What’s the Story?

The gifting industry is a long-established one, although this does not necessarily mean that it should be devoid of innovation. Unfortunately, advances in technology have not yet been able to transform the gifting industry. Part of this problem is rooted in the limited differentiation between shoppers in the minds of retailers, which view both gift shoppers and self-shoppers alike. However, the shopping journey of a gift shopper is very different from the shopper’s journey when shopping for oneself. There are glaring differences across the entire shopping journey when purchasing gifts versus shopping for oneself. Retailers need to address multiple friction points involved in the shopping of gifts such as shipping cutoff dates, anxiety in determining the correct size and color, and the need for the correct shipping address of the gift recipient. In addition, the post-purchase shopper journey involves the gift recipient and not the buyer—representing a blind spot for retailers. We depict the shopping journey of a gift buyer in Figure 1, underlining the key challenges for shoppers in the gift-purchasing journey. [caption id="attachment_119023" align="aligncenter" width="700"] Source: Coresight Research[/caption]   By creating an easy-to-use digital and personalized gift-giving experience, retailers can create value for both the gift buyer and the recipient; this can also translate to retailers capturing the interests of not only the customer but also the end-user. There is an increasing need for an end-to-end holistic solution in the gifting market to fulfill the needs of today’s multichannel shoppers, while ensuring a memorable experience for the shopper and the recipient. In this report, sponsored by Loop Commerce, we analyze the key industry trends that impact the gifting industry and consider how retailers can deliver an optimal experience to gift shoppers and recipients at the same time. We also discuss Loop Commerce’s Gift Experience Management (GXM) solution, GiftNow, which helps retailers to enhance the gifting experience for their customers by allowing them to send gift cards or products digitally through email or message—and recipients can modify or exchange the gift even before it is shipped.

Why It Matters

The gifting market represents a big opportunity for retailers: There are calendar gifting events galore in the US, of course, in addition to occasions such as birthdays, baby showers and anniversaries. We estimate that the US personal gifting market was worth $404 billion in 2019 and that it will reach $510 billion by the end of 2024, at a CAGR of 4.8%. [caption id="attachment_119024" align="aligncenter" width="700"] Note: Market size estimates include birthdays, anniversaries and major holidays. Our estimates do not include the corporate gifting segment
Source: Coresight Research [/caption]   Corporate gifting market in the US was valued at $125 billion in 2018, according to bespoke gifting company Knack. We discuss this untapped opportunity later in this report. Another important category for retailers is gift cards. According to our estimates, at $60.6 billion, gift cards accounted for around 15% of the overall personal gifting market in 2019—and the proportion is usually higher during the holidays. We expect gift cards to account for around 20% of the overall gifting market this year, primarily due to the need for contactless shopping and consumers switching spending online due to the ongoing Covid-19 pandemic. In fact, over seven in 10 shoppers are switching spending online, according to Coresight Research’s recent survey.

