Like how does the store or company profit off of a $20 gift card that costs $20?
In: Economics
Companies sell goods for less than it costs them to acquire said goods. If you think about it this should be obvious, it is the only way they can make any money at all.
Therefore if a company is selling a gift card for their own store it can be reasoned that whatever goods bought with that gift card are going to provide a profit. But what about a gift card for a different company? In that case the gift cards are provided to the selling company at lower than face value.
For example if a company makes 50% profit on their products then if another company can sell a $20 gift card you can comfortably provide it to them for $18, meaning they make a $2 profit off the sale. Then when that $20 gift card is used in your store you still make $18 from it, or $8 in profit as opposed to your usual $10. A major benefit of doing this is that it brings people to your store that otherwise might not have come, and it is unlikely their purchases exactly equal the value of the gift card. Either they don’t use it all (free money) or they buy more (extra sales).
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