The Examiners on Retail Bankruptcies: Readers Weigh In

This week, the Examiners took up the issue of suffering shoppers in retail bankruptcies. Many said bankruptcy law offers sufficient protections to customers when their favorite stores run into distress, though they acknowledged customers don’t always know how to take advantage of these protections. And while some said the onus is on the consumer to protect himself by knowing the risk involved with retail transactions, others said it is simply good business for retailers to look out for consumers.

Whether shoppers deserve special treatment divided readers on Twitter:

@WSJBankruptcy Gift cards are like unsecured micro loans to the retailer. Honoring them at all is a preference to customers.

— Matthew Skeen (@MattSkeenJr) July 30, 2015

@WSJBankruptcy Customers should not share the pain. Customers should be treated better than GUCs because they are different.

— thomas kim (@tmkr2advisors) July 27, 2015

Shelley Hunter, who blogs about gift cards and retail bankruptcies on her website Gift Card Girlfriend, says retailers can and should do a lot better.

The root of the problem here is poor communication with gift card holders, which begins well before the retailer files for bankruptcy. Despite the misconception that merchants prefer outstanding gift cards never be redeemed, the opposite is more likely. Various statistics show that people who shop with gift cards often overspend the cards’ value, shop full-priced merchandise rather than sale items and make multiple visits to use the full value of their cards. In many states, unredeemed gift card dollars eventually are transferred to the state anyway, so it behooves merchants to court gift card owners and get those dollars back into their stores.

Stores generally do a poor job of reaching out to gift card owners to remind and incentivize them to redeem their gift cards. In bankruptcy, the lack of communication that robbed the store of profitable customers in the first place now hurts the consumer instead and is viewed as a liability rather than an opportunity to move even more liquidated merchandise. It’s my belief that gift card shoppers are always profitable and should be over-communicated to during both the good times and the bad. With e-gift cards, communication is simple. With plastic gift cards, even general announcements would be better than nothing. Burying a gift card deadline on a restructuring FAQ web page to satisfy the requirement of customer notification is completely unacceptable. Merchants can and should do better.

Feel free to share your views with us in the comments or by tweeting to us at @WSJBankruptcy.