best practices for 5 enabling gifting in - loop … paper: 5 best practices for enabling gifting in...

best practices for enabling gifting in your store

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2White Paper: 5 Best Practices for Enabling Gifting in Your Store

table of contents

Overview

The Experience Matters

Consider the Gifting Behavior of Consumers

Innovate for a Competitive Advantage

Leverage Omnichannel Retailing

Mitigate the Risk of Gift Returns

About the Author

About Loop

References

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3All Rights Reserved ©2014 Loop Commerce, Inc.

From the Hanging Gardens of Babylon to the ubiquitous ‘Christmas sweater’,

gifting is a time-worn tradition entrenched in rich historical literature.

Indeed, the essence of giving gifts is a way for people to connect meaningfully,

but it seems that today’s consumers are unable to gift the way they want to,

and end up finding alternatives to circumvent technical limitations.

For retailers, the benefits that come from enabling your customers to gift are

many: driving new revenues, a new and effective way for customer acquisition,

and raising your brand awareness, among other significant benefits.

Here at Loop, we’ve spent a lot of time, energy and resources in understanding

the mechanisms and psychology behind gifting, and have curated five best

practices for enabling gifting in your online store.

I hope you find this white paper to be a useful resource when developing your

online gifting strategy.

Sincerely,

Roy Erez

Co-Founder & CEO

forbes namedloop commerce

1 of 12 companiesmoving global

commerce forward

overview

success metrics from our closed beta clients

97%3.5x 39%of Loop recipients are new customers

more conversions than gift cards

exchanged without associated return costs

increase in average order value

11%

a snapshot of the gift card ecosystem

U.S. Gift Card Market

The gift card market is expected to

hit $139 billion in 2016, with 330%

growth in the online gift card segment.

Today, gift cards account for roughly

18% of all holiday gift spending1.

Estimated U.S. Gift Card Spending, in billions

Not all Gift Cards are Created Equal

Consumers tend to stick with a selection of large, familiar brands when choosing to buy gift cards.

Gift Happiness Index

Gift cards and cash are among the least loved gifts, according to research done

by world-reknowned expert in behavioral economics, Professor Dan Ariely,

analyzing the results from a 10,000 people survey2 conducted in 2013.

99 109 118 127 134 139

2011 2012 2013 2014 2015 2016


the experience matters

If history is any indication, the ancients have long clung to the idea that it

is better to give than receive. While gifts have changed, the fundamental

concept of gifting has endured. Cultures have been continuously inventive,

coming up with new ways to ensure that the right gift goes to the right

person. E-commerce is just latest stage in a storied tradition entrenched in

many past and present cultures.

It’s not surprising that gift giving crosses cultural divides and has endured

through the millennia. Psychologists, anthropologists, economists and

marketers alike “have found that giving gifts is a complex and important part

of human interaction, helping to define relationships and strengthen bonds

with family and friends,” The New York Times wrote in 2007.

Gifts have also long been a means for nations to extend a token of friendship

and strengthen ties with allies. The Statue of Liberty, one of the most


popular tourist destinations in the U.S., was presented as a gift by the people

of France to mark the U.S. centennial as well as to recognize the alliance

between the two nations that blossomed during the Revolutionary War.

Research has shown that the practice of gift giving stretches back to some

of the earliest cultures, though there is little support to indicate that the

Neanderthals could tie a bow. The social value of giving has been recognized

throughout human history, such as with the Native American cultures of the

Pacific Northwest, who for thousands of years have engaged in a festival of

gift giving known as the potlatch. This complex ceremony celebrates extreme

gift giving to the extent that a guest who did not match the host’s level of

giving could lose face. Perhaps one of the most legendary examples of the

ritual role of gifts in ancient history is chronicled in Virgil’s “Aeneid,” through

the wooden horse that the Greeks presented to their adversaries in the

Trojan War. Whether or not a myth, it went down as perhaps history’s best-

known gag gift.

