Asia markets 'prime' for social gifting

Growing penetration of smartphones, social networks, and advancing mobile payment technologies in region present huge opportunities for social gifting to take off.

Social gifting--which refers to an individual or a group of people buying and sending gifts via social networks--is a trend which industry watchers believe is set to take off soon in Asia, in the same way it has been gaining popularity in many western countries.

Social gifting was started as a means to drive sales to brick-and-mortar stores by offering discounts but without diluting their brand image, noted a July report from Spire Research. This method of giving gifts has become an increasingly attractive e-commerce platform for retailers to pay attention to because it allows them to attract sales without increasing marketing costs.

So a group of friends can team up to buy a gift card or voucher from a participating retailer, for example, which they can then send to the recipient online, noted Leon Perera, CEO of Spire Research, in a follow-up interview.

This has also spawned an increasing number of social gifting companies which specialize in delivering services around this form of buying, such as Wrapp, Cashstar, Socialgift, Groupcard Apps, and DropGifts--making social gifting a US$1 billion industry, he pointed out.

Asian markets 'prime'
Brian Riley, analyst at CEB TowerGroup, reckon many Asian markets present huge opportunities for social gifting service providers given the growing penetration of smartphones, social networks, and the advancement of mobile payment technologies in the region.

While social gifting has been a bit slower in taking off in Asia, primarily because the underlying technologies have not been introduced until very recently, Riley says such services will likely take off in the "next year or so" as more markets integrate social gifting into their payments infrastructure.

"Asian markets are particularly prime for development as their mobile payment technologies are far more sophisticated than North America. Asian markets, particularly South Korea, Japan and Malaysia will likely set the pace," the analyst added.

Perera concurred, saying the trend is likely to take off in countries with high rates of Internet and social media penetration. It will also be a hit in countries which send large numbers of migrant workers abroad, such as the Philippines, China, and Myanmar, he pointed out.

For migrant workers, social gifting eliminates the cost and hassle of sending a physical gift across national borders. It is perfectly feasible, given the rising penetration of mobile phones among migrant workers, the CEO elaborated.

One of the main players in the social gifting industry, Sweden-based Wrapp, opened an office in Taiwan in April with plans to use the market as a "beachhead" for its Asian expansion plans.

"Taiwan has very high penetration rate of smartphones and Facebook usage, and a relatively high GDP (gross domestic product) among Asian countries," said a company spokesperson, adding that these are key criteria for selecting new markets.

Wrapp revealed that its next Asian office will likely be in Japan at the end of 2012.

The company said it was optimistic of driving adoption rates in Asia with its brand partners too, and while gift cards are not as big in the region as it is in the United States, the smartphone adoption rate "is equal or even higher".

Even social networking giant Facebook is keen to get a piece of the action, acquiring social gifting startup Karma in May for an undisclosed sum.

CEB TowerGroup's Riley anticipated that several localized versions of social gifting services will gain traction as markets mature, similar to how daily deal sites took off in the region.

India's, which is the country's first social gifting company, is one example of this, Spire Research noted. "The Badhai voucher can be used in leading retail chains as well as on e-commerce sites. It also enables social or pooled gifting through Facebook and allows users to track special occasions," Perera said.

In particular, luxury brand retailers may stand to benefit greatly from the trend, as "the cultural practice of gifting in countries like China and India is often used to signal the status of the giver", the CEO added.

Regulations need maturing
It's a matter of when to jump into the market that Asian retailers and vendors will have to consider, since there are risks in diving into social gifting too early as well as not moving in fast enough, thereby losing any potential first-mover advantage, he stated.

There is also the challenge of immature industry regulations, Riley pointed out. Consumer protection across the globe is still lacking in terms of fee disclosure requirements, prudential controls over cash deposits, and unregulated third-party money handling, he said.

"Some markets, such as Europe, now cover many of the transactional aspects under the broad-based European Payments Directive, but most other markets including the U.S. which dominates the gifting business, still lag in their perceptions of cash control," noted the CEB Tower analyst.

Riley added this would likely evolve over time, in a manner similar to the way debit and credit protections have been instituted worldwide.