Industry Overview

Gift Cards Continue To Be a Popular Gifting Option Gift cards are an integral part of the overall gifting economy and continue to be among the top choices for gift shoppers. Gift cards/vouchers have emerged as the second-most-sought-after category for gift shoppers this holiday season—Coresight Research’s September 2020 holiday survey of 1,134 US gift shoppers found that 44% of respondents expect to shop for gift cards or vouchers. The survey also revealed 69% of respondents are switching spending from services to products. Gift cards look set to see the biggest gains from this shift in consumer spending—some 31.5% of those switching spending expect to buy gift cards or vouchers. One of the key reasons for the popularity of gift cards is that recipients can spend the loaded balance as they wish. This eliminates the need for the gift buyer to rely on guesswork if they are not sure about the recipient’s likings. Gift recipients love gift cards—six in 10 Americans expected to receive a gift card as a present during the holidays last year, according to the NRF’s “Annual October Holiday Consumer Survey” of 7,782 US adults. [caption id="attachment_119025" align="aligncenter" width="700"] Base: 7,782 US adults surveyed on October 1–10, 2019
Note: Respondents could select multiple options
Source: The NRF [/caption]   Gift cards contributed around 18% of total expected spending on gifts during the winter holidays last year, amounting to $27.5 billion, according to the NRF. Gift cards were also popular during other major gifting events in the US: Gift cards for Father’s Day accounted for 14% of total expected spending for that event, at $2.3 billion; and gift cards for Valentine’s Day accounted for 11%, at $1.3 billion. [caption id="attachment_119026" align="aligncenter" width="700"] *Winter holidays comprise the gifting events during November and December
Source: The NRF/Coresight Research [/caption]   This year, we expect gift cards to comprise a higher proportion of total spending on gifts than last year for all gifting events, as consumers are wary of visiting physical stores due to safety concerns amid the Covid-19 crisis—buying a digital gift card offers an easy and convenient gifting method as they are easy to send/give. Furthermore, gift cards are one of the potential solutions to inventory or supply chain challenges facing retailers this year. In some cases, gift-card recipients would be new to the brand or retailer, and retailers must seize this opportunity to retain the customer by focusing on improving the overall experience for the recipient, which begins with the delivery of the digital or physical card. Returns Are Costly and Complicated for Retailers Returns continue to be among the topmost pain points for brick-and-mortar and online retailers alike. US shoppers returned approximately $309 billion worth of merchandise in 2019, accounting for 8.1% of total retail sales, according to Appriss Retail and the NRF. This percentage is even higher in the case of e-commerce. Online returns in the US amounted to an estimated $41 billion in 2019—over 9% of total e-commerce sales. While returns are an industry-wide problem, there are some disparities across sectors: The returns rate is very high for footwear retailers at 15.8%, but is just 5.3% for beauty retailers, according to Appriss Retail. Surprisingly, clothing, footwear or accessories emerged as the top gifting category for holiday gift shoppers this year, with 44.2% expecting to spend on such products, according to our recent survey. [caption id="attachment_119027" align="aligncenter" width="700"] *Calculated by Appriss Retail by analyzing e-commerce and point-of-sale data from 40,000 stores in the specialty and general merchandise segment
Source: Appriss Retail [/caption]   Returning gifts is a common practice. In fact, 77% of respondents expected to return at least some of their gifts—with around 20% expecting to return over half of their holiday presents—during the holiday season last year, according to a 2019 survey of 15,800 global consumers conducted by Oracle. Returned gifts lose much of their value by the time they are returned, in part due to seasonality, which could make returned products redundant to retailers for as long as eight to 12 months, before they are back in season. Online returns also cost more than in-store returns, primarily due to the associated reverse logistics and handling costs. With shoppers continuing to avoid physical locations and shifting spending online due to the ongoing pandemic, the opportunity to offer a digital—and customizable—gifting-giving experience can have a major impact in reducing the gifting returns burden. Personalization in Gifting Is a Must Personalization is a very important facet for gift recipients. There are numerous occasions, such as baby showers, wedding anniversaries and Valentine’s Day, for which personalization can make a big difference. Although retailers are aware of personalization and its benefits, a gap exists in the current gifting landscape and personalization market. Gifting is emotional and social, rather than a mere transactional activity. Retailers must look at new ways to deliver experiences along with products in order to build lasting relationships with the gift recipient and the gift buyer. Recipients have outlined the need for personalization in gifts quite clearly. Over six in 10 (62%) Americans prefer to receive a heartfelt, personalized gift over a generic store-bought gift, according to a November 2019 survey of 2,000 US adults conducted by Vistaprint. Similarly, 68% of gift buyers feel happier when giving someone a heartfelt and personalized gift, according to the same study. [caption id="attachment_119029" align="aligncenter" width="700"] Base: 2,000 US adults surveyed in November 2019
Source: Vistaprint/Coresight Research [/caption]   Corporate Gifting: An Overlooked Opportunity Personalization is important in corporate gifting too, but getting corporate gifting right can be much more difficult than buying a gift for your friends or relatives. In fact, 70% of business gift recipients reported a negative experience when receiving a gift from a business partner or their employer, according to an August 2018 survey of 1,049 US adults who received a business gift within the last 12 months, conducted by bespoke gifting company Knack. The topmost reason for gift recipients to have negative feelings is that the gift buyer did not put much thought in the gift, with 28% of respondents citing it as a reason to feel negative about their gift. [caption id="attachment_119030" align="aligncenter" width="700"] Base: 1,049 US adults surveyed during August 2018
Source: Lab42/Knack [/caption]   It can be very challenging for businesses to find the right gift for their business partners or their employees, primarily because of differences in tastes and liking across a very wide employee or clientele base—something that may be difficult to capture. There is a need for holistic and personalized gifting experience in the corporate sector—also the area where corporate gifts lag the most. We believe this is a big opportunity not only for corporates, but also for the retailers that can build lasting relationships and repeat customers by solving this problem. Company Overview: Loop Commerce Loop Commerce enables personalized digital gifting for products and gift cards. The company leverages data analytics and digital capabilities to help its clients improve and optimize the gifting experience. In this section, we discuss Loop Commerce’s Gift Experience Management (GXM) solution, GiftNow, in detail. What Is GiftNow? GiftNow is Loop Commerce’s end-to-end omnichannel gifting solution; it is designed to address the gift-experience gap that arises when shopping for gifts versus self-shopping. GiftNow’s holistic interface brings together the thoughtfulness behind a physical gift, flexibility of a gift card and convenience of online shopping. It enables retailers to eliminate the friction points in the gift shoppers’ path to conversion. How Do Gift Shoppers Benefit from GiftNow? GiftNow’s primary objective is to enhance the gifting experience. Retailers can choose any product from their inventory to activate under the GiftNow interface. Using the GiftNow platform, it is also possible to shop for physical gifts and then deliver them digitally. Shoppers can select products without worrying about knowing the preferences of the recipient—such as product size or color—or their address. After “receiving” the gift through a personalized greeting in the form of a digital message, the gift recipient can modify their gift if they wish—by selecting a different color or size, or even an exchange—before the product is shipped. In fact, according to Loop Commerce, 45% of GiftNow recipients virtually exchange their gifts pre-shipping. Gift shoppers can also select a gift card depending on the occasion and personalize its delivery message to the recipient with a greeting—which can be both video or text.  [caption id="attachment_119031" align="aligncenter" width="700"] Process of gifting a physical gift using GiftNow
Source: Loop Commerce [/caption]   GiftNow also eases the process of corporate gifting. It allows businesses to curate a collection of gifts for their employees. The recipients can select a gift for themselves from the options available and modify it before it is shipped. [caption id="attachment_119032" align="aligncenter" width="700"] Process of corporate gifting using GiftNow
Source: Loop Commerce [/caption]  

