Gift recycling results in growing black market

(Ecns.cn) – A variety of unwanted gifts have flooded the market in China following the week-long Spring Festival holiday, once again spurring the unregulated gift recycling industry.

The majority of such exchanges occur inside the countless cigarette and liquor stores found along any Chinese city street, as well as in shops selling electronic products in major IT and electronics markets.

Such transactions usually take place free from any official oversight or trade regulation, and once disputes arise between gift recipients and merchant repurchasers, there is no way to seek legal redress.

New Year boosts gift recycling

The Chinese Lunar New Year is the most important festival in the country and generates the strongest demand for gifts every year. According to a survey published by the China Gift Industry Research Institute in Beijing, demand in the Chinese gift market reached as high as 768.4 billion yuan ($121.7 billion) in 2011, and the Spring Festival season accounted for up to 60 percent of it.

This year, apart from high-end liquor and cigarettes, luxury-brand goods such as handbags, jewelry, watches and the latest electronic devices from companies like Apple dominated Chinese gift culture among individuals and companies.

On February 5, 2012, an advertisement in the window of a cigarette and liquor store in Nankai District of Tianjin read "Repurchasing cigarette and liquor gifts at reasonably high prices."

A reporter from People's Daily entered the shop and pretended to be a customer hoping to get cash for two cartons of Chunghwa cigarettes she had received as gifts. After consulting the prices, she was told she could get 550 yuan (US$87) for a carton, which sell for about 700 yuan (US$111) in normal supermarkets.

When she hesitated, the shop's owner told the reporter that she might only get 500 yuan (US$79) for the smokes somewhere else.

Even with a customer who drives a hard bargain, a single exchange will almost always bring the gift recycler a bigger profit than an ordinary sale. According to the reporter, the store owner usually sells a carton of soft pack Chunghwa cigarettes for more than 600 yuan (US$95).

The proprietor of the shop had already collected more than 100 bottles of fine wine and over 200 cartons of brand-name cigarettes – all unwanted gifts from the Spring Festival. With the number of such transactions growing every year, gift recycling has clearly become a very lucrative business.

Industry grows on Internet

In recent years, gift recycling has expanded beyond its brick-and-mortar beginnings and established a rapidly-growing presence on the Web, with Chinese keywords such as "gift recycling" yielding over 9.2 million results on Baidu.com, China's top search engine.

On any of these Web sites there are recycling prices for nearly every kind of gift, including prepaid gift cards, electronics, top-class watches, leather goods, clothes, cosmetics, jewelry, liquor, wine and many others.

On the site of a company that mainly engages in gift recycling in Beijing, the iPhone4 became a particularly popular item around this year's Spring Festival. For an 8GB handset, which would cost 3,988 yuan (US$632) at an Apple Store, the recycled price was usually around 3,000 yuan (US$475) at the site.

Last year, many staff members won iPhones or iPads during lotteries at their companies' annual parties, while a number of people also received them as Spring Festival gifts, making Apple products this year's rising star in the gift recycling industry.

Risky business

Though gift recycling can benefit businesses and consumers, it has hidden risks that the public should be aware of.

According to the People's Daily, all cigarette and liquor stores buy gifts from consumers without supervision despite their state-issued business licenses, which stipulate that the stores can only do retail business in cigarettes and liquor, with no exceptions.

Currently there are no laws regulating the gift recycling business, which means that such businesses are in fact illegal. If disputes arise, store owners may insist that the gifts they buy are for their own personal use and not for reselling, leaving the customer holding the bag.

Because the gift recycling business is a gray area in China, both store owners and consumers should be wary of protecting their own rights.