About $40B in unused gift cards attracts investors

With jobs and credit harder to come by, cash-strapped consumers increasingly are looking to bring in a little extra money selling the gift cards they receive as presents.

That’s contributing to a pickup in activity gift card resale sites, which are drawing both higher traffic and greater interest from outside investors.

Plastic Jungle, a Clovis, Calif.-based site for selling, buying and exchanging gift cards, last week announced the largest recent deal in the sector. It secured $4.8 million in a Series A venture funding round from Shasta Ventures, Bay Partners, First Round Capital and Harrison Metal.

The 12-person startup plans to use the money to add staff and expand its marketing efforts.

“There are about $40 billion worth of unspent gift cards in consumers’ desk drawers and sock drawers,” according to Gary Briggs, a former eBay chief marketing officer, who joined Plastic Jungle as CEO in November. “We think the opportunity is quite significant.”

Plastic Jungle is one of several sites competing for a slice of the gift card resale market.

Swapagift.com, launched in 2003 as an exchange for buying and selling discounted gift cards, has also attracted investor attention lately. The site was acquired for an undisclosed amount in February by Wolfe.com, which runs a network of sites for buying and selling gift cards, finding coupons and managing prepaid services. Wolfe also owns the prepaid card site GiftCards.com.

Other competitors include Clayton, Mo.-based Cardavenue, which runs sites for both exchanging and auctioning gift cards, and Briggs’ old employer, eBay, which is a major player in the resale space.

Gift card retailers and service providers have also attracted sizeable investments. GiftCertificates.com, which sells gift cards redeemable at several hundred merchants, has received $90 million in venture funding since the late 1990s, and the company last raised a $2.5 million funding round in August.

Plastic Jungle is looking to differentiate itself through its policy of guaranteeing the full value of every gift card sold on its site. Its model is also unusual in that gift card owners can opt to either sell their cards to Plastic Jungle or offer them directly to consumers for a 10% commission.

Briggs says that it’s a time consuming process for consumers to sell the cards to other users on the site, so the majority of sellers opt to sell to Plastic Jungle.

For buyers, the appeal is buying a gift card at a reduced price. As of last week, gift cards for such retail chains as Macy’s, Gap and Williams-Sonoma were commonly selling for discounts of about 10% off of face value on Plastic Jungle.

Certainly, there’s plenty of inventory to be had.

The National Retail Federation estimated that Americans spent $24.9 billion on gift cards last holiday season, and while Plastic Jungle is not yet profitable, Briggs says that the company has been seeing traffic increase about 50% each quarter.

As a result, “We did more business in the first quarter of this year than we did all of last year,” he says. —Joanna Glasner