How many unused gift cards to you have right now? The next time might be sooner than you think. In a market where players are disappearing regularly George Bousis has built a substantial defensible business in the resale of gift cards.
How do you create a barrier to entry in the gift card resale business? In this interview George tells Roy exactly how he has created a technology barrier that is far superior to anything ever done before in this space. The business is growing so fast that he is hiring 3 or 4 new people every week. Based out of Chicago, Illinois, Raise.com is a company to watch.
You can listen to or read the interview below:
Roy: My name is Roy Weissman from MediaJobs.com. Today, we’re speaking with George Bousis, who’s the founder and CEO of Raise.com. Sixty-three million in gift cards go unredeemed every day. Raise is an online marketplace where users can sell unwanted gift cards to each other, turning waste into real value.
Hello George, how are you doing today?
George: Doing well, Roy. Thank you for having me.
Roy: George, we appreciate your spending the time. How did you get into this business? Why this business? What is your background? When did you start it? Why don’t you give us the basics?
George: I was in the grocery business before starting Raise.com. At the time, I was working for a family business where I was helping develop a loyalty and rewards platform. Through this platform, we’d be able to understand exactly what our customers were purchasing, how often they were coming to the store, what did they buy exactly during what season, where did they come from?
A lot of this data, these metrics kind of fed into a larger picture of a real estate portfolio; where we should open up future locations. Kind of throughout my research in the loyalty world, I guess, I came across gift cards space. Doing a little bit of research on the space, I realized there was a huge problem going on with all these unused gift cards. The gift card market was just growing every year and there wasn’t really a solution for any kind of consumers trying to turn those gift cards into cash, or buy discount gift cards of brands that they normally shop at.
So naturally, the inner-entrepreneur in myself kind of developed a little bit of a small business plan, and then tried to put two and two together of how I could create something that can really help solve a larger problem. I pretty much started the company out of my apartment about two years ago. Saw massive space, that was $100 billion plus a year, where 20% were going unredeemed every single year.
The market was growing 30% year-over-year, worldwide. I just thought it’d be a large opportunity to get involved in this space. I kind of left a day job with the family and started the company. Two years later, we’re growing fairly quickly.
Roy: When you say growing, how big are you today? Can you give us a metric?
George: Sure, there’s 43 of us here now. We’ve been actively hiring about two people a week now. Most of them here local in Chicago. As far as growth, revenue is over eight digits. It’s been quite a ride from an apartment to a large-scale operation.
Roy: You guys are doing revenues over eight digits?
George: We are.
Roy: Now, when you count revenues, you’re counting, so someone sells a gift card for $50, how much of that do you get?
George: Sure, so let’s take it through a scenario. Let’s say you have a Target gift card. You received something for your birthday and it’s a $100 gift card. You’re saying that I don’t normally shop at Target. I would rather go shop at Whole Foods. I would rather go use that money to go pay for something else that I need. You would take that Target gift card. Let’s say you wanted to list it for $0.95 on the dollar. So you list a $95 gift card that’s worth $100. As soon as the gift card sells, we charge a 15% commission to the sellers. You would collect the difference between the $95 transaction, less 15%.
Roy: When you say eight figures, that’s the gross amount for all the gift cards?
George: That’s correct.
Roy: Okay, so then you get 15% of that, whatever that number is. But that’s still pretty substantial. Within two years, you’re doing an eight figure business.
George: We are.
Roy: That’s amazing. Isn’t this space crowded? I mean, you go online. You look up unused gift cards and there’s tons of sites. One site, Plastic Jungle, claims to be the largest one.
George: Sure, well actually recently, Plastic Jungle had gone out of business. This happened a couple weeks ago. We think we’ve really solved the solution in this market. All the other players in this space are really buying gift cards from their users. If you have $100 gift card, they’ll offer you, say, $0.50 on a dollar for your gift card, or $0.60 on a dollar. So we’re taking on that liability of having to shift the card, send the card, receive the card, and worry about a ton of cash flow.
The operations cost are through the roof. What we’ve done is just created a complete C‑to‑C market, very similar to traditional marketplaces like eBay, or StubHub, or Etsy, where everything’s done by the users. At that point, we weren’t holding onto any gift card inventory. We didn’t have to worry about fulfillment. We created technologies to kind of make physical gift cards electronic. So at the point that the buyer did purchase a gift card, he could access it through his account via mobile device, print the voucher, or use it online.
