The company seeks to disrupt the gift card industry by making it easy to buy a personalized gift that the recipient will be happy about
Americans spend $38 billion per year online on gifts alone, by some estimates. This includes gift cards as well as items purchased online and intended as gifts.
But the process of gift-giving through e-commerce leaves a lot to be desired. You can give a gift card, but that’s not very creative or thoughtful. Or you can buy a more personal item, but you may not know your friend’s shipping address, let alone their clothing size or taste.
That’s where Israeli startup Loop Commerce comes in. The company, which aims to improve the gift-buying experience online, has raised an additional $16 million round of funding, bringing the total invested in the company to $30 million. The funding comes from existing as well as new strategic investors. This round was led by Oren Zeev, a lead investor in companies such as Houzz, Chegg, Audible, Tipalti and others, together with Dan Tierney and Stephen Schuler (through their family office, Wicklow Capital), co-founders of GETCO and investors in several previous startups.
The behavioral economics of gifts
According to behavioral economists, the purpose of gifts in modern societies is largely symbolic. In other words, they send a message about your relationship with the person you are giving a gift to. For instance, a woman who buys her boyfriend the exact gadget he wants shows that she really understands him and that they are a well-suited couple. That’s why the closer the relationship, the less likely a gift card is to be satisfactory.
Loop Commerce provides a platform for e-commerce sites to let people buy personalized gifts without the potential pitfalls. Thus, you can buy a cashmere sweater online for your best friend. She will get a notification that she has received a gift from you, but she can then fill in her own size and preferred color and enter her mailing address. She won’t know how much the item cost, and she’ll know that you remembered how much she loves cashmere and that you put extra thought into the gift. Best of all, if she really hates your taste, she can exchange the gift for something else even before it is shipped.
The platform helps e-commerce sites by bringing them new potential customers as well as providing them with data about what kinds of gifts went over the best. According to behavioral economics research, the best gift for a guy is a gadget and for a woman it’s something expensive and useless.
Follow the money
Loop said in a press release that it would use the funding to accelerate its growth, including hiring of new employees in engineering, data, sales and marketing, product and design.
In addition to Zeev and Wicklow Capital, industry investors include PayPal, Andrew Fine and Silas Chou (through his family office, Novel TMT), the retail tycoon known for his holdings in retailers such as Michael Kors, Tommy Hilfiger, and Ralph Lauren Europe; Don Katz, EVP at Amazon; Mark Carges, former CTO at eBay; Dan Rose, Facebook’s VP of partnerships and strategy; Ken Seiff, former EVP e-commerce at Brooks Brothers; Michael Scharff, former SVP at Toys “R” Us and Best Buy; Ron Offir, former SVP e-commerce at Michael Kors; Richard Sarnoff from KKR; Chuck Geiger, CTO of Chegg and former CTO of PayPal; Roy Rubin, founder and former CEO of Magento; Dovi Frances, managing partner at SG; and Mohan Gyani, board member at Blackhawk Networks.
“Loop Commerce provides retailers and consumers with a solution for e-gifting that gives merchants a compelling way to help people buy the perfect gift on their sites,” said Hill Ferguson, SVP and Global Head of Consumer Business at PayPal. “We are excited to support Loop as it delivers shopping experiences that engage and delight consumers.”
“Introducing the personal back into the otherwise impersonal online experience is only the beginning of what we believe to be the transformation of commerce,” Roy Erez, CEO and co-founder of Loop Commerce said in a statement.
Loop launched its product in the second half of 2014. The company’s customers including Macy’s, Lancôme, Urban Decay, Diane von Furstenberg, Johnny Was, Relax the Back and Thomas Dean.
Featured Image Credit: Loop Commerce