Rather than a tool for subterfuge, gifts have long been a favored form of

expressing love, respect, and affection to others. Gift wrapping goes back

to 2nd century B.C. China – and today, gift giving on the Chinese New Year

continues the practice by wrapping gifts, often in red paper. The ancient

Romans exchanged gifts during a celebration held around the Winter solstice

holiday known as Saturnalia, delivering pottery or wax figurines to adults

and toys to children. Many scholars have pointed to the practice as a main

influence on the Christmas gift-giving tradition.

Modern gifting practices took hold much more recently. The tradition of

wrapping gifts in colorful paper, for example, was introduced by the founders

of Hallmark during the 1917 Christmas season. When the Hall Brothers’ store

in Kansas City ran out of the red, green, white and holly-pattern tissue sheets

used to wrap gifts, they turned to decorative envelope lining papers from

France that were shipped in from Hallmark’s manufacturing plant.


Wrapping is just an example of shifting norms – emotional etiquette

evolves, too. Nouveau technologies tend to be viewed as impersonal when

introduced, but gain legitimacy over time, until a point where they too

become antiquated.

For example, telegrams were used for important family news as well as

a means to congratulate the recipient. Phone calls were once considered

impersonal in comparison to handwritten letters, until email replaced much

of what used to be voice communications, making phone calls seem more

intimate today. Ironically, at the same time, handwriting has become so rare

that the hand-written greeting card has grown in importance. In fact, the

rapid technological progress of our times mean that gift-giving traditions are

in constant flux.

The common denominator of all these traditions is that gifting habits were

directly influenced by the available services and technologies of the time.

Contemporary gift giving comes with a new set of risks associated with

getting an appropriate and thoughtful gift to the recipient.

key takeaway

When implementing a gifting strategy, be mindful that gifting, at its core, is

a shared experience between two parties. As such, look towards making the

act of gifting more thoughtful for your customers.

For example, enable your customers to send customized greetings with their

gifts, or hide the price from the receipt.


consider the gifting behavior of customers

The essence of gifting is a way for people to connect meaningfully.

Interestingly, giving gifts has multiple benefits for both parties. In fact,

according to a three-part study by Elizabeth Dunn, Lara Aknin, and Michael

Norton3, givers can get more happiness than people who spend the money

on themselves.

To delve into that a little bit more, we did a joint survey with Professor Dan

Ariely and Kristen Berman and asked about 5,000 gift givers to think about

the last gift they gave, and the same number of gift receivers to think about

the last gift they got.

Some of our results from the joint survey was featured in an article written by

Professor Dan Ariely and Kristen Berman in Time’s Idea in December 2013,

titled “The Gift-Giving Mistake Not to Make”4.

Year-Round Gifting

Gifting is a year-round

occurrence, with a good

portion of gifts being

purchased for birthdays and

as casual ‘just-because’ gifts.


Here’s a short excerpt of our key findings, observing three systematic biases:

First, gift receivers rated the gifts as more exciting than gift givers; in general,

gift givers underestimated how much joy their gifts would bring, regardless

of what the gift was.

Second, gift receivers preferred the riskier gift rather than a generic or ‘easy-

to-gift’ item and wished that gift givers took more chances.

Finally, the underestimation of how much people would like the gifts was

particularly large for risky gifts.

So while in general we don’t appreciate how much others will enjoy the gift

we give them, we significantly underestimate the appreciation for risky gifts,

even if we didn’t get the gift ‘exactly right’.

Indeed, the risk of giving the ‘wrong gift’ is often why gift givers end up giving

non-committed gifts, such as gift cards. However, the downsides of gifting

a non-committed gift is that they are much less personal and therefore, less

desired by gift givers and recipients.

key takeaway

Enable your customers to give gifts the way they want - gifts that are a little

bit risky and show the effort behind it.

For example, help your customers by curating gift sections that help to

mitigate these risks - such as ‘size-free’ products like watches or wallets.

Mismatched Expectations

Gifts such as apparel, art and

jewelry, which were viewed

by givers as more risky to

gift, were actually the gifts

that receipients loved most.


