Loyalty & Rewards

Seashells And The Shifting Tides Of Gift Cards

Gift cards — no longer gathering dust in envelopes stuffed in the backs of drawers or forgotten in purses. The advent of digital gifting may be paving the way for instant cash back.

That’s part of the premise behind ShopSeashells.com, the flagship site and latest iteration of startup Seashells (we’ll stop with the alliteration in a moment).

As reported in May last year, the startup debuted with a retail loyalty program that tracked and rounded up consumers’ purchases, adding a 15 percent bonus to bring rewards and subsequent redemptions at various retailers.

In an interview with PYMNTS’ Karen Webster, Harrison Hines, cofounder and CEO of Seashells, said that, with the sunsetting of that model and the launch late last year of ShopSeashells.com, his firm is poised to take instant cash-back rewards to a new level.

“Our thesis was: I spent a lot of time in the personal finance space,” said Hines, speaking of the general genesis of the firm toward the end of 2015 and into 2016. Then, the key differentiator for Seashells was the aforementioned roundup savings program, and the free nature of its offering. But even with the benefits of that rounding up model with others, where, as Hines put it, “OK, I’ve saved a few hundred bucks, [but] there are still issues … You have to pay for [apps that are not Seashells’].”

Should gains in the pocketbook materialize, he said, most consumers opt instead to spend that money on a vacation or a flight to a desired destination and use a card, tying spending into credit card points. The company, said Hines, sold about half a million in gift cards over the six months since launch but stopped marketing just a few months in.

The gift cards, numbering about 10,000 separate cards, were ultimately redeemed for specific amounts “down to the penny … so we spoke with thousands of our users to figure out why they were doing that, and what they told us was that they were basically at the register in-store, or on the website, and when they were ready to make a purchase and they would see how much they owe, they would use their Seashells balance to pay for it. They were using their gift cards as a way to pay for their purchases and get extra rewards,” said Hines.

But one frustration uncovered, he added, was that “a lot of times [consumers] do not have enough money in their Seashells account to pay for the whole purchase” at a retailer. The account may be accruing $40–$50 monthly, he explained, but a single $200 transaction on Amazon would be out of reach.

Thus, “we took away the roundup [feature] and made a payments platform where you could use digital gift cards to pay, like you do now at Seashells … You can do it for any amount, as often as you’d like, but you get rewards specific to that retailer,” said Hines.

“Such a model has resonated very well,” he said, “so that’s when we decided to shift gears to ShopSeashells.com … [where consumers] instantly earn cash back.”

Hines said his firm is the first cash-back platform that uses digital gift card permission to offer that cash return, and it controls the payment.

“Let’s say you are buying something for $112.08 from Amazon,” he said. “You are seeing the total you owe. Then, rather than putting the credit card information into Amazon and paying the normal way and just getting your normal credit card points, you could essentially click that $112.08 total amount, and what we are doing in the background is generating a digital gift card for the $112.08 that you owe.”

“We are using that to pay instantly,” Hines said. “By doing that, we can pass along cash back instantly. We can pay the retailer net of our commission.”

So, for the sake of easy math, he proffered, if the retailer is paid $100 and the commission is 10 percent, Seashells owes the retailer $90 for the $100 gift card that is given to the consumer.

“Now, I have your $100, minus processing fees; I only have to give away $90 to the retailer, and so now, I have that $10 that I can play with in profit, and I can kick [the consumer] back $5. So, we’ll give you that cash back the second you use the gift card.”

The consumer, in turn, he said, can use that cash back on the Seashells platform, save it as credit card points or cash it out instantly to a bank account or PayPal.

Thus far, signups have passed the 24,000 mark, said Hines, with 175,000 “redeems” in just over a month since launch, with more than 150 participating retailers.

There’s an added benefit, said Hines, in that the process does not need the merchant to do anything additionally on their own end. Conversely, say, with eBates, retailers or merchants must handle processing fees, chargebacks, fraud and a host of other issues, whereas Seashells assumes that risk.

“[Retailers are] happy to pay a commission, because they are already saving 3 percent on processing,” maintained Hines, and they also see the benefits of avoiding events like fraud and chargebacks, where at the same time, all gift card sales are final, with the no returns or negative impacts on cash flow.

“Gift card sales are final,” he added, in contrast to other retail activity, where as much as 8 percent of sales are returns.

How to get consumers on board? So far, Seashells is gaining traction through websites geared toward saving money, while “we definitely want to have a more mass appeal,” which is tying into a social media push, with content marketing also joining that mix, said Hines. Near-term goals include gathering more retailers to the Seashells roster (with Uber and Chipotle, among others, signing on to the digital gift card proposition).

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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 edition of the FI Innovation Readiness Playbook examines how the innovation playing field is leveling as small FIs implement bolder strategies and larger banks adopt more measured approaches.

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