East Lansing-based GiftZip.com was one of a few gift card companies recently featured in Entrepreneur Magazine.
According to excerpts from the article:
As the holiday shopping season kicks off — and merchants brace for another lean year — a small group of online entrepreneurs is setting up shop around one of retail's only bright spots: The gift card.
Yes, the gift that says "I put almost no effort into this" has morphed into a $90 billion industry, according to the TowerGroup, a Massachusetts research and consulting firm. Sales of gift cards—that is, any card issued by a merchant redeemable for goods and services—jumped to $97 billion in 2007 from $57 billion in 2005. While the dollar figure dipped in 2008, First Data, a retail tracking service, found that shoppers actually bought more gift cards than the year before; they just loaded less money onto them.
"When the dust settles, we see gift cards surpassing $100 billion by 2012," said Brian Riley, research director for the TowerGroup. Online entrepreneurs who've built businesses around the phenomenon are banking on it. Here's how they're cashing in on plastic fever:
The gift card without the card. Shoppers choose a merchant "card" and an e-gift card pops up in the recipient's inbox,which can be redeemed in-store or online. "My intent was to take that department-store kiosk model and put it online," says founder Sam Hogg, who came up with the idea while taking a Sustainable Supply Chain class at Michigan State University.
Who's in: The mass (Forever 21, Target) and the deeply niche (Culinary Teas, Glitzy Pet Jewelry) How it pays off: Merchants compensate the East Lansing, Mich., company by paying a percentage of sales, or paying to have traffic driven their way or their logo placed next to a big company like Target. GiftZip began in June; Hogg expects to break even early next year.
Read the entire article here.