Friday, June 1, 2001

Hidden Value in Online Gift Sales

Online retailers are missing an opportunity to tap into a projected $36 billion dollar market in gift sales by 2005, according to a new Report, "The Hidden Value In Gift Sales" by Forrester Research, Inc.

"Online gift buyers make more money, spend more online, and shop more often than nongift buyers," said Forrester Analyst Carrie A. Johnson. "Online gift buyers purchase more than just Christmas and Father's Day presents -- they continue to buy throughout the year for birthdays and other special occasions."

Yet, according to Johnson, retailers are wasting resources on shopping tools and services that are of little interest to gift buyers. On-time delivery, not wish lists or gift-wrapping, is what matters most to gift givers because it produces a positive experience for the person receiving a present. And it's that experience that begins the "gift spiral," which leads to increased sales and loyalty: A satisfied gift giver becomes a repeat customer, the happy recipient becomes a new customer, and both introduce more consumers to the retailer that supplied the original gift.

"Retailers must recognize," explained Johnson, "that gift giving is a continuous process, not a one-shot event." To benefit from this gift spiral, retailers must treat an online gift giver not as just another customer, but as a shopper with unique goals and needs. Retailers targeting gift givers must promote their on-time delivery records and downplay tools and themed gift areas like: "For the Dad who has it all."

To turn gift recipients into new customers, retailers will use the end of the purchase process for gift givers -- the receipt of the package by the recipient -- as the beginning of new-customer-acquisition efforts. "Retailers," continued Johnson, "must use packaging to build awareness, spiffs to incent trial, and an easy process for returns or exchanges to highlight customer service."

With satisfied gift givers and recipients, retailers will benefit from increased revenue and lower costs. Forrester's Consumer Technographics® data shows that one online shopper's small gift purchase can lead to more than $2,000 in sales. Customer acquisition is powered by low-cost viral marketing; gift shoppers, not retailers, foot the bill for the marketing vehicle that eventually turns recipients into buyers -- the gift.