Enabling Technologies

The Next Opportunity in Prepaid: An Interview With SmartGift’s Co-Founder Monika Kochhar

MEDICI

LTP: Can you provide us with a brief introduction to SmartGift, its technology and the core problem it solves?

Monika Kochhar: SmartGift innovates the multi-billion-dollar gifting economy. We basically have two options when buying for others. We can either buy a product or a gift card.

When we give a product, we have limited information about the recipient such as their size or color preference resulting in suboptimal gifts or returns. In 2014, Americans returned $284B worth of merchandise. About 20% of those returns, or roughly $60, happened during the holiday season. Best Buy estimated that returns cost it around $400M or about 10% of revenue that year.

Gift cards offer flexibility, but in a recent survey, 83% of people who identified themselves as gift card givers wished they had done a better job by giving something more personal.

Gifting needed a workflow that would eliminate these inefficiencies and transformed the consumer experience by making it thoughtful and engaging, yet flexible.

SmartGift is an e-commerce tech company that provides retailers and brands with product e-gifting technology that removes the obstacles people face when trying to buy a real physical product as a gift. Gift shoppers can buy an item on a retail partner’s site as a gift, send a gift notification to the recipient by social chat or email. And recipients can choose their product preferences such as the size and color or exchange the gift for the retailer’s e-gift card—all before the item ships.

We haven’t forgotten about the human element of gifting either. All the tiny details that make gifting great: the ribbons, the wrap and the anticipation—we’ve made it all available digitally.

This ups the consumer experience and creates operational efficiencies for retailers through much-reduced returns, increased sales and customer acquisition.

LTP: What is your view of established players and their solutions in the gifting industry? What do you think are the challenges that the industry currently faces?

MK: We operate at the intersection of three trillion-dollar markets: prepaid, payments and commerce.

In prepaid, the plastic gift card market has moved beyond novelty and is now firmly in the mainstream. With maturity comes slowing growth. While the total US gift card volume is estimated to reach $149B in 2016, annual growth rates have halved since their peak in 2012. Digital innovation will breathe new life into this market. E-gift cards are expected to more than double in growth to $14B by 2017 yet not enough to make up for the slowdown in the growth of the plastic card. SmartGift uses stored value behind the scenes and is a prime example of digital innovation in prepaid.

In payments, it’s all about removing friction. SmartGift offers a gift checkout optimized for gift purchases where gift shoppers have incomplete information about the recipient's preferences. It removes friction just like next-gen checkouts provided by Stripe, Apple, Samsung, Visa, MasterCard, PayPal, Chase and others, which otherwise leads to abandoned shopping carts.

In e-commerce, the biggest challenges are customer acquisition, the cost of returns, growing the top line and offering relevant mobile-first customer experiences. Product e-gifting helps with all four and retailers are currently not doing enough about it.

Product e-gifting is a powerful and cost-effective way to win new customers. The gift sender sends an implicit message to the recipient with the gift purchase: “I bought you this product that I believe you will enjoy from a brand that I know and trust.” Research shows that 92% of consumers trust recommendations from family and friends above all other forms of advertising and the vast majority of gifting transactions occur in these circles. It also provides retailers with a new channel to market and sell more products, offers a relevant mobile-centric customer experience as transactions now occurring on smartphones are rapidly outpacing those on tablets, and it greatly reduces returns as 38% of gift recipients tweak at least one product option before accepting the gift, offsetting the 40% return rate that the NRF reports for a typical holiday season.

LTP: What is differentiated about SmartGift? Can you share some unique insights and challenges with consumer gifting behavior?

MK: Yeah, absolutely! SmartGift applies human-centered design from ground up. For example, one of the things we found is that people love the convenience, thoughtfulness and flexibility of product e-gifts, but they also want to share in the moment when the recipient opens the gift. When gift recipients receive a gift email from the retailer, it just becomes another form of transaction and misses the social aspect in gifting altogether.

SmartGift is the only product e-gifting solution that lets consumers deliver the gift at the perfect moment. Consumers know how they communicate best with certain people, whether it’s through WhatsApp, text, Google Hangouts, Facebook, Skype or email. So we let gift givers deliver the gifts in the most convenient and familiar channel at the perfect moment. That can be long distance, at a candlelight dinner or while having a birthday cocktail with a friend. It allows them to share in the moment of surprise. It’s a big part of the age-old gift exchange. We also haven’t forgotten about all the tiny details that make gifting great—the ribbons, the wrap and the anticipation of everything. These things matter in the gifting exchange and it is what our users love most apart from the obvious functional benefits. And, of course, we took a strictly mobile-first approach. We made it a breeze to purchase meaningful gifts at the point of inspiration through mobile. This will help spark the growth of product e-gifting whether through spontaneous, everyday micro-moments such as a friend’s promotion or a get-well gift, and of course, return gifts. All of this really takes prepaid to its next phase. It makes something that has become impersonal more personal.

Retailers can get up and running with SmartGift’s product e-gifting tech in no time. It really is a snippet of code that maximizes gift purchase performance and millennial engagement.

LTP: What upcoming milestones for SmartGift can you share with us for the rest of 2016 (or beyond)?

MK: The rise of the “Buy” button in social channels needs to also expand to the “Gift” button. There is definitely huge potential in a ubiquitous “Gift” button for wide distribution and social channels.

We’re also excited by the exponential growth potential of gifting. Gifting is a perpetuating system of balanced reciprocity. Carrie Johnson from Forrester Research hit it perfectly when she wrote, “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.” So a dedicated product e-gift shopping destination or marketplace excites us too.

And then there is artificial intelligence and all the fascinating stuff that’s happening right now. AI-powered gift shopping assistants that know the gift recipient and recommend products based on her preferences, shopping history and occasion—all that thrills us!

Well-designed and executed technology will not only bridge the physical and digital divide but enhance experiences to such a level that people will prefer and enjoy the digital ones over the physical counterparts. We believe that a digital Christmas when people check their devices for gifts under the Christmas tree is very near and we want to be part of it.

Receive and send SmartGift demo gifts here

MEDICI Team

MEDICI

MEDICI Team is a group of content writers, bloggers, journalists, researchers, and editors from the MEDICI who collaborate to create FinTech insights.

Apply to Become a Contributor