Roy: But there has to be, I mean, here’s another one, Gift Card Rescue.
George: Yep. Gift Card Rescue, Card Pull, they all purchase gift cards from users and they hope to resell them.
Roy: They buy the gift card? The difference between you and these other guys is you don’t buy the gift card?
George: No, we just facilitate the transaction between buyers and sellers and collect the commission.
Roy: Is there anyone else out there doing the same thing that you guys are doing?
George: There isn’t. We’re actually the only people right now worldwide that are doing anything like this. I believe the reason for that is if you’re not familiar with the gift card space, there’s a ton of fraud in this space. Plenty of these companies have gone out of business because they didn’t understand how to combat the fraud. They were taking on all the risk.
Between holding on to the gift card, having to worry about a fulfillment center, having to send to send it out, it’s a customer service and fulfillment nightmare to have to deal with all these balances. So what we did is we invested all of our money in technology and security. We really wanted to help pioneer this space and create the best user experience with the least amount of fraud.
In doing so, our fraud is below, I’d say a quarter of 1% on this site. When there is case of fraud, we have 100% money back guarantee. We do whatever we can to fulfill any order. We’re actually working with the brands directly to combat fraud, verify balances on gift cards, and do what we can do maintain a great customer experience.
Roy: In other words, if I want to sell my Target gift card, you actually ask for the information and you verify the balance?
George: We do. We work with many of the brands to balance check that gift card to make sure that it wasn’t purchased with a stolen credit card, there wasn’t any fraudulent activity. But this all happens in seconds through our technology that we’ve created. In doing so, we’re constantly cleaning the market and making sure that every gift card is legitimate and every gift card has the balance that it was listed for.
Roy: Now, I always wondered something. When I thought of getting gift cards, I said why do I need to go to get a Banana Republic gift card. Why don’t I just get a $100 Visa card and give it away, and then they can use it any place?
George: Sure, the problem with the Visa cards is that they have set up fees. So as soon as you go to activate the card, plenty of times there’s a hidden $7 or $8 fee, sometimes lower, sometimes higher. After a year of inactivity, the credit card companies can actually issue a fee monthly until that gift card is actually drained.
Roy: But don’t the merchants, don’t they expire their gift cards too?
George: Well, in 2009 there was something called the Card Act that was created. I think this is why the secondary market grew so much. There was regulation in the gift card space, where gift cards could not expire for at least five years. Most of these national retailers, to avoid dealing with a state-by-state gift card laws, created a non-expiration policy for their gift cards. However, this left a ton of liability for a lot of the brands because a gift card is a liability on the books until they come back and book that revenue in their stores. What’s happened here is we’re actually working with a lot of the brands now to leverage those individuals and bring the motivated shoppers back into their stores.
Roy: You’re actually working with the brands? You envision getting revenue from the brands for promoting their cards?
George: Yes. There’s a long-term play as far as working with brands, levering a lot of data. There’s a lot of rich data that we have for brands that has to do with what other brands is an Apple user interested in? What motivates an Apple user? How much are they willing to spend? What is their demographic? So there’s a ton of information that we have working with the brands to create a positive overall experience both in store and while a user’s shopping.
Roy: How are you building your customers? Just online? Just [to] online marketing?
George: There’s a kind of different variety of ways that we’re building our customer base. Building it through [atrility] channels, building it through search engine. We started doing a little bit of paid search, working with offline partnerships as well. I can’t really discuss those right now. But there’s a ton of offline opportunities that we have that many people are going to see coming up in the next upcoming months.
Roy: Okay, so do you see yourself as more of a technology company or a marketing company?
George: Well, I see us more as a technology company with a kind of proficiency in marketing. We work with a ton of data. We have a ton of engineers here. Overall, our most important kind of way that we operate our business is from a customer service standpoint. Our customers are very important to us and we always want everybody to enjoy their shopping experience in our stores.
Essentially you’re offering people to have the power of buying money for less. You’re raising people’s purchase power. By doing so, I mean that if you know you’re going to go spend money at Wal-Mart or you know you’re going to go shop at Whole Foods, why wouldn’t you come on Raise.com and come purchase a discount gift card to any of those stores, use them rightfully at the stores, and save money for shopping at a store you’re already going to spend money at?
