The rush of excitement and anticipation that comes with opening a birthday or Christmas present could join the humble high street store voucher in the dustbin of history if the growing trend of social gifting develops into a mainstream activity.
Social gifting is being compared with the group selling trend led by the likes of Groupon. It enables recipients to log onto Facebook and collect a gift voucher given to them by a friend.
The ability to send a gift card or voucher via Facebook or a mobile app is being made possible by a number of social gifting sites springing up at a similar sort of pace that social buying sites like Groupon and others did a few years ago.
Wrapp is one such start-up, which is being tipped to become the Groupon of social gifting. With $10.5m (£6.7m) of funding behind it, the business launched in the UK in March this year and has already convinced a number of high street brands – including Karen Millen, Pizza Express, and Asos – to sign up to the site.
Hjalmar Winbladh, chief executive of Wrapp, says these high street brands are simply going where the consumers are “hanging out”. He adds: “They are looking for new ways to engage with consumers and drive sales into the stores. Ideally, they would like to do that in a non intrusive way and cut through the clutter that exists out there.”
Wrapp and competitor models offer people the chance to purchase gift cards for friends and family, but many people are taking advantage of the free cards that are on offer. According to the latest Wrapp figures, 2.8 million giftcards have been given since last November.
Many gift cards are, in reality, promotional offers, which could be seen by consumers as just another money-off voucher gimmick in order to get people in-store. Current offers on Wrapp include a £50 voucher for Fitness First, is effectively a five-day gym pass and fitness consultation, a £3 Pizza Express voucher and £5 off at fashion retailer Oasis.
Chris Orrell, founder of Hotel Voucher Shop, which has also signed up to Wrapp, says that at the moment social selling is more of a promotional mechanism rather than about selling more gift vouchers. “I love the concept, but I think it will be another year or two to be fully adopted by the public.
“People are taking up the free gifts, rather than the paid-for cards but I think it will turn into more of a commercial proposition within a year or so,” he says.
Simon Williams, head of corporate sales at John Lewis, agrees that it is currently more of a branding tool than a way to make money. He says: “We’ve seen social gifting grow in popularity in the US over the past few years, so we’re keen to see how UK customers respond to the idea. The concept is still in its infancy in this country, so at the moment we see it as another way to drive brand awareness and social engagement, with the potential to be a revenue and footfall driver as customers start to adopt it more widely.”
However, Wrapp’s Winbladh claims that it is helping retailers to move away from a discount culture. He argues: “It’s not about discounting – the two-for-one deals, 30 per cent off, or the big blowout sale – it’s about brand building, it’s highly targeted because brands can choose who to send their gift cards to, it’s performance based and it’s also good way for them to sell more gift cards.”
DropGifts, a competitor to Wrapp’s social selling service, has the likes of Urban Outfitters, John Lewis and SpaFinder signed up to its service. Managing director David Van Reyk says gifting via Facebook and mobile enables marketers to glean important insights about online and offline shoppers. He claims: “Social media is relevant for gifting because a lot of brands use their presence on social networks to represent the strength of their brand rather than to sell products direct.
“Social gifting makes it easier for customers to give their brand as a gift and is also a good way for retailers to get data on their offline customers that they couldn’t otherwise get.
Another positive aspect to this type of service is that the app can be used across borders to send gifts to friends based in different countries, where the local currency is changed accordingly.
UK social gifting start-up Gift2you, which is due to launch in October, has carried out research in this area. Chief executive Andrew Wilmot explains: “We asked 400 consumers across international markets about what we are planning, and there is a great interest in using it across borders because it’s not easy to ship gifts. For affluent, young and time poor consumers, this approach meets their needs.”
Wilmot believes that getting consumers to return to social gifting is down to the quality of the experience. He says: “Social gifting vendors make money from repeat gifting, which will happen when people have had a good experience. What will become more important is how people see the brand, the fact that it is a social gifter will become less and less important and people will just see the offering as a gift mechanism.”
Repeat gifting and trial could also be leveraged though peer-to-peer recommendation. Andrew Johnson, director general of the UK Gift Card and Voucher Association (UKGCVA) says: “Social gifting will help encourage customers that already have an affinity with the brand, to show their friends this affinity too. In turn, this would hopefully encourage these friends to engage with the brand as well.”
