In Israel, returning an item to a store, receiving a credit voucher, and then forgetting to ever use it is an all too familiar experience, even for smart consumers.
Daniel Zelkind and Itay Erel have developed an app that provides a fairly simple solution to this problem, and they claim, salvages NIS 600 million annually in store credit which would otherwise be lost.
“The store credit market has a NIS 2 billion turnover each year, with 30% not utilized. People forget about the store credit in their wallets until they have expired, lose them, put them in their pockets and run them through the wash, or sometimes they are printed on chemical paper that fades with time,” says Zelkind. “All this happens because people are stuck with the credit and don’t know what to buy. We’re not talking about supermarket credit, of course, people visit supermarkets very frequently and can always find something to buy with whatever credit they have there.”
The solution they developed is a mobile app (for iOS and Android), though which one can easily put credit up for sale, or search for credit that someone else is selling. The idea is fairly simple: whoever is selling NIS 200 worth of store credit can set the price for which he or she is willing to sell it (generally less than face value), and whoever wishes to buy store credit simply chooses one of the many retail chains that are listed on the site (such as Fox, Castro, H&M, Hamashbir, or Shilav), finds a listing that is appealing in terms of its amount and discount rate, and buys it. Registration via Facebook, Twitter, Google, or email is required in order to conduct transactions using the app.
Though the app has an easy-to-use graphic interface, its complexity lies in the logistics of transferring the credit from person to person in exchange for money. Zeek serves as the connection between the two parties, in place of a face-to-face meeting, but the process is still somewhat clumsy. This is due to the fact that the retailers refuse to accept physical or digital copies of store credit, only originals.
So, how does it work? The company claims that the credit will reach the buyer within seven business days, but it generally takes only one or two days. “We send the credit via registered mail, and, in certain cases, by courier, for credits totaling NIS 500 or 1000,” explains Zelkind.
For the seller, the waiting period is longer. The company explains that they wait for confirmation that the buyer has received the credit - whether it is receipt confirmation from the registered mail, direct contact with the retailer confirming that the credit has been used, or direct feedback from the buyer that he or she has received the credit. “In any event, we guarantee that, within 14 business days, we will transfer the money from the purchase to the seller,” says Zelkind.
And still, in order to streamline processes, they are working strenuously these days on a technological development, based on the retailers’ cash registers, but that will allow for digital credit to be used. “This is a solution that will be available within a few months,” says Zelkind. “When it happens, it will simplify matters completely.”
Erel spoke about the retailers themselves, and explained, “We don’t actually need their cooperation, but we received positive feedback from those with whom we did speak.” Zelkind added, “We were pleasantly surprised by the conversations with Israeli retailers. Despite what people think, the companies are actually not happy about store credit that gets wasted, even though they have already been paid. Using store credit can benefit them, because then there is also a chance that the customer will spend more than the value of the credit, and it can also increase the frequency of the customer’s visits to the store.”
Zeek’s business model is still not entirely clear, and the two founders are in talks on the matter with the retail chains, but they emphasize that no matter what, for users, the buyers and sellers, there will be no charge for use of the app or transaction fees of any sort.
The company is beginning with a pilot in Israel, with hopes of entering additional markets, such as Asia, Latin America, and Europe, in the future. The US is irrelevant, because store credit is very rarely used there.
For the time being it only has a Hebrew website.
The first investor in the company was Uri Levine, former president and co-founder of traffic app Waze , who today is chairman and co-founder of financial fees comparison site Feex. He is also an angel investor.
Published by Globes [online], Israel business news - www.globes-online.com - on March 19, 2014
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