Roy: Now when I buy this discount card, these days you just send me a code number or I have to wait for you to mail me the card?
George: Most of the transactions on our site, it’s reaching about 90%, are all electronically. What happens is when you purchase a gift card, it’s electronically available, seamlessly on you’re my Account page. You can access that account via mobile device, because our website is optimized using HTML 5 for smart phones. You can access it on a home computer and print out a voucher. Or you can shop directly online by using that code.
Roy: So of your 43 employees, what are the greatest percentage? What disciplines are they?
George: I would say member services, the risk department, and sales, followed by engineering, affiliate marketing, social, content, and creative user experience and user interface.
Roy: The new people that you’re hiring, what kind of roles are they?
George: It’s pretty much spread across the organization. We’re obviously looking for more engineers at this time. By engineers, I mean programmers. We’re looking for member services. As the business has been scaling and growing, we’ve been growing in the upper two or three digits every month. To deal with the call volumes and deal with the emails and the live chats and everything, the fastest growing department, I’d have to say, is the member services, followed by our sales team.
Roy: Many of your customers don’t just do it online? They call you up?
George: They do.
Roy: Why do you think that is? They don’t know you? What do you think the reason is?
George: Well, they don’t know. There’s questions. How can I redeem the card? Again, those are all answered on our site. But many people don’t want to dig around or look for something. Maybe a card goes bad. Hey, there’s no balance on this gift card. Well, what we do is, when you’re processing thousands of transactions, you’re going to have a problem once in awhile.
What happens is we have to open an investigation ticket, look into the seller, see what happened, contact the brand, work with them to see what we can do. Overall, just kind of caters into the whole positive experience that we have for our buyers. Many times there’s questions on the sellers side. How are the fees assessed? When am I paying the fees? Are there any upfront costs? Again, these are all available online. But you’re always going to have customers that are going to call in and we’re more than happy to answer those questions and help our users out to really educate them on what’s going on.
Because again, this is a very new space. There’s not much known about it of, I’d say, all gift card buyers, I would say that maybe 1 or 2% only know that you can sell a gift card online and you can get cash back for it. It’s really growing very rapidly. As kind of the space grows, you’re doing what you can to educate users and other consumers out there on how to sell a gift card or how to buy a discount gift card to any brand.
Roy: When I buy a gift card, what, do I print out a certificate that says I have a gift card for X amount or something?
George: Exactly. Let’s say if you come on our site. We have brands like JC Penny have 20% off, or Starbucks have 20% off. Every day brands that you’re normally going to shop at. When you purchase one of these gift cards, the order is processed and you’ll get an email that says that the gift card is now available in your account. You would log into your account and you can either access that using a mobile device. You would show your mobile phone to the cashier at the store. She would type in the pin or scan the phone. You can print out a voucher and hand it to the cashier and she would punch it in, or again, scan it. Or if you’re an online shopper, you can take that gift card serial number and pin, and go shop online.
Roy: What would you say, obviously it sounds like you’ve built a phenomenal business in a short period of time, but what’s to stop the big guys or somebody in doing this? What do you think your secret sauce is? What’s that barrier to entry for the other guy?
George: I just really think we’re very, very far ahead with partnerships, very ahead in technology and research and combating fraud, and order processing, and in name. I would say we are easily a year and a half to two years ahead of any competition in joining the space. Of course, we welcome anybody in coming into the space. It just further validates our business. But we don’t really see any threats anytime soon or in general at all.
Roy: What do you envision, say five years from today? What do you vision your revenue models to be? Where are you going to be generating revenue? Obviously selling, doing the gift cards. Any other channels also?
George: Sure, I think there’s other kind of plans that we have as far as advertising. There’s placement opportunities for brands. There’s brands selling direct on our marketplace. There’s these offline partnerships. There’s data. We’re in development of large technology that we’re going to be releasing, I would say in two, four, or latter part of two, three now.
So there’s a ton of things that we’re doing to build on this. In any marketplace, it’s all about critical mass and volume. We’re reaching that point of critical mass and volume processing thousands of transactions every day. The growth has been phenomenal. As more partnerships are established, as we continue to grow on distribution, we know there’s always going to be a buyer on the other end. Because you’re always getting a deal on our site. Regardless of the brand that you’re shopping at, regardless of the restaurant that you’re eating at. There’s usually always something that’s available.
