Consumer watchdog Which? has warned against buying gift vouchers this Christmas because of the risk of these being worthless should the retailer become insolvent.

Which Mag

Research from Which? found nearly one in 10 had received a gift voucher from a retailer that had gone under, since the start of the pandemic. Of the 2,000 people surveyed, some 7% had received a voucher for a retailer that had gone bust since March 2020. Further,  almost two-fifths (38%) of these consumers were unable to spend the full balance of their voucher, with an average of £25 left unspent.

One in five (21%) of those with vouchers for failed retailers had a voucher for an Arcadia Group retailer. Some of these stores, including Topshop and Miss Selfridge, only allowed customers to pay for 50% of their order total using gift card credit after they fell into administration after Christmas last year. Shoppers had to fund the other half with their own money.

What Happens to Vouchers when a Retailer is in Administration?

If a retailer is in administration, it may refuse to accept gift vouchers at any point while efforts are being made to save the business.

This happened with Debenhams when administrators decided to stop accepting gift vouchers on 20 December 2020. One in eight (13%) of the survey participants who received a gift voucher for a retailer that went bust said they had a voucher for the troubled department store in the past year.

Adam French, a Which? consumer rights expert, said: “Which? is advising consumers to think twice before buying gift cards this festive season. While they might seem like an easy gift for hard-to-please family or friends this Christmas, our research shows you could be left high and dry if the company goes bust.”

Simon Renshaw, director with Company Debt, said: “Sales figures within retail are weak and are 1.3% below the level of a year ago. Despite problems relating to the pandemic receding, the sector is now affected by ongoing supply chain problems and consumer confidence has not returned – and many people are worried about the rising cost of energy, which will be bad news for retailers expecting to see some sort of recovery this Christmas. If there is an interest rate imposed by the Bank of England, this will worsen matters for the High Street yet further.

“We’ve seen a number of retailers issue profit warnings in recent weeks and so those buying gift vouchers need to pick carefully if they want to avoid a disappointing the recipient ”