Six ways online retailers can convert more gift shoppers to buyers and reduce returns.

Roy Erez, CEO, Loop Commerce

Roy Erez, CEO and co-founder, Loop Commerce

E-commerce has been built overlooking the need to distinguish between those consumers shopping for themselves and those shopping for others. This blind spot around digital gifting equates to a $200-$300 billion missed opportunity for retailers. However, leading retailers and brands such as Macy’s, Saks Fifth Avenue, Bergdorf Goodman, Coach, Neiman Marcus, American Giant, Lilly Pulitzer and others have recently begun to embrace innovative, new solutions in order to tap into, and monetize, this emerging category.

On June 13th, we brought together distinguished retail executives and industry experts for a first-ever summit focused on opportunities within digital gifting entitled, “Shopping for Others: Unlocking a Blind Spot in Digital Commerce.” The event included a panel discussion on this emerging retail category and how retailers can tap into the benefits of digital gifting to quickly capture additional sales, acquire new customers and reduce the cost of returns. The panel also discussed how digital gifting can further build brand value and excitement in a way that increases consumer engagement with the store.

The discussion was led by Fung Global Retail & Technology managing director Deborah Weinswig, and included Milton Pappas, senior vice president of digital marketing for Hudson’s Bay Company’s HBC Digital division, Victor Ortiz, vice president of digital product management for Toys R Us, and myself.

Here are six lessons for retailers based on the panel discussion.

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Distinguishing Self-Purchase Checkout from Gift Purchases is Critical to Drive New Sales

Distinguishing products being purchased for the buyer versus someone else can be challenging for retailers when utilizing traditional e-commerce models and checkout flows, which are built and optimized for self-purchase. Milton Pappas noted that tracking gift card sales as well as offering gift wrapping distinguishes gift purchases from self-purchases, but gives little visibility into the recipient and their preferences.

Anything we can do to enable them to make personal gifts versus gift cards is a win-win.

In order to offer an effective digital gifting platform, retailers must acknowledge the differences between a consumer shopping for themselves and a consumer shopping for others—not only during the birth of a child or wedding, but for every purchase year-round. By doing so and offering multiple services and experiences for consumers beyond self-purchase, retailers can convert site visitors previously unable to shop, and attract and excite new and existing customers in a way that enhances brand loyalty and future additional customer engagement.

Use Gift Recipient Data to Build a Brand ConnectionBut Discriminately

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While it has become standard for retailers to send personalized offers based on self-purchase data, the line can be more delicate when targeting gift recipients that may not have offered their data first-hand. For example, Toys R Us uses data gathered through a baby registry to reach out to parents when the baby is about to turn one. Deborah Weinswig noted that this could feel “creepy,” as though the store knows too much about a child. However, Victor Ortiz stated that consistent, personalized marketing on a regular basis establishes a brand connection slowly, and makes a promotion for a birthday natural. Milton Pappas echoed this idea, and noted that with wedding registries, for example, customers have already established a relationship with the company. As a result, suggesting a relevant anniversary gift is expected.

In many to most cases, a gift recipient is invisible to the store, offering very little information into the lifecycle of the purchase and the relationships between the buyer and recipient. New approaches and platforms for digital gifting can deepen the data gathered on the gift buyer and recipient by showing the full lifecycle of the transaction, for example, why the gift was bought, how much they spent, what the recipient does with the gift (change the color, size, exchange or return), and track their purchase behavior from that point forward.

Returns, Exchanges and Unredeemed Gift Cards Cost Too Much

Returns are a challenge for retailers. On one hand, returns can be used as a mechanism to drive traffic to the store. On the other, they can be costly. Gift cards also present a liability if they go unused. Milton Pappas explained, “The return rate in apparel is a big challenge from an online perspective,” he said. “There are a lot of opportunities for retailers to optimize and reduce returns. Anything we can do from a gifting perspective to enable them to make personal gifts versus gift cards is a win-win. We have more satisfied customers, and we reduce the return rate.” Victor Ortiz agreed, pointing out that buying for children is especially difficult because their interests change quickly, and sizes are hard because they are growing.

