WWD.com/business-news/digital/mall-operator-chains-debunk-internet-hoax-on-gift-cards-1877651/
government-trade
government-trade

Mall Operator, Chains Debunk Internet Hoax on Gift Cards

Merchants seek to reassure shoppers that cards will be honored.

Eddie Bauer took steps to debunk the e-mail hoax.

Seeking to reassure customers, the third largest U.S. retail property manager and chains such as Eddie Bauer and Talbots are taking steps to debunk an Internet hoax warning shoppers not to buy holiday gift cards.

This story first appeared in the December 4, 2008 issue of WWD.  Subscribe Today.

An e-mail circulating since mid-November says gift cards from certain retailers will become invalid on Jan. 1 because of impending bankruptcies or store closures. It lists Gap Inc., Macy’s Inc., The Talbots Inc., Pacific Sunwear of California Inc., Eddie Bauer Holdings Inc. and others, which has led to hundreds of consumer calls and Web inquiries.

Responding to the bogus claims, Jones Lang LaSalle, which manages about 120 malls, said it will guarantee holiday gift cards by issuing a mall credit of equal value if a gift card sold by one of its national retail tenants is unredeemable because of Chapter 7 liquidation filed between Nov. 28, 2008, and Jan. 31, 2009.

The Chicago-based firm has placed guarantee signs at its properties, given retailers fliers to distribute about the program and launched a Web site, GetTheFactsonGiftCards.com.

“As economic conditions threaten to put a damper on the spirit of the season, let us offer you this promise,” according to a statement on the Web site. “When you purchase a gift card from one of our national retailers, you have our promise to help see that your gift card is redeemed.”

Talbots and Eddie Bauer also put statements on their Web sites, refuting the e-mail and assuring customers that, even if certain stores close, gift cards can be used online or in hundreds of other U.S. locations.

“Rumors of mass closings of Eddie Bauer stores are false,” wrote company president and chief executive officer Neil Fiske.

Talbots ceo Trudy Sullivan posted: “There is an e-mail…that advises consumers to ‘use or lose’ gift cards from 29 retailers, including Talbots, because their stores are closing. This e-mail contains inaccurate information….It is our policy not to comment on rumors, but this one is potentially damaging to the relationship we have with you, our loyal customers, so we feel it’s important to clarify the facts.”

Greg Maloney, president and ceo of Jones Lang LaSalle, said two weeks ago, mall managers began to be deluged with calls from shoppers.

“We wanted to get as much information out as quickly as possible to set everyone’s mind at ease,” he said.

Maloney said he does not expect Jones Lang LaSalle to end up on the hook financially, but stressed the gesture was important to calm consumers and protect gift-card sales, projected this holiday season at about $25 billion nationwide.

An Eddie Bauer spokeswoman said the brand received “hundreds” of calls, prompting it to post Fiske’s statement on the Web site and then, when the calls kept coming, to e-mail thousands of customers.

A Gap spokeswoman also said the brand had received a significant number of inquiries.

A spokesman for General Growth Properties, the nation’s second largest mall owner, said the company is “continuously monitoring Internet conversation about gift cards,” but declined to comment further.

Taubman Centers had not received calls about the e-mail, said a spokeswoman.

Simon Property Group declined comment. A Macy’s spokesman said the company has received a few calls about the e-mail, but it hasn’t been a major issue.

Store executives would not discuss the impact of the rumor on gift-card sales. However, National Retail Federation vice president Ellen Davis said that some revenue loss is inevitable.

“This will discourage some shoppers from buying gift cards,” Davis said. “It could turn into a self-fulfilling prophecy that really impacts gift cards and on into inventory levels and first-quarter sales [results.]”

The rumor has been particularly insidious given the climate of fear and because it lumps liquidations (Sharper Image and Linens-N-Things), with retailers like Macy’s, Talbots and PacSun, which have selectively pruned locations or closed secondary concepts this year.

Davis said retailers in recent years have become accustomed to buying some merchandise specifically for early January, to freshen their stores for the gift-card crowd. With fewer gift cards sold, stores have less opportunity to reach new customers and preview spring.

Even without the rumor, the NRF is projecting gift-card sales will drop 6 percent, to $24.9 billion from $26.25 billion last year, with the average person spending $147.33 on cards.

An NRF survey found shoppers planned to hunt for bargains rather than buy gift cards, which don’t go on sale.

In a related matter, the gift-card industry may be subject to greater regulation after several Chapter 7 liquidations in which consumers lost money. The Sharper Image, for example, didn’t honor an estimated $20 million in gift-card obligations before shuttering. Linens-N-Things, which says it no longer accepts gift cards on its Web site, estimated in court filings it averaged $9.25 million in monthly gift card redemptions.

In September, the Consumers Union and three other advocacy groups filed a petition to the Federal Trade Commission saying the agency “should declare it an unfair and deceptive practice for retailers to sell gift cards without segregating and holding in trust gift-card funds” to guarantee that consumers receive face value in the event of a retailer’s liquidation.

At present, customers holding gift cards to bankrupt retailers end up as unsecured creditors, below company employees.

In a Nov. 14 response to the petition, FTC chairman William Kovacic said the commission had begun to study the issue.