Jifiti: the gifting app that might save Christmas for the brick-and-mortar crowd

By Michael Carney , written on November 20, 2012

From The News Desk

If brick-and-mortar retail is going to combat the onslaught of ecommerce challengers, there’s an overwhelming chance that it will do so on the back of innovative startups creating tools to leverage their offline advantages. One such startup is launching publicly today in partnership with Simon Property Group, an S&P 100 company that is the largest real estate company in the world, as owner of 333 retail real estate properties in North America and Asia comprising 242 million square feet.

Jifiti takes the concept of gift registries common to weddings and baby showers, and de-formalizes them making the concept applicable to everyday mall shoppers. The company’s app, available on iOS, Android, and HTML5 mobile web, encourages shoppers to tag items to their wishlist and share that list with family and friends via Facebook, Twitter, email, and SMS. Generous gifters in the user’s life have the opportunity to purchase the item in whole or in part in the form of branded store gift cards.

The startup platform accomplishes several things that, if it catches on, could make it a savior of physical retail. First, the app takes the concept of showrooming and turns it on its head. Shoppers are encouraged to visit a store, view and experience the items that they like in person, and leave without purchasing. Only in this case, the user creates a nearly frictionless path for others to make the purchase within the store’s ecosystem. Second, Jifiti tapps into the connected consumer trend that we’ve discussed before and which so many retailers have ignored out of fear or ignorance.

“Jifiti will let our customers continue to have fun shopping in their favorite stores while tapping the power of their social graph to receive the gifts they want,” says CEO Yaacov Martin. “[Our service] is bridging online catalogues with offline brick and mortar shops – giving shoppers the best of both worlds.”

The other rather disruptive concept employed by Jifiti is that of partial gifting. If a family member or friend wants to chip in toward a large and expensive item, shey can do so in any increment that they wish. Of course when the user receives the gift card it can be used for any purchase at the selected store, but the message will read something like, “Aunt Judy just gifted you $50 toward toward your Nintendo Wii U bundle.”

Retailers love selling gift cards for a number of reasons. First and foremost, is the lock-in that it creates guaranteeing that the consumer will make a future purchase through the store rather than elsewhere offline or online. Secondly, gift cards are like short term loans and large, savvy corporations exploit this free “financing” in a variety of ways to run their business and even to make short term investments. Finally, a percentage of gift cards are never redeemed, either in whole or in part, making them free money paid to the store.

Because of these advantages, retailers are happy to pay affiliates significant commissions for selling gift cards. Industry standard ranges from 5 percent to 15 percent depending on the vertical, with consumer electronics coming in at the low end and fashion at the higher end. Jifiti will average right in the middle, says its CEO, making its compensation significantly higher than most affiliate commerce companies.

The challenge with a platform such as this is breadth. Ideally, the platform would support every retailer that its users would ever wish to shop at. Jifiti has gotten a good head start in this department, and it’s been easier than might be expected. In some cases, the company negotiates direct partnerships with the retailers, but in many others it can sign up manually through a company’s website, making its business development efforts somewhat trivial. Unfortunately, this ease of signup makes reduces one of the barriers to competition.

Another point of competitive concern is the existing Amazon wishlist feature. The company’s mobile app doesn’t currently make it very easy to add items while browsing in a physical store and then share the list with would-be gift givers, but this functionality would be trivial to build into a future version. At that point, shoppers are back to choosing whether to support their local store (chains) or to go with the ecommerce marketplace where the products are, when compared to Best Buy for example, 17 percent cheaper on average.

Jifiti was developed in Israel, where the company still maintains its a part of its development team, but is now headquartered in Columbus, Ohio – a prominent hub for retail corporations.. The service is available nationwide in the US in several hundred premium retailers, but the company’s Simon Property Group partnership launches today in the Boston market only, where the service will be heavily advertised in its shopping mall locations in time for the all important holiday season.

The startup has raised “a significant seed round,” in the words of co-founder and CMO Shaul Weisband, with the round consisting primarily of strategic retail partners. He declined to disclose further details of the financing.

Traditional retailers have been battered in recent years through a combination of the growth of ecommerce-only competitors like Amazon or Gilt, and a generally sluggish economy. They are at an inherent disadvantage due to the expense of running physical storefronts and must differentiate themselves by focusing on the shopping experience and related customer service. If they’re wise, the industry leaders will continue to turn to technology platforms like Jifiti which should play an increasingly large role disrupting the traditional notions of in-person shopping.