Social-gifting boom spawns dozens of companies
The latest buzz in e-commerce is a new category of business that lets people give gifts on social networks or through texting or email.
San Jose Mercury News
Buying a birthday present for a friend? Forget the wrapping paper and bow. This is the age of social gifting, and all you need is a Facebook account and mobile application.
The latest buzz in e-commerce is a new category of business that lets people give gifts on social networks or through texting or email. Text a relative a digital gift card to say happy birthday, no last-minute trips to the post office necessary.
Dozens of social-gifting companies have cropped up since 2011, promising to make giving gifts easier for consumers and drive more sales for retailers. It’s not just a startup fad: Facebook and Amazon each launched gifting features last year.
“It’s been a land rush in the gift-giving space,” said John Poisson, founder and chief executive of online gift-giving service Wantful. “This is a massive business opportunity.”
Some skeptics see a fad that will be short-lived. The reason people like giving and receiving gifts, some say, is the excitement of unwrapping something and the personal connection of a meaningful exchange.
“Gifting hasn’t proven itself in any meaningful way,” said Sucharita Mulpuru, a retail analyst with Forrester Research. “I don’t think that anyone is giving this in lieu of real gifts in person.”
Social gifting has splintered into a number of different niche areas as companies stake out their place in an increasingly crowded landscape. Some apps send digital gift cards, while others let you buy goods — anything from a 5-pound bag of gummy bears to lingerie — and have them delivered from your smartphone. There are apps offering free coupons to post to a friend on Facebook and others that let you buy a friend a beer.
Social-gifting companies may have found a sweet spot among online and mobile consumers looking for convenient and instantaneous ways to check that gift off their to-do list.
“I can wish my friends a happy birthday and give a gift in one fell swoop,” said April Wall, a San Francisco Bay Area resident.
Liora Avitan said social-gifting companies are more aligned with consumers’ shopping habits. Without malls or shopping centers near her New York City apartment, she wants the convenience of buying gifts from her laptop or phone.
“I’m doing everything online already,” she said.
Avitan, 27, uses Wrapp, a Sweden-based service with an app that has emerged as the darling of the social-gifting scene. She relies on Wrapp’s automated birthday notifications — the app is synced with Facebook — to remind her when to buy for her friends and family.
“I think I give more gifts now than I used to,” she said.
Wrapp hit 1 million users 14 months after launching, faster growth than Pinterest or Twitter. It’s moving many of its Stockholm operations to its San Francisco office, which opened last May, because the U.S. is its fastest-growing market.
Wrapp’s digital gift cards can be downloaded for free, and most are worth $10 or less. The gift cards can be sent through Facebook, email or text, and recipients keep the card in a digital wallet on their phone but have to redeem it in the store.
Aaron Forth, the company’s global chief operating officer, said shoppers tend to spend more money than the amount on the gift card once they’re in the store.
Nanci Booher, of Portland, said she exchanges Wrapp gift cards with her son and daughter. They post them on each other’s Facebook pages, and she takes her kids shopping for school clothes and video games.
“We love doing it together,” said Booher, 45. “It’s a total bonding thing.”
Not everyone is a fan. Critics say social-gifting companies have reduced gift-giving to another form of advertising, stripping the sentiment from it.
“You log onto Facebook and it tells you that you have six friends with a birthday and sending really loud messages that you should buy them each a Starbucks card. That just makes no sense to me,” said Poisson, whose San Francisco-based company, Wantful, offers online personal-shopping services that help consumers pick gifts based on the recipient’s tastes.
Greg Spector, chief marketing officer for Wrapp, said the app was never meant to replace the intimacy of gift-giving with someone special.
“I wouldn’t use this to give my wife an anniversary gift,” he said. “That’s just not what this is for.”
Despite the buzz, critics say the social-gifting business could be making some big mistakes. Companies assume people like to give a lot of gifts to a lot of people, and that a $5 coupon will suffice as a birthday gift — and neither assumption is true, they say.
“The biggest flaw with social gifting is that they assume people are gifters,” said Mulpuru with Forrester Research. “Who you gift to is usually very limited to a small subcircle.”
And CJ MacDonald, co-founder of Gyft, a San Francisco-based gift-giving app, chalks up Wrapp’s success to this: “People love free stuff.”
He said the company doesn’t offer much for retailers looking for sales or for consumers who want to give a meaningful gift.
“People get $5 free gift cards, and they’re going into the Gap and buying socks for $4.99,” he said.
Even Facebook hasn’t found solid footing in social gifting. Chief Financial Officer David Ebersman said on a recent call with investors that Facebook Gifts contributed less than $5 million in revenue during the fourth quarter of 2012, and cautioned analysts that revenue from Gifts “is very small” and not expected to grow in 2013.
Mulpuru expects Facebook will scale back its investment in gifting, and although Wrapp will probably stick around for a while, she said people may decide that gift-giving is one of the few things that can’t be replaced by the digital world.