Social gifting: the new buzzword in e-commerce

Mon Apr 30, 2012 11:24am EDT
 
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By Nivedita Bhattacharjee

(Reuters) - Last year, the buzzword in e-commerce was Groupon Inc and its myriad of competitors that offered daily online coupons to entice shoppers in a down economy. Now, the latest fashion in retail is social gifting, where people get together on Facebook to buy each other gifts.

Start-ups such as Sweden-based Wrapp, which is launching its U.S. business on Monday, are getting millions of dollars in venture-capital funding, and retailers like Best Buy Co Inc, Gap Inc and Starbucks Corp are scurrying to be a part of it.

"Brick-and-mortar retailers are all looking for new, more efficient ways to drive sales into stores without diluting their brands ... we wanted to really see how retailers can leverage the megatrends of smartphones and social networks," said Hjalmar Winbladh, chief executive of Wrapp.

Wrapp is essentially an app that can run on smartphones, tablets and computers. It allows Facebook friends to buy each other gift cards from participating retailers either individually or by teaming up, which they can store on their mobile devices and redeem either online or inside physical stores. Retailers like it because there is little marketing cost and because customers often end up buying more once they are inside the store.

Since mid-November more than 165,000 active users have given over 1.4 million gift cards that can be redeemed in some 50 major retail stores across Europe, according to Wrapp.

"The thing that struck me as unique and interesting about Wrapp is that it is kind of the intersection of three trends: gift cards, social networks and mobile (shopping)," said Reid Hoffman, a cofounder of LinkedIn and a partner at Silicon Valley venture-capital firm Greylock Partners.

Wrapp has received $10.5 million in funding from Greylock and technology VC firm Atomico. Hoffman serves on Wrapp's board, as does Skype co-founder and Atomico founder Niklas Zennström.

In the United States, the Swedish company has tied up with retailers including H & M Hennes & Mauritz AB, Gap Inc, Sephora and Fab.   Continued...

 
Facebook Director of Marketing Mike Hoefflinger announces a new "Premium on Facebook" service as he delivers a keynote address at Facebook's "fMC" global event for marketers in New York City, February 29, 2012. REUTERS/Mike Segar