Gap, H&M, Sephora and Others Unwrap New Social Gifting Service in the U.S.

More than 25 major retailers, including the Gap, H&M, Sephora and Brooklyn Industries, are working with a Swedish company named Wrapp to roll-out a social gifting service starting today.

The intention of the service is to drive consumers into stores, much like Groupon, but rather than enticing them with coupons, the bait is presumably even better: Free gift cards.

Wrapp, which was founded by a mix of former executives from Spotify and Groupon and received financial backing from Reid Hoffman of Greylock Partners, is now available in the U.S.

It works like this:

  • Using Facebook and a mobile application, people can give their Facebook friends free gift cards, commonly valued at $5 to $15.
  • A notification saying that they’ve received a gift card is posted to that friend’s wall, where anyone can see it and contribute more money if they wish.
  • The person, who received the gift card, can then redeem it using a mobile application in the store.

Lexy Funk, the CEO of Brooklyn Industries, a New York retailer that sells handbags and apparel online and at a dozen-or-so stores, said she was drawn to the concept because of its ability to target customers based on their Facebook information, including age.

“Wrapp has the potential to be more sophisticated for us and the consumer,” she said, adding that she experimented with Groupon, but felt it attracted a lot of low-end users.

With Wrapp, a $15 gift card could show up for someone in their 40s, but a $5 gift card might appear for someone younger, depending on the retailer’s core demographic or how much they may want to spend to acquire that user. Funk said it will take some tweaking to find the right combinations, but that they are eager to try it out.

A lot of companies are trying to define social commerce. Some have translated it very literally by trying to generate sales directly on Facebook. Others have taken smaller steps, such as letting users “like” products from their online store. But so far, not many companies have been wildly successful.

Wrapp’s concept ties together gifting and social in one easy-to-understand package.

Hjalmar Winbladh, Wrapp’s CEO, said retailers are looking for an efficient way to drive customers to their brick and mortar and online stores, and with Wrapp, they can do it in a way that continues to build their brand online and leverage friend-to-friend marketing.

“Everyone is trying to leverage their Facebook presence and the smartphone boom in a way that’s not just about discounting,” Winbladh said.

Retailers only pay Wrapp when a customer comes into the store and redeems the gift card.

Based on company’s successes in Sweden, retailers like Brooklyn Industries’ Funk are hopeful that the results will be meaningful.

Since Wrapp’s commercial launch in Sweden five months ago, it has more than 165,000 active users; has given away more than 1.4 million gift cards; and reports that the average sale size from those gift cards are four to six times higher than the card’s original value.

And, that’s in a country with fewer than 10 million residents.

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