At Shop.org’s Annual Summit 2013, Chief Marketing Officer Miki Berardelli

and Senior Vice President of Global Stores Matt Marcotte highlighted Tory

Burch’s focus on digital technologies and how they have enhanced the

customer experience5.

One fashionably forward innovation that Tory Burch has recently

implemented is Client Book6, an iPad based application for sales associates

which aggregates customer data across all channels.

To illustrate Client Book’s ability, Marcotte shared a story where a husband

who walked into a store, gives the sales associate his wife’s name, and based

on data from Client Book, was able to pick out the perfect gift for his wife.

The wife then returns to the store the next day to find out how her husband

‘got it right’ for the first time in twenty years.

innovate for a competitive advantage

A Difficult Choice

79% of consumers buy gift

cards because they know the

recipient can choose what

they want7.


This represents the power of what Marcotte describes as “having access

to client data and using it in an intuitive way” – and is in fact, in line with

McKinsey & Company’s observations that “big data and analytics have

climbed to the top of the corporate agenda”8.

Unsurprisingly, Client Book’s initial rollout to its traditional retail stores has

resulted in “higher spend, units and loyalty with lower returns”, experiencing

a 62 percent higher average order value for customers serviced using the

application9.

Through actionable data, recipients got what they want, gift-givers feel great

because they are giving meaningful gifts10, and most importantly, the retailer

avoids potential losses whilst making profitable sales.

Tory Burch’s usage of emergent technology to enhance the traditional retail

experience shows how a company’s ability to utilize cutting-edge technology

can translate into a tangible competitive advantage, improving retail

performance through rethinking the gift purchasing process.

key takeaway

Gifting is difficult - be aware of nouveau technologies and solutions that you

can implement to help your customers overcome the challenges involved

with buying a gift.

In particular, realize that customers place a premium on buying and getting a

real physical gift, and actively pursue innovations that enable them to gift the

way they want to.

Keep it Thoughtful

When it comes to more

thoughtful occasions like

Anniversaries and Mother’s

or Father’s Day, consumers

would only consider a gift

card ~7% of the time11.


J.C. Penney once said that “the well-satisfied customer will bring the repeat

sale that counts”.

Corporations are constantly taking note of how their customers are

purchasing, making sure that they have a presence where their customers

shop, and that they have what it takes to make them happy.

It’s no surprise that technology (such as smartphones, among others) have

introduced new ways of shopping, bringing additional dimensions to both

traditional retail and e-commerce. Indeed, the modern customer is one who

embraces technology in every step of their purchasing journey.

For example, a customer may browse online before going to a store in

person, and once in the store, might search for reviews on the mobile phone

before deciding on the purchase or vice versa.

leverage omnichannel retailing

Shopping is Beyond the PC

Amazon, one of the top

online retailers, revealed that

roughly 29% of its customers

are ‘mobile only’ shoppers12.


In an interview on the National Retail Federation’s blog Retail’s Big Blog13,

Terry Lundgren, President, Chairman and CEO of Macy’s, Inc. shared his

thoughts on Macy’s best customers, saying that they are “those who shop us

in-stores and online – we strive to have a 360-degree view of the customer.”

Darren Hitchcock echoes Lundgren’s sentiment on his blog post in

Econsultancy14, pointing out that omni-channel retailing is “seeing things

from a consumer’s point of view, (and) not from the comfort of your own

business boundaries”.

In other words, omni-channel retailing is a seamless approach to the

consumer experience through engaging the customer on all available

shopping channels.

As the e-commerce industry is relatively new to omni-channel retailing,

companies are becoming increasingly interested in ways to streamline and

optimize the customer experience.

For a start, companies are taking steps to seamlessly integrate their

e-commerce operations with their retail stores, paying more and more

attention to how customer data can be used to get a ‘360-degree view’ of

their customers.

Taking it a step further, many retailers also realize that their interactions

with the customer extends beyond meeting them offline and online, and

that the challenge today is to provide a great experience across different

Engaged customers tend to buy twice as much


technological mediums. In fact, Jon Donahoe, President and CEO of eBay,

shared at Magento’s Imagine 2013 that 21% of their users are ‘multi-screen’15

when they buy something, and observed that engaged consumers tend to

buy twice as much, making them twice as valuable.

