Gift Certificate Prizes Losing Value

An owner Mr. A of a “Sea Story” game arcade closed his store on Tuesday after running it for two years in the Gangnam area of Seoul.

He had no choice but to close the store because daily proceeds have fallen 30 percent recently, and there is no way to distribute gift vouchers. He decided it was best to close the arcade rather than to be pressured to take on more vouchers from distributors.

“The voucher market was paralyzed a few days ago. Most gift certificate issuers are refusing to take refunds. This could disrupt the gift certificate market as a whole.”

The voucher market is rapidly freezing, and gift certificates are losing the function of securities as stores refuse to receive even culture and movie gift certificates.

Experts point out that this could lead to decreased consumption and economic slowdown.

Mr. B, owner of a game arcade ‘Sea Story’ in Gangbuk area demanded the gift certificate issuer to refund 10,000 vouchers in vain. “The game industry is anxious that the voucher issuers are not able to take refunds,” he said.

“I am frustrated because there is no way to convert stacked vouchers into cash,” said another owner of an arcade in Gangdong-gu, Seoul.

Gift certificate distributors are also having a difficult time.

“Requests to refund vouchers have quadrupled since earlier this week. We cannot do anything because if the voucher issuers go bankrupt, distributors are likely to follow suit,” said a representative of a voucher distribution company.

“More than half of the voucher issuers have less than a 50 percent cash reserve ratio. Five to six issuers are regarded as bankrupt in the market,” said Park Roh-hyung, representative of a voucher distribution and consulting company Webutopia.

According to Seoul Guarantee Insurance, payment reserves of voucher issuers was 210 billion won as of late June, which is 21 percent of overall voucher issue limit. Taking into account that gift certificate issuers are cashing in provisions, the cash reserve ratio is estimated to be less than 10 percent at present.

“Transaction of game vouchers stopped since earlier this week. The vouchers are losing their function, with prices plummeting,” said Choi Cha-hyun, a manager of online gift certificate distributor Ticketnara.

“The worse case scenario is a voucher issuer going bankrupt intentionally and fleeing the country. Preventive measures should be taken,” said Kim Min-seok, chairman of Korea Computer Game Industrial Association.

With the game voucher market de facto paralyzed, affiliated stores are reluctant in receiving all gift certificates.

Owners of affiliated stores held an emergency meeting on Wednesday and decided to cancel the affiliation.

“Currently, all gift certificates issued by game voucher issuers are dishonored bills. We are not receiving certificates because of the risk of ‘cashability’,” said an owner of an affiliated store.

If the affiliation contract is retracted, almost all gift certificates including culture, game, and movie vouchers will lose the function of securities.

“Gift certificates accelerate transaction to more than 50 percent than cash. If gift certificates as a whole lose the function of securities, this could be a huge blow to related industries not to mention the film industry,” said Song Tae-jeong, a researcher at LG Economic Research Institute.