Roy: How much do you envision, do you envision using the data to market other products to your customers?
George: Yes, I think it’s really tailoring the site to become a social shopping experience and working with the brands to motivate users to come shop in their stores and really understand a bit more about the user. So understanding that if you’re in the market for home improvement, what can I do to motivate that user to continue shopping, not only using our site, but going to those stores that are featured on our site and spending money.
Roy: How many customers have you guys done business with to date?
George: There’s been over 100,000 now.
Roy: You obviously have them all on an email list?
George: That’s correct.
Roy: That’s very impressive. Why do you think you’ve been so successful with this? What do you think you’ve done, did you raise money to start this business?
George: I think it’s the market. It was ripe for disruption. There’s a huge market opportunity when there was regulation of the gift card space, it kind of opened up the secondary marketing gift cards. I think timing is a big thing.
I’d say experience. We have a very, very talented team here, from our CTO, from our COO, who’s also my co-founder, from other individuals here in the affiliate space, to member services. There’s just a ton of experience.
There’s a very hard work ethic. I think coming from Chicago, having that strong work ethic and having good people on your side, it’s just been game changing for us. I work seven days a week, pretty much mornings and nights. The thing is you have to do whatever it takes as an entrepreneur to make sure that your business succeeds. You never want to be that individual that says if only I’d worked a little harder, worked a little longer, worked on these days, things could have gone my way.
From two years, from my apartment to now having, we have an 8,000 square foot space here in Chicago and are going to be expanding on another 4,000 square feet and growing. I think really the decisions that you make early on and not spending money outside your means, and really understanding your business. I think the problem is that there are many companies that raise money a little bit too soon. Rather than building a great product that people find tremendous value in, they look to try to make as much money as they can, as fast as possible. I think that’s the wrong approach.
I think you need to invest in your product. You need to provide the best user experience and the best interface, the best shopping experience online, in the case of an ecommerce store. You have to give people a reason to come back. That’s really what we’ve done.
Our average customer comes back multiple times per month and shops multiple times per month. There’s a ton of reengagement. We’re very targeted with the groups that we go after. We don’t just spend money to spend money. I think it’s making smart decisions, factual decisions using data and numbers to back up everything that you’re doing. I think that’s where a ton of the success comes from.
Roy: What percentage of your business is repeat business?
George: We have an 89% repeat order probability. Which, in traditional ecommerce is between 7 and 10%.
Roy: I was going to say, 89% is just, it’s beyond enormous. That’s like giganto enormous.
George: Exactly. You’re solving a greater problem, I think, is really the large piece here.
Roy: Well, when you calculate, any business, especially in an ecommerce business, the cost of acquisition is critical. What do they say in the cell phone business, it costs them something like 5 or $600 to get an account. And that’s on top of the cost of the phone and all kinds of stuff. Yet, if you get 89% repeat business, that means the cost to the person to come back is minuscule.
George: Well actually, our customer acquisition, we actually make money on the customer acquisition cost. It’s a very strange, I’d say, opportunity. But again, it’s very practical and very easy to understand our business. You’re buying discount gift cards to brands that you’re normally shopping at. You’re selling gift cards and getting cash for ones in places that you don’t normally shop at or are not going to spend money at.
Roy: Now did you guys raise money to start this business?
George: Early on, I kind of used all of my own money starting the business. Practically went broke and borrowed a little bit of money from my mother, who secretly helped us out because I didn’t want to admit to my father that I needed a little bit of help. I think it’s being a little bit of a bully or being a little bit tough on myself. I started the business at 23 years old out of college. There’s not much I could do.
With that little bit of money, we built a business, got it off the ground. Then we raised a little bit of money through some friends and family. Since then, we’ve just grown tremendously. We’ve had plenty of opportunities to raise money with private equity groups and venture firms.
We’ve, to date, turned everything down. I think it is in our plans because we’re reaching that point of scale and growth, and we’re also looking towards internationalization. I think that’s a huge milestone and a very large opportunity for us to continue to grow the business as we look to expand other markets.
Roy: Can you give us a sense of how much money you initially raised in total to get this business off the ground?