The rapid rates of change and innovation signal a transforming retail

paradigm. Today, retailers need to be present wherever their customers

are, armed with the proper functionality to meet the evolving needs of the

modern customer.

key takeaway

Today’s shopping experience is fluid, and customers are no longer siloed. The

modern purchasing process spans various devices, and customers interact

with the retailer both offline and online.

Pay attention to how your customers are shopping, and be ready to engage

them on all the channels they shop on.


With more and more people purchasing gifts online, retailers can expect a

proportional increase in gift returns over time.

Kurt Salmon, a retail consultancy, estimates that a third of all Internet sales

get returned16, and the National Retail Federation posits that returns can

make up to 40% of holiday sales, depending on the category of goods17.

The Wall Street Journal wrote a great article on this topic, highlighting how

the convenience of online shopping is eating into e-retailers’ bottom lines.

Indeed, the damage that returns deal to e-retailers’ bottom line is serious,

with some retailers noting that the act of customers returning the product

may sometime cost them more than a lost sale.

Returns represent a significant cost to retailers that has room for

optimization, and many are turning to various solutions to mitigate this cost.

mitigate the risk of gift returns

An Inconvenient Truth

Shipping service United

Parcel Service predicts that

the existing return rate of

30% - 40% may rise by as

much as 15% in 201418.


For example, eBags Inc focuses on getting returns back into circulation19,

whilst Amazon empowers their customer service representatives to offer

consumers gift cards or discounts to keep their products20.

Unsurprisingly, retailers are also turning to data analysis to streamline

operations, whether it be to use data to help customers estimate fit, or to

identify which shoppers are ‘chronic returners’, affording them valuable

insights into to how to solve the problem.

This move is in line with a report by McKinsey & Company22,which highlights

the power that big data and analytics have, enabling retailers to transform

the way they do business through understanding their customers and their

service better.

Indeed, the fundamental question at hand is how retailers can best balance

their need to drive sales whilst delivering a great customer experience with

simple economic sensibilities.

key takeaway

Look into how expectations have changed and revisit old processes to

address the nuances of the modern customer.

For example, help your customers pick the right gift by providing them with

helpful product information such as size guides, or implement technologies

that help to mitigate the risk of gift returns.

The Trend is Upwards

Black Friday’s online

spending is up 19%

compared to 2012, and shows

no signs of stopping21.

Roy Erez is Co-Founder and CEO of Loop

Commerce, a Silicon Valley e-commerce company

backed by PayPal and top industry executives,

offering a disruptive approach to commerce

through an innovative gift shopping experience.

Roy is an entrepreneur and former venture

capitalist with more than 15 years of experience

that spans technologies, industries and verticals.

about the writer

Loop Commerce, Inc. | 611 Santa Cruz Ave, Menlo Park, CA 94025

www.loopcommerce.com | [email protected] | +1 650 694 9060

Backed by top industry executives as well as PayPal, Loop

Commerce is changing how retailers approach their top

e-commerce pain points by providing an innovative, patent

pending shopping and gifting platform that removes

the obstacles consumers face when trying to buy a real

physical product as a gift.

Loop ensures that buyers can purchase any product on

a retailer’s online store without making guesses about

the right size, color, desired style, or shipping address.

Recipients instantly receive a notification about their gifts,

avoiding shipping time constraints and enabling shoppers

to give a real physical gift at the last minute. Gift recipients

then become part of the shopping experience, selecting

the details of their gift or exchanging it for a completely

different product.

With Loop, retailers can now use gifting to drive new

business through customer acquisition, reduce the costs

of returns and exchanges, create new opportunities for

product up-sells and increased AOV, and gain actionable

insights into customer data.

about loop ™

Email us at [email protected] to learn more.

