to allow those gift cards to work for Apple hardware?
Why wouldn’t it be? Like I said, that’s probably in the neighborhood of their wholesale price to resellers. That “loss” in extra profits they would have gotten from selling directly to the consumer hasn’t prevented them from allowing resellers. Why would it prevent them from selling gift cards?
iTunes Gift Cards come in various amounts, and you can choose from multiple colors and themes. Julia Timonina
Woz’s contributions to technology were huge but every bit as interesting are Woz’s contributions to society. Woz sponsored to US festivals and later went on to volunteer as a school teacher
Verifone
Thanks for sharing this information. I really like your way of expressing the opinions and sharing the information. It is good to move as chance bring new things in life, paves the way for advancement,
P J Bernstein