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Red Balloon extends gift card expiry to 3 years, as compliance pressure mounts

Naomi Simson, founder of Red Balloon, says her business was not consulted over new mandatory gift card expiry dates that have prompted the online experience retailer to spend almost half a million dollars on a new program to ensure compliance ahead of Christmas.

Legislation passed by the NSW Government in October will require gift cards sold in the state to carry a minimum expiry period of three-years from 31 March 2018, tripling the 12-month period that’s widely considered to be the industry standard.

While Simson said she was “delighted” with the change because it offered consumers more flexibility, she has outlined serious concerns about the “uncertainty” Red Balloon is facing over the regulations.

“We’re the largest gift card seller in the country … we weren’t consulted,” she told Internet Retailing.

Simson said it wouldn’t have been the right thing to do to leave consumers in the lurch by not taking the front foot and changing its policies, but that because it’s difficult for an online retailer to determine which customers are in NSW and which aren’t, investment had to be made in making the program nationwide.

Woolworths also announced yesterday that it would be extending its gift card expiry date nationally on Woolworths Group gift cards from 31 March next year.

Cross-border trading was one of the concerns raised by the Australian Retailers Association’s executive director Russell Zimmerman with NSW Minister for Innovation and Better Regulation Matt Kean at several meetings earlier this year.

Compliance concerns emerge

Zimmerman said several retailers have expressed concerns over compliance in the last few weeks, further claiming that the Minister did not listen to industry concerns and that consultation with the sector has been wholly inadequate.

The minister refused to listen … we have been advised by a number of retailers that they are not sure how they can implement this,” he said.

There is no love lost between Zimmerman and Kean, following several meetings earlier this year that led to them trading barbs.

In a media release issued this morning alongside announcing the compliance date for the new regulations on Wednesday Kean said, “there’s no reason all Australian consumers shouldn’t benefit too”.

Kean claims the changes will deliver up to $60 million a year back into the hands of NSW shoppers, who he says are being “gouged” by current 12-month expiry conventions because many aren’t using the full balance of cards in the allotted time.

Simson said Red Balloon has some 250,000 customers to work with over Christmas and that the four months provided to ensure compliance with the changes would be difficult for smaller businesses with less resources to cope with over the silly season.

“As a small business advocate I am incredibly nervous for the impact this will have on family and small businesses across the country, and I really hope the regulating authorities responsible have thought through the ramifications of the change and how they can support business owners through the transition,” Simson said.

Red Balloon cited development work, additional headcount and opportunity cost associated with prioritising the changes over other projects in the wider business plan over Christmas as notable costs.

Transition period on the horizon

Late yesterday afternoon Internet Retailing became aware of an email sent out to stakeholders by NSW Fair Trading detailing its intention to apply a transition period of a “number of months” to facilitate compliance.

Regulators are also working on guidance material to explain its approach to enforcing the changes, with an intention of finalising details by mid-January 2018.

Kean did not answer questions about whether any such program was planned when asked.

“I make no apologies for putting consumers first and I encourage businesses to do the same,” he said in a statement.

“These Australian-first gift card reforms are a major win for consumers across this state.

“Some businesses have already made the change and others are taking the opportunity to make the change across the nation, extending the benefits of longer-lasting gift cards to all Australians.

“Customers look for value and there’s no value in gift cards which expire before consumers have a chance to use them.

“I’m sure customers will look favourably upon businesses which get with the program, and that’s got to be good for business,” Kean continued.

Accounting for the changes

There are also concerns shared by Simson and the ARA over the implications extended expiry dates may have for accounting conventions and taxation requirements.

“If you are a small business in Bondi and you sell vouchers for a facial – that means that you now have to honour that voucher for the next three years and the costs to your business will change, CPI [for instance] will go up every year,” she said.

Simson noted that the Tax Office do not collect their portion until after a voucher is either used or expires.

Kean said yesterday that the gift card changes are part of an ongoing run of “consumer first” reforms by the NSW government, which Zimmerman said is concerning given what he believes is a lack of consultation provided to key stakeholders thus far.

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