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The Erosion of Deals
If you read this blog then you no doubt like to maximize everything and get a good deal. I certainly do my best to seek out good deals and to even show you how they can benefit you. Sometimes these deals last a long time and sometimes they go away in an instant. Other times they simply erode slowly away as the market corrects itself.
The truth is that the market will correct itself eventually. Either the deal will be too good and cost a company too much money and it will die or it will be too good and a company will realize they can make more money by charging more. My true goal is to personally stay ahead of these trends and to help you do the same. Today I noticed a deal that has eroded and thought it might be interesting to break it down.
$100 Gas Gift Cards for $90
Last year SVM Gift Cards began selling $100 gas gift cards for $90 on eBay. Depending on the brand, you could often profit a few bucks plus earn credit card rewards. Here is the math of a deal I wrote about last June for $100 BP gift cards.
- Cost of 3 gift cards: $270
- Sale Price (91.5% of face value): $274.50
- eBay Bucks earned: +$5.40
- Portal cashback: +$2.97
- Cost of postage: -$3
- Profit: $9.87 + credit card rewards
At the time, you could buy the gift cards at 90% of face value and sell them at 91.5% of face value while keeping eBay Bucks and portal rewards! Very nice. Unfortunately, the first bit of erosion came with the resale value of these cards. As more people began buying gas cards for 90% of face value, gift card resellers started paying less. As of today the best rate you can get from a reputable reseller is 89% and most are at 86%.
The Deal Didn’t Die Immediately
The resale rate erosion didn’t kill the deal immediately. After all, some people were just happy with no cost manufactured spend. If you could sell the card at a 1% loss, but you could earn 2% in eBay Bucks and 1%+ from a portal then you could still come out ahead. SVM figured this out and then guess what happened? They raised the price to $92!
That price rise made the economics even worse in most cases. Thankfully eBay Bucks deals and other promotions made the occasional purchase still make sense. Apparently that (along with other economic factors) meant that SVM felt they could still make more money and now we have this:
That is right. Welcome to the world of the $94 gas gift card. Now, I do acknowledge that manufactured spenders and gift card resellers are not the only market for these cards and in fact are probably not the primary market. SVM is probably trying to figure out at which discount level they sell the optimal level of cards at the right price. Either way, the economics of this deal are going to be tough, even with eBay Bucks promotions.
The New Math
Now let’s assume eBay sends out a 4X (8%) eBay Bucks promotion. Will it make sense to purchase these cards in order to manufacture spend?
- Cost of 3 gift cards: $282
- Sale Price (89% of face value): $267
- eBay Bucks earned: +$22.56
- Portal cashback: +$3.53
- Cost of postage: -$3
- Profit: $8.09 + credit card rewards
The answer is yes, but the deal is significantly worse. Even with a 4X promotion, you make less profit than you did before without a promotion! This is the market evening itself out. The deal has eroded. Time to move on for the most part.
One Thing to Consider
There may be one interesting side effect of this higher price. Theoretically since these cards are now discounted less, resellers may have more demand and thus the rate they are willing to pay could increase. Of course, even then you would probably still need a promotion to make a deal like this worthwhile and I doubt the purchase price would increase drastically.
Finally, Is It A Deal?
Will I cover these deals on Miles to Memories still? The answer is yes as long as you can sell the cards at zero or negative cost when combined with eBay Bucks and portals. That clearly isn’t the case now, so this is not a buy nor would I mention this sale if not within the scope of this post. But beware, a lot of deal sites still say it is a deal!
Deals like this one come and go. I did quite well buying and reselling gift cards in 2015 and still do it occasionally, although the entire gift card reselling “gig” has eroded similar to above. Now I am on to other things for the most part and hopefully I am helping you to move on too. Perhaps this post was meaningless to you, but to me it shows that deals come and go and that the market works to correct inefficiencies. (And I love inefficiencies.)
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