A FREE $500 Gift Card?!?

It appeared too good to be true, especially during the holiday season: Inside my “Men’s Interests” magazine was a prepaid five hundred dollar gift card, courtesy of Red Star World Wear, redeemable on their website for “…brand new cool Red Star products”. Hmmm… Why would a company I’ve never purchased anything from – heck, never even heard of – simply send me $500 of their merchandise for free?

My curiosity piqued, I visited their website and looked over their selection of “cool” sunglasses, watches, and (a few) sunglass cases. Some actually were “cool” indeed – time to use their extremely generous $500 Gift Card!

Well, here’s how their generosity works: Each item they offer has a “Proposed (retail) Price” (say, $210) and a lower “Gift Card Price” (say, $126). Order an item, and the “Gift Card Price” is deducted from the $500 Card. Order at least $450 of items (or, 4 or 5 max, based on their prices), and they’ll even throw in a free watch. Sounds pretty sweet!

All that they ask is a “Service Fee” of 9% of the retail price or $9.90, whichever is larger, on each item purchased, to cover “…1st Class postage, general overhead and profit, free exchange, and processing and handling services.” So, ordering 4 items plus one (1) free watch works out to be at least $49.50 in “Service” fees – a cost that, as they clearly state numerous times, includes their profit.

Now, I don’t mind a company making a fair profit – it’s the fuel that drives the engine of innovation and capitalism. However, it got me wondering: How much profit might they be making?

As an example, I compared a pair of Red Star’s “Prowl” sunglasses to the “closest” pair I could find on China’s official suppliers website (I say “closest” because I really didn’t have time to look through over 165,000 models of sunglasses available on their site), and came up with this fairly rough comparison:

Red Star World
Wear “Prowl (RS02A)
2011 Hot
Shipping Boxes Sunglasses
  • Blue frame, anti-fog, polarized, 8 layer hard finish, 100% UV/IR Protection
  • Price: 9% of $126 “Gift Card Price” = $11.34 actual price.
  • Blue, polarized, gradient lenses, TR90 frame, UV400 protection, CE & FDA Certified
  • Price: $1.50 to $3.00 wholesale price per pair (minimum order 300 pieces, FOB Shanghai, China)

Bottom line? Even acknowledging the fact that Red Star still has to pay shipping from Shanghai to (probably) California, and then overhead, handling, and shipping costs when the product is in the United States, they’re still (probably) making $30 profit on my $49.50… and maybe more, as they almost certainly bought more than 300 pairs of sunglasses.

Scam? Ripoff? Not at all. Red Star World Wear does offer some nice products that no doubt perform as advertised, and their profit margin doesn’t seem excessive. But I don’t know what’s worse: An unbelievable, over-the-top marketing pitch for what are probably average grade goods offered at a fair price… or the possibility that they may actually try to sell their goods at their “Proposed Prices”.

Thanks for reading!

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