Loop Commerce helped retailers offer better gifting options with digital GiftNow cards. Now, it's merging digital and physical with real cards for Gap's Athleta.

The gifting market is a huge one. Yet for many retailers it is synonymous with gift cards — and includes everything from printed gift certificates and handwritten notes to plastic gift cards and online versions as well.

For some shoppers, gift cards are default choice, often due to necessity. After all, buying gifts is a complex affair — especially for categories such as apparel, accessories and beauty products. Givers can be unsure of style, color preferences and sizing, which makes the ubiquitous gift card an easy avenue to take. Or last-minute gifting which makes delivery impossible.

But often, the receiver, and even the buyer, sees it as an impersonal and a thoughtless choice. For Roy Erez, cofounder and chief executive officer of Loop Commerce the frustration of wanting to give an item as a thoughtful gift, but not knowing the exact shipping address required in the checkout, led to the founding of Loop — which offers retailers a complete turnkey gifting commerce platform and solution, seamlessly embedded within their online store.

The company’s clients already include major retailers such as Macy’s, Neiman Marcus, Bergdorf Goodman, Coach and Saks Fifth Avenue, among others. In addition, the company has raised $30 million from investors that include: PayPal; Barry McCarthy, former chief financial officer of Netflix and board member of Pandora; Ken Seiff, founder of Bluefly and managing partner at Beanstalk, and Dan Rose, vice president of partnerships and monetization at Facebook, and formerly of Amazon; among many others.

Here, Erez shares his insights into consumer behavior around buying products as gifts for others, an over $200 billion market opportunity online, and the power behind a personalized gifting experience that drives new sales opportunities and attracts new customers while making repeats of existing ones.

WWD: What are some of the friction points in the user shopping experience when shoppers buy gifts for others?

Roy Erez: Gifting is an emotional process, and gift givers generally want their gifts to be — and deemed by the recipient as — thoughtful. But gift givers are often faced with challenges and the anxiety of getting it wrong. Critical factors in today’s shopping process like a recipient’s style, size, color preference, or even exact shipping address, make the majority of very desirable gift items for many (such as apparel, shoes and jewelry) too hard, and too risky to gift.

At the same time, shipping dates often exceed the desired delivery time for the gift to arrive, as many of us are just getting around to buying gifts at the very last moment. Due to fear of “getting it wrong” and having to burden the recipient with an exchange at the store, many consumers are forced to abandon online gift purchases at the stores and gifts of their choices and buying safer, less thoughtful gifts, elsewhere.

WWD: What does this mean for the brand and retailer perspective in regard to that experience?

R.E.: Retailers and brands are constantly looking for ways to attract new customers, convert them and drive more sales; but they are leaving a lot of money on the table and missing out on substantial opportunities in the $200 billion-plus market of consumers buying real and thoughtful products as gifts for others. Ironically, even the retailers’ existing and loyal customers are in many cases not entertaining their gifting needs with them, due to the complexities and anxieties associated with gift buying. Gift cards do not capture the full opportunity available to the retailer. In fact, 56 percent of consumers consider themselves “non-gift card” buyers, and many retailers aren’t successfully reaching them.

They are also missing out on an enormous pool of potential customers, including both male and female shoppers who for example want to buy fashion brands for their loved ones and friends, but are worried about taking the risk. And with existing shipping cut-off times, retailers are also struggling to provide the quick and seamless delivery options that so many customers require to accommodate the last-minute gift purchase situation they find themselves in, leaving retailers vulnerable to the likes of Amazon Prime same-day shipping.

WWD: Why do you think the current retail model doesn’t work when it comes to gifting?

R.E.: Reliance on trivial requirements in commerce such as stockkeeping units or shipping time have crippled retailers’ abilities to meet the significant gift demands, making it impossible to send a thoughtful and personalized gift without knowing size or color information, or have it delivered on time. Having many choices of similar products is a necessity for retailers and an advantage when shopping for yourself, but creates friction and the anxiety of choosing the wrong item when it comes to buying for others.

And while gift cards have grown to be a huge market as a solution to accommodate the complexities of buying gifts, they represent an impersonal solution to the gifting experience for both buyers and recipients — and they are only an acceptable option for a portion of shoppers. In fact, research has confirmed that approximately 25 percent of consumers would never buy a gift card, and 31 percent will do so reluctantly and only on some occasions. This represents over half of the total consumer base, that happens to make on average 22 to 25 gifts purchases every year, and are completely missed out on.

WWD: What is unique about the experience of buying products as gifts for others?

R.E.: When shopping for others, which is more frequent than not, done last-minute, consumers have very high expectations when purchasing a product using the e-gift service. Gifting is personal and thoughtful. Consumers want to get the great gift and demonstrate the thought they put into it. They then expect the high bar of a “giftlike” experience, which includes the recipient not seeing a price as the first interaction with the gift, or having to manually checkout the item and use gift card codes as payment.

Then, buyers definitely don’t want their recipient to incur any costs to accommodate price changes from time of purchase to redemption for any reason (i.e. purchasing on sale or adjusting and adding for sales tax or shipping costs). Just as consumers don’t hand-deliver gifts with price tags on them, or ask their recipient to add money to complete a purchase, they expect the same experience when purchasing and delivering gifts for others online.

WWD: How does Loop Commerce’s solution help fashion apparel retailers and brands?

R.E.: Loop is creating new commerce opportunities for retailers and brands by removing the hurdles and reinventing the shopping experience of buying thoughtful gifts for others. By eliminating the friction consumers face when buying and delivering gifts (such as removing the need to know product size, color and shipping address, or even the need to accommodate the time to ship the gift), we’re enabling retailers and brands to maximize the market opportunity of buying products as gifts for others, while making everything from shoes and apparel to makeup and cosmetics “risk-free” gifts with an instant delivery mechanism.

Importantly, we’re driving sources of new revenue and customer acquisition for retailers, who gain two customers with every Loop transaction. And, by freeing retailers from the limits of sku-centric gift buying and shipping cut-off times, while offering a risk-free and flexible shopping and checkout experience, we’re able to help retailers attract new and existing shoppers and convert them at much higher rates.

WWD: How does Loop Commerce’s solution differentiate itself from gift cards and alternative variations in the e-gift space?

R.E.: As discussed, gifting is an emotional process, and consumers have very high expectations when purchasing real products as gifts, which are very different from their expectations when purchasing gift cards. Loop’s e-gifting platform and solution is the only one that combines all the benefits of product-based e-gifting, with the flexibility of a gift card and the ease and convenience of online shopping — converting shoppers who seek to purchase products as gifts, and not gift cards. Rather than sending a recipient a gift card with a picture of an item, we accommodate all of the elements that make the gift delivery thoughtful and seamless.

Gift cards represent a large and important business; but they are only a subset of the gifting market. More consumers want to buy actual gifts, and we’re helping retailers complement their gift-card strategy and capture this opportunity.

Retailers then also benefit from the experience and capabilities derived from the Loop network of top, multibillion-dollar merchants, as well as the unique partnerships that are intended to help drive new customers and sales to our retail clients.

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