He concludes: “I don’t believe social gifting will be a fad, but it needs to follow a brand’s strategy, along with other products. I don’t think it will necessarily replace gift cards in the long run, but it is definitely about building long-term stability within the brand.”
Social gifting has the potential to extend the reach of some businesses. SpaFinder is one such brand that is hoping that its spa, wellness and beauty gift cards and vouchers will go viral via DropGifts, a social gifting site which it started selling through this month.
Three-quarters of SpaFinder gift cards are already distributed in digital form but the business is hoping that its promotional £5 free gift card offer, which is available via social media or mobile, will attract a younger audience.
Cassandra Cavanah, executive director at SpaFinder Europe, says the aim of the free offer is to encourage recipients to spend more at its global network of 7,000 spas, fitness studios and wellness facilities. Gift givers can also top up the £5 gift card to enable recipients to buy something more substantial via the SpaFinder website.
“It’s a really interesting channel,” says Cavanah. “Gifting seems to be natural in terms of how people are interacting with each other.
“Any time a new channel comes along, we participate. We have had a high redemption rate already, with people opting for the free gifts and topping up. Social gifting has a lot of potential as people learn that it exists,” she adds.
Social gifting isn’t a rival way to distribute gifts cards, but makes gifting more social and enable friends to gift each other in the space they are communicating most, she says. “It will be used and communicated by the younger generation, where all they have ever done is talk to each other through Facebook, so why wouldn’t they give gifts online.”
Social gifting is where consumers can send gift vouchers via Facebook or mobile. Once they have downloaded a social gifting app onto their smartphone or signed up online, Facebook friends and birthday data are loaded onto a user’s gift card page.
A birthday alert is sent via the app and retailers can send through free gift cards if the user’s profile matches the type of person they’re trying to reach. Users can either take advantage of many of the free gift offers and cards available on the various social gifting sites or buy vouchers that can be redeemed at a particular store or for a particular brand.
Gift givers can send the gift card with a note, and this appears on the friend’s wall, or via text message on their mobile. The recipient then downloads the app and the gift card appears in their wallet within the app, and they will get a reminder when the gift card will expire. The gift can be redeemed in-store or online by downloading its barcode.
Retailers do not have to pay anything until the card is redeemed, and can choose who they offer free gift cards, to enable them to target a particular type of consumer.
61%: the UK has the highest penetration of social networking users in the EU, with 61 per cent of all smartphone owners accessing social networks or blogs during the three month average ending October 2011.
12%: gift cards in the UK are now a £4.5bn industry, which has grown from 2 per cent to 12 per cent over the last nine years, and is expected to continue its upward trend into 2012 and beyond.
38%: the number of people in Great Britain who have purchased gift cards in last 12 months.
Sources for all data: comScore and UKGCVA
Head of online marketing
Firebox (gifting company)
Marketing Week (MW): How are you using social gifting site Wrapp and why?
Mark Irving (MI): Wrapp has provided Firebox with a new way of distributing promotional gifts to our customers. We saw the success that Wrapp had in Sweden (where it launched) and really liked the model. Firebox is always open to new ways of marketing itself, especially methods that could have global reach. There’s a good chance that this could really take off because the service is well integrated with Facebook, the app is easy to use and there are some big brands involved.
MW: How do you benefit from this service?
MI: We have the benefit of being able to learn about both the customers using the gift cards and those that are sending them. Despite us offering some promotional gift cards for free on the site we are still seeing enough orders coming through at profitable levels to make [the partnership with Wrapp] work.
MW: How big do you think the social gifting trend will be?
MI: This has the potential to be huge as there’s clearly a growing appetite for social gifting. It’s not so much about the hype that this method of gifting gets, but how quickly customers become accustomed to using the service both in terms of gifting and receiving. People are also rapidly getting more and more comfortable with using mobile devices, which are ideal for sending quick timely gifts while on the move.
MW: How else could social gifting change the way people give and receive gift cards?
MI: From the perspective of having one wallet containing all the gift cards you’ve received, this clearly has mass market appeal. Group gifting is also something that could really take off. It is still early days. However, initial signs have been very positive and it’s something our customers are clearly interested in getting involved in.