Israeli-born Roy Erez was living in California when he found the perfect gift for a friend, who had just had a baby. But the Silicon Valley-based venture capitalist quickly hit a stumbling block.
When it came time to complete the purchase, the only detail he could recall about the recipient's shipping address was that it was somewhere in New York City.
That information gap quickly became Erez's "light-bulb" moment, when he started wondering how much revenue retailers were leaving on the table from situations like these. Yet in what Erez estimates to be a $200 billion annual opportunity for gifting, incomplete addresses aren't the only problem retailers face.
Because consumers can be hesitant to choose a unique gift they're unsure about, they'll often go the safe route and opt for cash or a gift card. Those options either eliminate a sale entirely, or can lead to unrecognized revenue from cards that aren't redeemed.
Even when shoppers do take the risk on a unique item, retailers can get stuck with high return costs that include processing and repackaging unwanted products.
To take the risk out of gift giving, Erez in 2012 co-founded Loop Commerce with Yahoo alumnus Alex Sirota. The idea is simple. Shoppers select a product on a participating retailer's website, and choose to send it as an electronic gift. They enter the recipient's name and email address — as well as their own — and say when they want the digital gift delivered.
After typing out a message and providing their payment information, the recipient is sent an email from the retailer notifying them of the gift. But before they go to redeem it, they can choose the size and color that they prefer, or opt to exchange it for something else. That not only cuts back on the guesswork for shoppers, but eliminates much of the risk for retailers.
"Stores are optimized for shopping for yourself," Erez said. "They are leaving money on the table."