Gift vouchers/cards is a concept that has become quite popular in the last few years and most retail chains that have a multi-city presence seem to have their own gift card options these days. 

Gift cards come in handy when you want to buy someone a gift and are not sure of what to buy. Rather than buying someone a lampshade and wonder if it will go with the curtains in her living room, you might as well gift her a gift card for a home furnishing store and let her make the choice. 

I understand the utility and selling proposition of gift cards, however I’ m not satisfied with the way these are priced. A gift card/voucher that entitles you to a purchase of Rs. 1,000 is typcially sold for Rs. 1,000. So, in effect you exchange cash for something that can be used to make a purchase of an equivalent amount at specific stores before a specific date. From the perspective of a store owner that is great value:

•  You get the money upfront and can earn some additional interest on it
• The redemption rate on the gift cards won’t be 100%. A small percentage of them won’t be redeemed at all, some of them won’t be redeemed for the full value. 
• A few customers might end up buying goods for value more than the gift card’s value to redeem it fully, thereby generating additional revenues. 

If you are the owner of a retail chain, won’t you be interested in promoting gift cards and selling them at less than their face value (let’s say, a Rs. 1,000 gift card for Rs. 950)? One major problem that comes in the way of offering a discount on the gift cards is how to stop regular customers from paying off their purchases through a gift card (Rather than paying for an item for Rs 2,000 in cash, you could as well buy a gift cards for Rs. 1,900 and buy the item through it). 

Can you think of a better way to price the gift cards to promote their sale? One suggestion that I had in mind was moving ahead the validity start date of the gift card by a few days. So, you can buy a gift card today for a face value of Rs. 1,000 at Rs. 950, but it can only be redeemed starting 3 days later (or, you can redeem it for Rs. 950 in the next 3 days). One can still pay for one’s purchases and get a discount by buying a gift card a few days in advance, but my guess is the proportion of people doing that would be quite low. Any better ideas?