US retailers welcome a new Facebook gifting option

Wrapp brings social gifting to Gap, H&M, Sephora, Fab, Angry Birds, & more

A social gifting service focused on driving consumers into stores is launching its service in more than 25 major retailers in the US today. Wrapp is taking the concept of offering coupons to drive consumers into retail spots and making it even better by using free gift cards.

Brands such as Fab, Gap, H&M, Rovio Entertainment and Sephora are working with the young Swedish company to try this new spin on an old way of driving traffic and sales.

The service uses Facebook and a mobile application so that people can give their friends free gift cards -- usually valued at $5 to $15. Then, once a friend is given this gift card, a message is posted to that friend’s wall, where others can see it and contribute more money to the card -- commonly for a graduation gift or birthday. This theory works on the principal that many people would be willing to contribute a little something to a friend for a given occasion, but would feel weird giving someone a $3 gift card -- but if 10 friends do the same thing for the same company then a $30 gift card for the Gap is a pretty nice present.

The gift card recipient can choose when to cash out and redeem the gift card, or leave it there for hopes thatmore people will contribute.

Back at the start of the year we reported that Wrapp was still gearing up to get into the US gift card market. Many businesses find great revenue in the gift cards they sell since a large number of them get lost or are never redeemed. But gift cards can also be great for retailers because people who do end up using them, will likely spend more than the value of the gift card when redeeming them. 

And Wrapp's a social-gifting service allows for people to band together to make the gift a little more personal and lucrative. The Stockholm and San Francisco-based Wrapp announced in January that it's raised $5 million in a series A round of funding from Greylock Partners. The new funds is an addition to the $5 million already raised from Atomico, a venture firm founded by Niklas Zennstrom, founder of Skype. The total funds raised comes to some $10.5 million, including about $650,000 in an angel round from Creandum in May 2011. 

If you consider that approximately $100 billion in gift cards are sent each year in the U.S. and around $35 billion to $40 billion in gift cards were sold during the 2011 holiday season alone, who wouldn't want to get a slice of that.

With executives from Spotify and Groupon, Wrapp  is trying to really define the social commerce sector as something that can compliment the brick and mortar shops as well as benefit more people in a more personal way.

Retailers only pay Wrapp when a customer comes into the store and redeems the gift card and gift card recipients can build up their store credit until it is worthwhile for them to start shopping.

Since Wrapp’s launch in Sweden five months ago, it has more than 165,000 active users; has given away more than 1.4 million gift cards -- that equates to more than one gift card for every 10 people in the country.