George: It was a couple million dollars.
Roy: Oh, okay. Okay. Then, of course, your partner, you said is a developer?
George: My partner actually had a very extensive background in ecommerce. He has started another successful company that was called [Vilio]. They offered product deals on a daily basis that were heavily discounted. Then he was involved in a drop shipping business, which did product fulfillment for other large ecommerce websites.
After I’d gone to business school and came up with a plan, I kind of reached out to him and was like hey, would you like to start this with me? I really think this can be something big. He saw the opportunity and jumped on board right away.
Early on, our website was called coupontrade.com. Our whole idea behind that was consolidated savings. It was a place where you can find gift cards and coupons and deals and everything all under one domain.
In doing that, we found that there was a little bit of disconnect as far as gift cards and coupons go. So we decided to split the two properties and continued on with Raise.com while also maintaining Coupon Trade as a very successful online coupon site.
We still have that website, too, to date. It’s a very successful site. It’s a great way to save money as far as coupon codes and online offers and whatnot goes. You can also stack your savings, so you can buy a discount gift card on Raise and if you’re a savvy internet shopper, you can head over to Coupon Trade and use one of these coupon codes and save more money at checkout.
Roy: Now the Coupon Trade, is that national?
George: Coupon Trade is national.
Roy: Oh, okay.
George: We work with thousands of stores on there, everything from Nordstrom, Nike, Target, Macy’s, a ton of these brands where you can come on our site, purchase a gift card at 15 or 20 or 30% off. Then you can go on Coupon Trade and find another coupon and save between 5 and 50% off. Combine those savings and save all you can when shopping online.
Roy: In two years, you’ve done a phenomenal job building up this business. Where do you think you’re going to be in three years from a revenue standpoint?
George: From a revenue standpoint, we should at least be in a couple hundred million dollars in revenue in the next couple of years. We already have plans and growth and a whole, I guess, forecast of events and milestones that we have in mind of working with other affiliates offline, online, other ways to continue growing the business. I think if you look at the rate that the business is growing at today, it’s very realistic to be at that level in the next 12 months.
Roy: Who you going to sell the business to?
George: Well, I think when you build a company and you look to build a successful business, you’re not looking for the sale right away. I think we’re looking to build long-term business and a business that will continue to succeed and make money, and can solve a larger problem out there for users. I think at any point, if there’s an acquisition or anything that is presented and it’s a right offer, or if we believe that the acquirer will continue our mission to help users and help consumers solve this problem, I think it’s very likely. In the event that we think that individual or that company doesn’t share the vision that we do, I think we would rather continue on and help continue building the business.
Roy: George, you’ve built a phenomenal business here. Eighty-nine percent. I’ll never forget that number. Eighty-nine, I mean that’s like, phenomenal. It’s like, if you said that number to anyone, even in the middle of nowhere, they’d be impressed, even if they didn’t even know they’d be impressed. Eighty-nine percent repeat business.
George: We’re constantly being impressed with what we were doing and so it’s been a dream come true. It’s been an amazing adventure. I don’t have any regrets.
Roy: And then, an acquisition cost that you make money on, marketers would just be drooling at that thought. Today, people always talk about you got to have an upsell and you have to have ten other things to sell them. So you lose money on the first sale. You guys, you’re not supposed to make money on the acquisition cost. You guys have built a phenomenal business in such a short period of time. Is there anything I didn’t ask you that you wanted to mention that you think is important?
George: I think you pretty much summed it up. Everything was great. I’m more than happy to answer any other questions or anything else that you may have. Again, I think this whole user acquisition model for many business, I think it’s just a bit too much to have to spend money too early before really understanding your business. Especially for us, market share was very important. By building a product that people use in their everyday lives, on average when looking at our entire user base, time to second transaction, the second time that they transact on a site is less than 15 days.
You’re looking at, in a period of about two weeks, you’re having a user come back and shop twice on our platform. Again, I think it’s really providing the users the great experience with a ton of value and something that’s very practical and easy to understand.
Roy: Two things I didn’t ask you, are your cards right now domestic, or are you going to be expanding internationally? What are your plans there?
George: All of our cards are domestic currently. Most of them, national retail stores. We are looking at local businesses as well and creating a gift card programs, as you may. International expansion is huge for us. I think there’s a huge market opportunity in Europe, in South America as the economy rises there and there’s more and more consumers. There’s a huge opportunity in China that we’ve been looking at as well in the gift card space.