GiftNow: Market Positioning

In this section, we analyze GiftNow’s market positioning, current opportunities in the market and its key growth drivers. GiftNow’s key competitive advantages include the following:

• Contactless Gifting: GiftNow enables the contactless delivery of physical gifts. Gift shoppers can purchase gifts with confidence, add a personal touch to them and have them delivered to the recipients without having to visit a physical store.
• Personalized Experience: Gift shoppers can add personalized video or text greetings to add a personal touch to their gift. Recipients can also modify their gift before it is shipped. This helps retailers to expand their user base by delivering an e-commerce experience to gift recipients.
• Recipient Selects the Delivery Address: With people working from home and staying with friends or family, delivering gifts at the correct address has become very challenging. GiftNow enables recipients to get their gift delivered directly to their address.
• Instant Gratification: With GiftNow, gift shoppers can deliver personalized gift cards or physical products instantly, meaning that they do not have to worry about shipping deadlines. This also provides merchants with an increased number of days to sell their merchandise because it eliminates the need to buy gifts before shipping deadlines.
• Improved Conversion: GiftNow helps retailers increase the overall conversion rate by allowing them to reach customers that may have previously backed off from a purchase for any reason. For example, shoppers who tend to shop very late often miss shipping deadlines, which leads to cart abandonment. With GiftNow, shoppers can make last-minute purchases while being assured that their gifts will be delivered to the recipients in time—in fact, instantly.
• Limits Returns: GiftNow lets gift recipients modify or exchange their gift before it is shipped. Unlike conventional gifting, the recipient can select options such as the size and color of their gift, or exchange it for a gift card, thus reducing the likelihood of returns.

[caption id="attachment_119033" align="aligncenter" width="700"] Source: Company reports/Coresight Research[/caption]  

What We Think

In the short run, we expect demand for contactless purchases and an increase in e-commerce to be the two key driving forces in the gifting market. Innovations that make gifting hassle-free and contactless will be critical for retailers to succeed during this holiday season. Having an omnichannel gifting strategy will be a must for retailers to grab a larger share of the gifting market by creating avenues that enhance the experience for both gift shoppers and recipients. Retailers must seek to understand the existing pain points of gift shoppers and innovate to attract new customers. We expect returns to be an even bigger problem for retailers this holiday, due to shoppers’ safety concerns. Finally, retailers must continue to work on innovative methods to reduce returns as they have a substantial negative impact on retailers’ profitability.