Breakage

AAA

DEFINITION of 'Breakage'

Revenue gained by retailers through unredeemed, expired or lost gift cards. Breakage refers to money received from gift cards but never redemeed by customers. In 2006 it was estimated that consumers lost over $8 billion annually due to breakage. Most retailers no longer place restrictions (i.e. dormancy fees, expiration dates, etc.) on their gift cards to eliminate the accounting uncertainty they create.

INVESTOPEDIA EXPLAINS 'Breakage'

In 2007 the FTC settled a case it brought against Darden Restaurants for failure to disclose its gift cards dormancy fees and reached the same outcome in similar action it filed against Kmart. The rulings required both companies to reimburse customers who lost money due to the inadequately disclosed gift card fees.

RELATED TERMS
  1. Economic Indicator

    An economic indicator is a piece of economic data, usually of ...
  2. Chain Store Sales

    An indicator that provides information on the monthly sales volumes ...
  3. Federal Trade Commission - FTC

    An independent federal agency whose main goals are to protect ...
  4. Retail Sales

    An aggregated measure of the sales of retail goods over a stated ...
  5. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced ...
  6. Duty Free

    Goods that international travelers can purchase without paying ...
RELATED FAQS
  1. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  2. How can I find net margin by looking a company's financial statements?

    In finance and accounting, financial statements represent the fundamental means of analyzing a company's financial position, ... Read Full Answer >>
  3. What can working capital turnover ratios tell a trader?

    A company's working capital turnover ratio is traditionally positively correlated with business performance. A high, or better ... Read Full Answer >>
  4. How can I invest in electronic retailing (e-tailing)?

    Electronic retail is one of the fastest growing segments of the economy. Every year, more people are choosing to purchase ... Read Full Answer >>
  5. What is the difference between JIT (just in time) and CMI (customer managed inventory)?

    Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >>
  6. What are some common ways product differentiation is achieved?

    There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Measuring Company Efficiency

    Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period.
  2. Investing

    Choosing The Winners In The Click-And-Mortar Game

    E-tailing has changed the way consumers do nearly everything. Do you know how to pick the best retailer?
  3. Markets

    Consumer Spending As A Market Indicator

    What people buy and where they shop can provide valuable information about the economy.
  4. Fundamental Analysis

    Analyzing Retail Stocks

    To analyze retail stocks, investors need to be aware of the most common metrics used. Find out what they are.
  5. Options & Futures

    Are Structured Retail Products Too Good To Be True?

    Spot a rotten investment before you get seduced by its sweet promise of profit.
  6. Investing

    Doing More With Less: The Sales-Per-Employee Ratio

    If used properly, this ratio can give you insight into a company's productivity and financial health.
  7. Professionals

    Are These the 10 Best Stocks in the World?

    Most of the top 10 stocks in the world have performed exceptionally well over the past several years. Here's a look at their future prospects.
  8. Credit & Loans

    Credit Card Review: Premier Rewards Gold Amex

    Read more about the American Express Premier Rewards Gold card, one of the top charge cards in the United States and a favorite among frequent flyers.
  9. Credit & Loans

    Credit Card Review: Gold Delta SkyMiles Amex

    Learn about the three American Express cards that partner with Delta Airlines. Understand the benefits of the Gold Delta SkyMiles AmEx card.
  10. Credit & Loans

    Credit Card Review: Citi ThankYou Preferred

    Understand what makes a reward credit card worth opening. Learn about the Citi ThankYou Preferred card and its benefits and drawbacks.

You May Also Like

Hot Definitions
  1. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  2. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  3. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  4. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  5. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  6. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!