The USPS has notified the Postal Regulatory Commission that it intends to test market the sale of gift cards. The test would at first be limited to post offices that are already selling greeting cards. While the USPS says in its filing that the cards are “designed to support customersâ€™ mailing needs, by providing convenient access to a product that is commonly used as a means of sending a gift easily and economically through the mail”, “activation” fees would be steep- $3.95 for a $25.00 gift card, or a markup of almost 16%. Meanwhile, a postal money order incurs a fee of just $1.10 for up to a $500 face value.
Here are some more details from today’s PRC filing:
Initially, the Postal Service will test the sale of â€œopen loopâ€ cards, which are not specific to a particular merchant, but are branded by a Retail Electronic Payments Network (e.g., American Express, Discover, MasterCard or Visa) and can be used by the gift card recipient at any merchant that accepts cards administered by that Network. The Postal Service will enter into an agreement with one (or more) Issuing Bank, Retail Electronic Payments Network, or Service Provider to offer the product. The cards sold will either be the standard cards offered by the supplier(s), or customized, co-branded cards, featuring Postal Service imagery (such as stamp art or the Postal Service corporate signature). The supplier will provide all customer support for cardholders after the cards are purchased, with the Postal Service operating solely as a sales channel. The Postal Service may also test the sale of closed loop cards (i.e., cards that are specific to a particular merchant) though no plans have been established as of this date.purchased, with the Postal Service operating solely as a sales channel. The Postal Service may also test the sale of closed loop cards (i.e., cards that are specific to a particular merchant) though no plans have been established as of this date.
The market test is planned for two calendar years. In May 2011, the product will be launched in 2,000 retail locations that currently sell greeting cards, in order to take advantage of the inherent cross-selling opportunity between gift cards and greeting cards (discussed further below). The test will then expand to up to 3,000 additional locations (including locations without greeting cards) in October 2011 to capture holiday sales.
The Postal Service will generate revenue from this test through an activation fee that customers pay at the time of purchase, in addition to the amount of money loaded onto the card. The Postal Service will retain a negotiated percentage of this fee, with the remainder being transferred to the supplier of the card. The payment of activation fees for open loop cards is standard in the industry, and the fees typically run between $2.95 and $7.95; larger fees are typically charged for variable cards, and for fixed cards with higher dollar amounts. Initially, the Postal Service plans the following fees: $3.95 for a fixed $25 card; $4.95 for a fixed $50 card; and $5.95 for a variable card.