By Allan Maurer
ELLICOTTE, MD—Dig through a wallet or purse and you may come up with an unused gift card from a merchant selling stuff you don’t need. Now, you can sell unwanted gift cards for cash to GiftCardRescue. When the entrepreneur who started the business appeared on ABC’s program “The Shark Tank,” two investors liked the idea enough to put up a total of $200,000 for a 50 percent stake in the company.
“The idea,” founder and CEO Kwame Kuadey tells TechJournal South, “came from a friend. “He had a problem a lot of people have. He had accumulated a lot of gift cards from stores he didn’t care much for. He wanted to get rid of them.”
Kuadey, then an MBA student at John Hopkin’s business school, says that out of curiosity he decided to look into the problem, doing it as an MBA project. “People were selling them on eBay and through Craigslist,” he says.
He started his company and ran it on the side while working for Citi Group fulltime after he graduated. When his Citi job was “discontinued” last December, he decided to go fulltime with the site and “go with it.”
Since then, aided by stellar press coverage that provided national publicity from The Washington Post, The New York Times, NPR, and the legion of bloggers and others who picked up the story, the company progressed to the point where it is doing $100,000 in sales this year and expects to do $150,000 next year. “The publicity was a God send from our perspective as a small company with no money for PR,” Kuadey says.
GiftCardRescue buys cards at 70 percent of their value and sells it at 10 percent off the face value, making its money on the difference.
“We don’t buy cards from all merchants,” Kuadey says. “We buy from the ones most wanted by consumers, about 150 to 200 merchants. We deal in cards that move very quickly.
The company focuses on national retailers and even among them, some specific cards wouldn’t move when offered at 25 percent off, and after a year in business, the company now recognizes more of those.
Some customers who shop specific retailers such as WalMart frequently return to the site often. “That way they can launch a sale before even going into the store,” says Kuadey. That’s an effective strategy for shoppers, especially when they add the gift card savings to store discounts, he notes.
So, 70 percent of the companies customers are repeat buyers,” he says.
His MBA background helped him prepare for his appearance on the “Shark Tank” program, he says.
“I knew how to prepare my pitch and value my company in a reasonable fashion,” he says. He valued GiftCardRescue at half a million and impressed two investors enough to garner $100,000 from each, giving them a 50 percent stake in the company.
He went in wanting to sell a 30 percent stake, but says, “The way I look at it, I’d rather have a smaller portion of something big. These two investors have been in the online space a longtime and have the background I need to grow the company.”
The firm has recently added new features such as a want list and gift card alerts.
Currently run by Kuadey and an intern, the company may look to hire a marketing person as sales ramp up.
Online: www.giftcardrescue.com
Southeast Venture Conference, February 29 – March 1, 2012 at the Ritz Carlton in Tysons Corner, VA – Where Smart Money Meets Smart People.
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