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The panel discussed why now, more than ever, retailers need to consider how online gifting solutions can reduce the cost of shipping returns by enabling the recipient to modify, exchange or return the gift before it has even left the facility. This is particularly relevant with traditionally “hard-to-gift” items such as shoes or clothing which require the correct size and style choice, to toys for children. When done right, digital gifting solutions have demonstrated nearly 100% gift redemption rates with no added cost to ship.

Social Media and Competition Fuel Consumer Demand for Immediacy and Instant Gratification

Since the proliferation of Facebook and other social media platforms, Millennials and beyond have become accustomed to saying, “Happy Birthday” with the click of a button. However, the panel noted that as Facebook reminds someone of a family member’s or good friend’s birthday, it is usually too late to ship a thoughtful gift. While pick-up-in-store options are a possibility for some and have proved to increase transactions, it was noted that around 40% of gift transactions are cross-state. This leaves consumers with very few options for those truly last-minute gifting needs outside of a digital gift card, which is anything but personal. Adding to this is Amazon’s same-day delivery capability which is gaining traction with last-minute gifting, further necessitating same-day gifting options for retailers.

Digital gifting platforms give retailers important tools to compete by facilitating the sending of thoughtful gifts immediately, and the ability for the recipient to exchange it before it ships.

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Consumers Must be Educated on the Existence of New Digital Gifting Options

According to Milton Pappas, consumers want to be more thoughtful than a gift card, and retailers have the opportunity to grow their business by filling this need. But the industry needs to do more to educate its consumers on the opportunities available. Online shoppers have been conditioned to think that they must have a size and shipping address to send anything to anyone online, or that Amazon is the only option for same-day delivery.

“One of the challenges we have as retailers and running ecommerce digital is creating awareness that consumers have options,” Pappas told the audience. “They need to know they can put thought into it, go to Saks, for example, and don’t have to come to the store to send something more thoughtful than a gift card.” He noted that on their website, they display the “Gift Now” option offering steps explaining how the digital gifting platform works. He noted that for customers who can’t buy-online-pickup- in-store (BOPIS), and want to give something more meaningful, it is a great option.

Ortiz felt that utilizing social media advertising is critical. “Retailers and technology providers need to manipulate the social spin, and drive consumers to their digital gifting platforms directly,” he said. “The biggest barrier is helping consumers understand that there is an awesome opportunity on the other side of that ad offering a same-day gift.”

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Facilitating Digital Gifting Correctly Will Diminish Cart Abandonment

Cart abandonment rates are very high in e-commerce, and even higher when it comes to gifting. This represents significant lost opportunities for retailers, but it is important to understand why customers—particularly those looking to purchase for others—are abandoning their carts. “Lots of times it’s not our site,” Ortiz said of his visitors shopping for registry gifts. “Some of it is friction and frustration based on all the items being gone within their budget. We need to help them pull together a nice basket, even if all that is left is baby bottles.”

Regardless, it is important that retailers determine how to salvage customers by better understanding why they are leaving. Many times, it is because they didn’t want to get the wrong gift which would need to be exchanged. The good news is this is fundamentally easy to solve with technology—particularly a platform that doesn’t ask a gift buyer about the size of a shirt they are buying for another person.

Digital gifting is a very strong and impactful use case that retailers can utilize in addition to registries and gift cards which can analyze data, strengthen relationships between gift buyer and recipient, as well as the brands and retailers facilitating the transaction. Retailers alike that adopt smart, digital gifting solutions will benefit from decreased cart abandonment, higher traffic, more customers and higher margins as the retail industry evolves around this new and growing online retail category.

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Pappas explained when talking about his digital gifting solution, “We see a good rate of new customers and recipients, a new source of email address, and if we can get them to the store it’s huge. It’s an acquisition vehicle for us… I’m getting a lot of new customers, and a high conversion rate.”

Loop Commerce provides a digital gifting platform for retailers and brands.

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