Social gifting makes marketers out of your Facebook friends

Successful Swedish start-up Wrapp offers a new way for retailers and merchants to get brands and products in front of consumers -- through your social network.
Written by Heather Clancy, Contributor

As if retailers didn't have enough new e-commerce and mobile marketing trends to digest, here's another phrase to add to the retail strategy lexicon, "social gifting."

Social gifting builds on the practice of e-gifting, when someone buys an electronic gift card from a retailer's Web site and sends it to you via e-mail. Instant gratification, all ways around. Social gifting raises that idea to the social level, allowing Facebook friends to give or receive promotional gift cards or to contribute together to give joint presents.

The social gifting concept got a boost in the United States this week when Swedish start-up Wrapp launched a U.S. version of its social gifting service with 15 high-profile merchants including H&M, Gap and Sephora. (Another 15 merchants are supposed to be added in the next few weeks, according to Wrapp.)

Wrapp takes the form of a mobile application for iOS or Android that you download and then connect to your Facebook account. Once you download the app, you can send gifts or promotional gift card to people within your network. There is also a Web version of the application.

Although Wrapp isn't the only game in social giving -- other early companies in the category include CashStar, SocialGift, Groupcard Apps and DropGifts -- the buzz it is receiving comes courtesy of both its credentials and its initial success in Europe.

The founders of the company include two technology executives involved in building out the popular Spotify digital music service, and the former CEO of H&M and Eddie Bauer is the chairman, which gives it some nice retail bonafides. The company has received $10.5 million in Series A funding from Greylock Partners and Atomico, and the board includes the founders of both LinkedIn and Skype.

Since Wrapp launched in November 2011, nearly 180,000 people have used it to give their Facebook friends more than 1.5 million free promotional gift cards for nearly 60 major retailers, according to the company's background information.

So why should a retailer care? Wrapp reports that the practice of social gifting often results in sales much larger than the original gift -- each sale averages 4 times to 6 times the value.

Describing his service, Wrapp CEO Hjalmar Winbladh said:

"You and I get to give our friends free gifts and promotional cards from great retailers, the gifts we give are stored in our friends' phones so they're always with them when they want to buy something they really want, and the merchants get a proven customer acquisition and retention platform built on Wrapp's friend-to-friend marketing for conducting performance-based campaigns."

The paranoid among us already are questioning whether or not social gifting will become the 2012 equivalent of daily deals, which helped undermine prices for some businesses (especially small ones) and downright burned others, when they couldn't keep up with the opportunistic one-time customers they acquired.

I see this phenomenon as different, since it is likely that your Facebook friends will think twice before sending gifts for a brand they don't already trust.

In the long-run, social gifting could be an incredibly effective form of marketing, one that is simultaneously social and mobile.

(Image courtesy of Wrapp; thumbnail courtesy of Stock.xchng)

This post was originally published on Smartplanet.com

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