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. Federal Trade Commission - FTC

    An independent federal agency whose main goals are to protect ...
  3. Chain Store Sales

    An indicator that provides information on the monthly sales volumes ...
  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. Luhn Algorithm

    An algorithm used to validate a credit card number.
RELATED FAQS
  1. How is minimum transfer price calculated?

    A company that transfers goods between multiple divisions needs to establish a transfer price so that each division can track ... Read Full Answer >>
  2. How is a product line depth related to a product line?

    A company's product line depth is the number of products in the company's product line. Product Line A product line is a ... Read Full Answer >>
  3. What is the effective interest method of amortization?

    The effective interest method is an accounting practice used for discounting a bond. This method is used for bonds sold at ... Read Full Answer >>
  4. How has electronic retailing (e-tailing) changed the consumer discretionary goods ...

    Electronic retailing has changed the consumer discretionary goods sector by increasing price transparency and product information. ... Read Full Answer >>
  5. What does an unfavorable variance indicate to management?

    In managerial accounting, an unfavorable variance is discovered when a company's management performs a comparison between ... Read Full Answer >>
  6. Is there a way to include intangible assets in book-to-market ratio calculations?

    The book-to-market ratio is used in fundamental analysis to identify whether a company's securities are overvalued or undervalued. ... 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. Economics

    Calculating Net Realizable Value

    An asset’s net realizable value is the amount a company should expect to receive once it sells or disposes of that asset, minus costs from its disposal.
  8. Savings

    The Pros and Cons of Buying on Amazon

    Learn how buying works with Amazon. Amazon has become the dominant player in online retail with its ruthless focus on lower prices and customer service.
  9. Stock Analysis

    Top Investment Ideas for Malls of the Future

    How investors should be thinking about the mall of tomorrow.
  10. Stock Analysis

    Whole Foods: How Will Shares React to Price Probe?

    Why it's important to look beyond the recent headlines about Whole Foods Market and accusations of pricing problems in New York.

You May Also Like

Hot Definitions
  1. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  2. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  3. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  4. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  5. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  6. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
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!