Why Apple Makes Money Off iTunes Gift Cards

moonman239

macrumors 68000
Original poster
Mar 27, 2009
1,523
22
I went to a Target store and bought a $25 iTunes gift card for $23.75. I wondered how Apple could make any money - it seemed like they were giving away money. Then tonight, it hit me. They know they'll get 30% of the amount of money the recipient pays. They know that they can safely assume that that 30% will amount to more than the amount they get from selling the gift cards.
 

Bear

macrumors G3
Jul 23, 2002
8,089
4
Sol III - Terra
Also, most places are betting that a certain percentage of gift cards will never get used. And some gift cards take a while to be used.

And the money from unused gift cards earn interest.
 

moonman239

macrumors 68000
Original poster
Mar 27, 2009
1,523
22
The discount on the card is not a hit to Apple. Target is selling the card as a "loss leader" (taking the hit) to promote in store traffic.
So they sell the gift cares for less than what they're worth just to get people to come. I'm thinking customers will use the price of the gift card as a small factor when deciding where to buy what they want to buy. If a different store sells everything else a customer wants to buy at a significantly cheaper price, the difference between the price of an iTunes gift card at that store and the price of an iTunes gift card at Target won't matter, unless said gift card is too expensive at either store.
 

YooperHunter

macrumors newbie
Jun 7, 2013
13
0
So they sell the gift cares for less than what they're worth just to get people to come. I'm thinking customers will use the price of the gift card as a small factor when deciding where to buy what they want to buy. If a different store sells everything else a customer wants to buy at a significantly cheaper price, the difference between the price of an iTunes gift card at that store and the price of an iTunes gift card at Target won't matter, unless said gift card is too expensive at either store.
Stores use loss leaders all the time. They use it in many industries. Car dealerships do it with oil changes all the time.
 

maryacott

macrumors newbie
Jun 29, 2013
5
0
New zeland
ITunes Gift Cards are extremely popular gifts. Whether they're given for birthdays or holidays, as thank yous, or promotions, everyone loves to get them.It's free money to shop for your favorite music, movies, books, games, apps, and more at the iTunes Store.