Now that we’ve already built the platform, it’s then doing our diligence and working with other stores in those areas. I think that international expansion is very realistic and going to be coming very soon.
Roy: Where do you think you’d start with international?
George: Probably Canada as the closest friend and fairly similar market to move down into it. After that, I’d probably say then the U.K. and Germany, France, the entire EU, and then on from there.
Roy: What percentage of your traffic now is mobile?
George: Mobile traffic, I would say is about 15% on our site right now. We’ve seen that steadily increase as our site has been recently [mobile-ly] optimized for smartphones. That will continue to go up with time. As this entire mobile experience, more and more people begin to use it and redeem these in store, it just becomes easier and easier. You’re kind of getting a bit of that barrier to entry, if you figure that today most people have smart phones.
What we’re trying to do is train the consumer in the thought that you can live life spending less. So if I know in the morning, my routine is getting up and going to Starbucks, I can purchase a Starbucks gift card at 20% off and get a couple free coffees over time. If I know my next stop is going to Walgreens to grab a couple things, I can buy a gift card and use it at check out and save a couple dollars there.
I know I’m going to a local grocery store. I’m going into a Whole Foods, or I’m going into an Albertson’s or Safeway, I can purchase a discount gift card and save more money there. I think it’s really useful and practical life to really save money on everyday things.
Roy: George, you’ve done a phenomenal job. We’re going to keep an eye peeled on you guys. I mean, if ever there was an up and coming company that is really poised to, I mean, you’re doing phenomenal, you’re ready. I think it’s going to be interesting to see. You’ve built a strong infrastructure. It’s going to be interesting to see in the next year or two how you grow. There’s some very unique opportunities to market your products and to build the business. Your numbers are already indicative of a very strong business model. How would people get in touch with you if they wanted to reach you?
George: They can email us at raise.com. There’s also support at Raise. Those emails for any type of press opportunities or just any kind of feedback in general. More than happy to answer any questions. Many times I hop on the phones and call some of our users and speak to them and ask them about their experience and how we can constantly improve our site and what we can do to really continue to grow and help provide people with this best experience. Any type of feedback, any type of inquiries or whatnot, more than happy to respond to them. Again, happy to do so.
Roy: One last question. How did you get the domain name Raise.com?
George: That’s the million dollar question that I’m asked all the time.
Roy: I can’t believe I waited this long to ask it.
George: Sure. That’s been something that a ton of people have been asking me about. There’s a very long and tough process that we went through. As you know, domains are really coming back right now. There’s a huge emphasis on domains and branding and then creating kind of a meaningful brand behind it.
We’re very fortunate to have one of our investors who’s a brand strategist. He’s really helped us through this transition. We kind of came up with the name Raise.com because we wanted to help raise people’s purchase power and really change the conversation when it comes to loyalty and rewarding individuals and driving behavior in stores.
So we came up with the name. We went out to go buy it and the seller of the domain had asked me for a $1 million. As a startup, that’s a tough number to kind of compete with at the time. We didn’t really think it would be realistic. But I had spoken to some of our investors. I had spoken to the team. They said you should do what you can and go after it.
I think the inner grocery sales person in me kind of came out at that point. Going back and forth with that individual that owned the domain, I ended up buying the domain for less than $50,000 and got an offer actually a week later for $400,000.
Roy: Wow. Buyer’s remorse, you had none. You were happy when someone made that—maybe it was the guys friend who sold it to you. He had his friend make that offer so that you wouldn’t renege on his deal.
George: Maybe it was. I think it was a great investment. I think that we really invested in our brand and invested in creating something that was premium and something that could really connect with people.
Roy: George, you’ve been very generous with your time. You shared some great information with us. I think you guys, we’re definitely going to have to check in with you in a year and see how things are going. It sounds like it’s going to be like, substantially larger in a year from now. It sounds like you’ve got a phenomenal business going. We wish you the best.
George: Roy, thank you so much for your time. I really appreciate everything. Thank you for the questions. I’m happy to have answered them and happy again, to discuss everything again later down the road.
Roy: Thanks so much, George. Have a good day.
George: Thank you, Roy. You too.