Optimize Online Gifting to Drive Sales and Win New Customers

People shop for only two reasons: buying for themselves and buying for others. In the fast growing, ever-shifting apparel and accessories sector, maximizing online conversions is a colossal challenge.

Despite the obstacles that fashion e-commerce poses, Forrester Research director Zia Daniell observes, "Online retailers are looking for creative ways to drive sales of high-touch categories such as apparel, with e-commerce players investing in areas ranging from virtual fitting room tools to fashion advice from couriers upon delivery of products." While many of these innovations are forging inroads between brands and those buying for themselves, retailers now see the huge potential of the gifting transaction.

The majority of gifts I've received over the past year were on behalf of my baby daughter. A plethora of onesies, baby bath towels and bibs -- all of them pink -- are still sitting boxed up, occupying prime NYC closet space. While we are grateful for every gift, this illustrates just how hard it is to buy for others -- even a newborn! When it comes to apparel and accessory shopping for others online, consumers have traditionally taken two paths. The first and most common is defaulting to the reliable yet impersonal gift card. For others who want to go beyond the digital cash and give an actual product, there's a lot of guessing involved. Does he like this shade of blue? What's her ring (dress, sweater, etc.) size? Does he prefer V-neck or crew?

These pain points and uncertainties created by online apparel shopping are frustrating enough for shoppers buying for themselves and further compounded when purchasing gifts. These result in losses for retailers at both ends of a transaction. The most glaring is shopping cart abandonment. According to a recent Business Insider Intelligence report, abandoned online shopping carts represent a $2 trillion opportunity for retailers.

A difficult or confusing checkout process is one of the major reasons that potential customers jump ship before a sale occurs. To stem the tide of abandonment, retailers need to (among other things) streamline and create the shortest distance for customers between adding an item and completing the sale both for customers buying for themselves and for gift purchasers.

The second crucial loss is a result of improper guessing on the gifter's side. When a person receives an apparel or accessory gift that isn't the right fit, size, style, color, material, etc., she can both stick it in the back of the closet or return/exchange it. The fiercely competitive e-commerce landscape has relegated retailers to absorb the high cost of returns and exchanges, including shipping (both ways) and credit card transaction fees.

Last holiday season, WSJ retail industry reporter Shelly Banjo wrote, "Behind the uptick in e-commerce is a little known secret: As much as a third of all Internet sales gets returned, and the tide of goods flowing back to retailers is rising. Shipper United Parcel Service Inc. expects returns to jump 15 percent this season from last year, making them a significant and growing cost for retailers." The article cites the biggest cause of returns is size.

Retailers need to look to the important and timeless trend of personalization to clear these hurdles while creating confident gifters and happy recipients. There's a good reason why online sales for Uniqlo grew by 340 percent in 2013. It's not because they invested in a multi-million dollar technology plan. It's because they focused on providing shoppers with an experience tailored toward making everything in their online store more intuitive, personalized for each individual consumer and creating the shortest distance to purchase.

A whitepaper by Compare Metrics on Shopper-Centric Discovery says it's a problem that more shoppers haven't been invited to participate in the personalization process. This is doubly true for gift recipients. To fully leverage the market opportunity that online gifting presents, retailers need to switch up the paradigm and bring gift recipients into the personalization process. Doing this simultaneously breaks down the barriers of uncertainty for gifters that can lead to lost sales.

Online retailers need to supercharge gift sales of high-touch categories and drastically reduce the costs due to returns and exchanges. This begins by providing a way to buy someone a gift online that requires the absolute least amount of information from the gifter (ideally paring it down to just an email address). Thoughtful item-level gifting needs to be as easy—if not easier—than buying a gift card. This requires putting personalized options such as fit, size, style, color, material and logistical information such as shipping address into the hands of the recipient. When consumers have the ability to instantly gift an item worry-free, retailers will capture the long tail of gifters. E-gifting accounts for the biggest growth in the gifting industry, poised to be at $10 billion up from $300 million just two years ago. The next step is to allow the gifter to personalize the thoughtful e-gifting experience with e-cards, virtual wraps, video greetings and other options that evoke the warm feelings centered on giving and receiving gifts.

Retailers are embracing personalization in ways that were never before possible. Location-based devices are bridging the in-store and online shopping experience in real time. Brands and retailers are investing more resources into identifying, reaching, engaging with and marketing to those shoppers buying for themselves. Those that also look for solutions that improve the online gifting experience will be well positioned to capitalize on the multi-billion dollar gifting market and drive more revenue from both shoppers and the people they shop for.

Monika Kochhar is CEO and co-founder of online gifting technology provider SmartGift.

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