East Lansing-based GiftZip.com was one of a few gift card companies recently featured in Entrepreneur Magazine.
According to excerpts from the article:
Asthe holiday shopping season kicks off — and merchants brace for anotherlean year — a small group of online entrepreneurs is setting up shoparound 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—thatis, any card issued by a merchant redeemable for goods andservices—jumped to $97 billion in 2007 from $57 billion in 2005. Whilethe dollar figure dipped in 2008, First Data,a retail tracking service, found that shoppers actually bought moregift cards than the year before; they just loaded less money onto them.
"Whenthe dust settles, we see gift cards surpassing $100 billion by 2012,"said Brian Riley, research director for the TowerGroup. Onlineentrepreneurs who've built businesses around the phenomenon are bankingon it. Here's how they're cashing in on plastic fever:
Thegift card without the card. Shoppers choose a merchant "card" and ane-gift card pops up in the recipient's inbox,which can be redeemedin-store or online. "My intent was to take that department-store kioskmodel and put it online," says founder Sam Hogg, who came up with theidea 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 paysoff: Merchants compensate the East Lansing, Mich., company by paying apercentage of sales, or paying to have traffic driven their way ortheir logo placed next to a big company like Target. GiftZip began inJune; Hogg expects to break even early next year.
Read the entire article here.