"Social gifting," the latest Internet shopping trend, is getting compared to Groupon for reasons both obvious and bad. The obvious: It's a buzzed about e-retail, marketing gimmick, which is getting a lot of Internet attention, especially today, as one popular social gifting company, Wrapp, opens up to U.S. markets. Like Groupon and its clones, this new Internet-meets-shopping set-up promises to bring marketing to retailers, discounted wares to consumers, and money to social gifting companies all without hurting anyone or anything in the process. The bad: That exact win-win-win situation, of course, didn't turn out that way, as many of those Groupon clones died, with queen bee Groupon having business sustainability issues of its own. So before retailers or consumers buy into this latest trend, here's some things to look out for.
The Marketing Lie
The way these services work, stores give away free gift cards worth $5 to $15 on Facebook drawing users into their stores. They see it as a small discount in exchange for marketing and sales. Stores believe (hope?) most social gift receivers will spend more money than allotted on the gift card. But the real draw is cheap marketing. "It could be a very powerful form of marketing (and) drive incremental value," Sucharita Mulpuru, an analyst with Forrester Research, told Reuters' Nivedita Bhattacharjee. This gets people through the door in a way that might be more powerful than Groupon's group discounts. "You’re tapping into the most efficient marketing which is friends of friends," Wrapp co-founder Hjalmar Winbladh told GigaOm's Ryan Kim. The whole gifting process happens on Facebook, meaning friends see when another friend has bought something at a certain store, sharing it on their Facebook feeds. If Facebook friend A shares they got a giftcard to store X from Facebook friend B, a Facebook user might deem that store worthy of its visit. Maybe.