Loop Commerce is attempting to stake its position in e-commerce by offering payments technology that provides a gift's recipient some control over what is being purchased.
"We want to have the flexibility of a gift card with the ability to get someone a real physical gift instead of getting them currency or something impersonal," says Roy Erez, CEO and co-founder of Loop.
Loop is beta testing a Web-delivered checkout system that retailers integrate into their websites. Users who want to give a gift go to Loop's system, which resides as an option on a retailer's online shopping. Loop then pushes a gift note to the recipient, asking for details on that gift, such as size, design preferences, color or even an eyeglass prescription.
Loop can also ask the recipient for a shipping address. Afterwards, the payment is accepted and the gift is sent. Loop's technology powers the user interface, which is co-branded with the merchant. The company did not name the merchants testing its system, though Loop anticipates a broad rollout in early 2014.
Erez came up with the idea for Loop Commerce when he was looking for a gift for a friend who was expecting a baby.
Loop does not disclose the purchase amount of the gift to the recipient, though the recipient can opt to exchange the intended gift for another item and pay the difference if the new item is more expensive. The company did not elaborate on how flexible the sender's "push questions" could be.
Since Loop is collecting transaction data, it gives the merchant a head start on forging a possible cross-selling relationship with willing gift recipients, Erez says. Additionally, the merchant can determine broader gift and e-gifting trends.
Loop's model has attracted investment form PayPal, which contributed an undisclosed amount reported to be about $4 million. PayPal, which is increasing its presence in the gift card market, would not provide an interview for this story.
Loop may see some headwinds given the prevailing popularity of traditional gift cards, says Phil Philliou, a payments consultant.
"From what I've seen, the reason why Visa and MasterCard gift cards have been successful is consumers want to enjoy the benefits of being able to shop wherever they want to shop and purchase whatever they want to purchase," Philliou says.
The company also faces a crowded market for e-gifts. The electronic gift card market should pass the $10 billion mark by 2016, according to CEB TowerGroup, which says Amazon, PayPal, Google and Apple are all active in the space.
Apple offers gift cards in the Apple store, and allows purchasers to access them from the Passbook wallet app. EBay distributes gift cards as part of a partnership with Blackhawk Network. And Gyft, a provider of digital gift cards, accepts PayPal and Bitcoin as funding sources.