2013-04-03

How To Succeed With A Retail Startup In A Post-Groupon World

Launching a successful retail software product means working with the right merchants at launch, and scoring the right launch partners means forging a high-touch relationship. “We needed to reassure merchants that we were going to help them sell in a digital way, not in a discounted way,” says Kara Kaplan, cofounder of Giftbar.



Kara Kaplan and Jen Morris are cofounders of Chicago-based Giftbar, which they conceived as a classy way to bring gift cards to small fashion boutiques. But they found that the cleverness of their “big idea” didn’t matter--small businesses were so wary after bad experiences with software products that a product-centric approach wasn't working.

“We needed to reassure merchants that we were going to help them sell in a digital way, not in a discounted way,” explains Kaplan. What Jen terms “the Groupon effect" had made many merchants feel negative towards the whole idea of working with a third party for their business. “Daily deals sites had diluted their brand and attracted the wrong types of customer, says Kaplan. “We knew we had to change our pitch and assure them that we could help them market to the right consumers.”

For a software business in this space, the medium is often the message. Launching a successful retail software product means working with the right merchants at launch, and scoring the right launch partners means forging a high-touch relationship. Morris and Kaplan met personally with every merchant. “Our passion resonated with them because they feel the same about their store,” says Morris.

What Giftbar Does Differently

“I could get one from Starbucks more easily than I could a local merchant,” explains Giftbar cofounder Kaplan about the "a-ha" moment which ultimately led her to set up Giftbar with long-term business partner Morris. “I have friends in the suburbs; to buy them a gift card from a store near them, I had to fax over my credit card details and then drive to their neighborhood and get an ugly, hand-written gift card. There just had to be a better way!” she says.

What they built extends gift cards from a simple commodity item into a software service--an "experience" for both the giver and the receiver, not just a medium of exchange. This is the story of software disrupting all sorts of businesses: What used to be a product can now be a major source of customer engagement.

Having founded two companies previously, Kaplan and Morris were keen to continue working together and saw an opportunity for mobile gift cards just as the economy tanked in 2010. “The gift card industry is worth $100 billion and yet it has such a negative connotation. But we looked at ourselves and realized that we were a perfect target market--busy women who love to gift the important people in our lives.” Recognizing how technology could help usher in the next iteration of gift cards through a personalized, customized, and elegant experience, the women set about creating a way to gift everyone in your life through one shopping card.

How They Launched Giftbar On Nights And Weekends

The founders bootstrapped their project, found a developer, worked the typical startup hours of every available hour, and launched officially in November 2011 with 85 hand-picked local merchants on board in Chicago and New York.

Since quitting their day jobs, Giftbar has grown both functionally and geographically. A first round of VC funding enabled Morris and Kaplan to hire a team, re-brand, re-build their website, and expand from their native Chicago to New York and, soon, L.A. For the web build, Morris and Kaplan turned to Digital Intent. “Their existing prototype was not performing--Giftbar needed a technology backbone that was able to scale to accommodate geographical markets, while solving several feature-level problems,” explained Digital Intent’s developer Matt Anarde.

The Giftbar founders worked with Digital Intent to build unique features within the site, which enabled people to “digitally gift someone in a classy way.” From bespoke digital wrapping designs, to the ability to upload photos, to a broad range of delivery methods, the founders focused on delivering a bespoke experience for both the giver and the recipient.

Retail Is A Two-Sided Experience

For merchants, Giftbar provides an extension of their own website--every store has its own page, supported by interior and product photography undertaken by Giftbar to maintain a consistent look and feel. “Giftbar isn’t Yelp; we don’t do reviews,” asserts Morris, “we take the time to portray our merchants in the way that we feel they should be portrayed, so it’s our assurance, and our stamp of approval”.

SaSaDi Odunsi, owner of Bump Brooklyn in New York, has only been with Giftbar for a few months but is already seeing the benefits; the week I spoke to her she had three Giftbar purchases. The Giftbar “mixer” feature, which allows people to spread their gift amount across several stores within the same neighborhood, has been especially useful for Bump Brooklyn. “We specialize in maternity fashion, so a Giftbar mixer allows customers to team up with other stores and give a more comprehensive gift to new moms,” says Odunsi. “With a $200 Giftbar card that includes us, a spa, and a baby store, the person can really get the most out of the neighborhood.”

The Giftbar team is currently working on a mobile version of their site, while building in additional functionality for both customers and merchants such as a “thank you” note feature for recipients and Facebook integration for stores. “When you buy a gift, it’s a reflection on you,” says Kaplan. “We’ve kept that at the top of our minds and created a darn sophisticated tool.” If you have an idea for a darn sophisticated tool, show us by entering your app design in the Target & Co.Labs Retail Accelerator.