Loop Commerce, Inc. | 611 Santa Cruz Ave, Menlo Park, CA 94025

www.loopcommerce.com | [email protected] | +1 650 694 9060

references

1. CEB Tower Group. (2013). Gift Cards of the Union 2013. Retrieved from:

http://www.executiveboard.com/exbd/financial-services/

tower-group/gift-cards/index.page

2. Ariely, D. & Berman, K. (2013). The Gift-Giving Mistake Not to Make.

Retrieved from: http://ideas.time.com/2013/12/20/the-gift-

giving-mistake-not-to-make

3. Dunn, W. E., et al. (2008). Spending Money on Others Promotes

Happiness. Science 319, 1687 (2008); DOI: 10.1126/

sciences.1150952

4. Ariely, D. & Berman, K. (2013). The Gift-Giving Mistake Not to Make.

Retrieved from: http://ideas.time.com/2013/12/20/the-gift-

giving-mistake-not-to-make

5. Nusca, A. (2013). At Tory Burch, a Clear-Eye Focus on the Customer.

Retrieved from: http://www.zdnet.com/at-tory-burch-a-clear-

eyed-focus-on-the-customer-7000021396

6. Ford, A. (2013). Shop.org Tory Burch Keynote. Retrieved from: http://

www.zdnet.com/at-tory-burch-a-clear-eyed-focus-on-the-

customer-7000021396

7. First Data Corporation. (2012). Consumer Insights into the U.S. Gift Card

Market: 2012.

8. Barton, D., & Court, D. (2013). Three Keys to Building a Data-Driven

Strategy. Retrieved from: http://www.mckinsey.com/insights/

business_technology/three_keys_to_building_a_data_driven_

strategy

9. Miller, G. (2013). Tory Burch’s Not-so-secret Weapon: The Customer

Experience (and Technology). Retrieved from: http://

upstreamcommerce.com/blog/2013/10/18/tory-burchs-not-

so-secret-secret-weapon-customer-experience-and-technology

10. Ariely, D. (2013). The Psychology of Gift-Giving. Retrieved from: http://

danariely.com/2009/12/20/the-psychology-of-gift-giving

11. First Data Corporation. (2012). Consumer Insights into the U.S. Gift Card

Market: 2012.

12. Danova, T. (2013). You’ll Be Surprised by Which Retailers are Most

Mobile-Centric. Retrieved from: http://www.businessinsider.

com/mobile-helps-e-commerce-gain-audiences-2013-10

13. Davis, E. (2010). Macy’s Terry Lundgren Talks Holiday Trends, Black

Friday, and the Importance of Believing. Retrieved from: http://

blog.nrf.com/2010/11/18/macys-terry-lundgren-talks-holiday-

trends-black-friday-and-the-importance-of-believing

14. Hitchcock, D. (2012). Five Ways to Embrace Omnichannel Retailing.

Retrieved from: https://econsultancy.com/blog/10621-five-

ways-to-embrace-omni-channel-retailing#i.1whejcm7rndz51

15. Hudson, K. (2013). [Recap] Magento Imagine 2013. Retrieved from:

http://www.demacmedia.com/magento-commerce/recap-

magento-imagine-2013

16. Banjo, S. (2013). Rampant Returns Plague E-Retailers. Retrieved from:

http://online.wsj.com/news/articles/SB100014240527023047

73104579270260683155216

17. National Retail Federation. (2013). National Retail Federation

Holiday FAQ. Retrieved from: https://www.nrf.com/modules.

php?name=Pages&sp_id=1140



73104579270260683155216

19. Frank, J. N. Ready for RetuWrns. Retrieved from: https://www.

internetretailer.com/2013/11/04/ready-returns



73104579270260683155216

21. Rao, L. (2013) Record-Breakng Black Friday Online Spending Up 19%,

Mobile Sales Surge 43 Percent. Retrieved from: https://www.nrf.

com/modules.php?name=Pages&sp_id=1140

22. Barton, D., & Court, D. (2013). Three Keys to Building a Data-Driven

Strategy. Retrieved from: http://www.mckinsey.com/insights/

business_technology/three_keys_to_building_a_data_driven_

strategy

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