Three Tips for Winning at Gifting

We all know that gift giving fuels the Christmas peak, as well as other annual festivals, such as Diwali and Chinese New Year. Retailers compete to tap into the frenzy of gift giving spending. Fingers crossed this year shops will be open for the full Christmas period. This will take some pressure of stretched infrastructure as On line rebalances to somewhere between the 31.9% in 2020 and 20.8% in 2019 (source: Retail Week survey). No doubt customers will enjoy being back in stores but in my opinion, changing habits and concerns about busy places for some, will support the trends of customers buying online and shopping local this Christmas.

"Gifts" is a retail category that isn't really a category at all, as literally anything can be chosen as a gift to show appreciation from giver to recipient. A retailer's definition of "what is a gift" has traditionally been based on how much of the annual turnover of the category is taken in the final quarter with 40% a good yardstick. I have a particular affection for the challenges of successfully trading gifts. Two of my early roles were: trading Gifts and Beauty for Marks and Spencer's European stores and then Merchandising their Christmas shop in the UK. Gifts featured in my remit at Tesco and John Lewis, so I've observed gift-buying behaviour in many different forms.

With Gifts the value equation is different

Here are my three tips for a winning Gift proposition:

1. Gift Trends: there are fashions in gifts.

• "Must have" toys for kids and technology launches for big kids. Remember the iPod, the first launches of the iPhone and iPad, Alexa? It is hard to make a profit on these hot branded products, but they are great footfall drivers.
• Category fashions: candles exploded in the 80's even sustaining a specialist chain, Wax Lyrical and who remembers Pot Pourri? Every home had several containers full. More recently pet gifts and anything gin related have been hit categories. The gift offer has to constantly evolve to be current.
• Create a trend with clever buying and marketing, as customers are always seeking new ideas. In Marks and Spencer one Christmas we sold 50,000 picnic rugs with waterproof backing at ￡40 a pop. Who would have thought? With a winner like that, it will decline sharply in year two by about 40% highlighting what a challenge it can be to trade gift products successfully. Understanding your customers will create innovative opportunities.

2. Presentation: with gifts the value equation is different.

• The intrinsic value of the product must stack up. If the customer can add up the component parts together and realises that they are paying too much for the packaging, they will reject it.
• Presentation contributes exponentially to the perceived value for both giver and receiver. This may sound like a contradiction of the first point but it's all about the contents and the execution. The Beauty industry are masters at desirable gift selections and everyone loves to receive a wicker hamper full of food.
• Brand credentials add extra value. This is always true and particularly with gifting. The customer will pay more for aspirational brands. In giving a brand we are making a statement about our values and will choose a brand that matches them or reflects the lifestyle we desire. The brand also demonstrates the worth of the recipient to the giver. A food hamper from Fortnum and Mason has intrinsically more value than one from Waitrose. In France I learnt that the English cachet of Marks and Spencer carried a premium for toiletries and they would sell in large volumes at nearly double the UK price.

3. Key Price Points: customers usually work to a budget per recipient.

• A clear price architecture helps the customer find solutions easily. Although the Sunday supplements seem to like sharing luxe gift edits for items costing ￡100's or even ￡1000's most people are working to ￡5 or ￡10 up to a couple of hundred for their nearest and dearest.
• Quantitative and qualitative data really helps to understand customer behaviour and how to construct the range. Finding the right attributes ( hobby or interest, occasion, recipient) to analyse the sales by price point will pay off.
• Consider add on costs: customers will factor in gift packaging, personalisation and delivery costs when buying online so the overall cost of the transaction needs to be visible and fair. If it can be priced into the price of the product even better, so the customer doesn't have to do the work e.g. free engraving.

So, will 2021 be any different ?

Most importantly it is going to be about executing well digitally, as even before Covid, most journeys started online. Customers now take as read that retailers will have a good website, product availability and reliable delivery options. More is required to differentiate. Curating a gift selection online can be a challenge. Random items merchandised together by an algorithm are not attractive or browsable. Brands who take gifts seriously change their navigation to create Christmas and Gifts tabs and provide the ability to shop by recipient, by interest, by category or by price point to minimise the journey. John Lewis do thoughtful curation well. The digital world also brings niche brands and specialist providers to a wider audience and increases their "giftability". Platforms such as Not On the High Street and Etsy help customers support small businesses in a digital version of local, so are likely to do well.

In store, gifts have often been grouped together in gift shops, which give customers a "one stop shop" but can seem contrived and concentrate footfall in on area. This year spreading gifts throughout the store adjacent to relevant departments to allow more space for circulation is more likely to work for customers shunning busy locations. For small local shops continuing click and collect or even email and reserve options, as our local book shop does, so customers minimise time in store, is likely to be popular. Services such as a "gift concierge" to help customers shop safely is also a smart move. Fenwick have just launched one with a digital or in store appointment.

The gift experience offered by many retailers is very variable

Here are my observations on how my Gifting tips are relevant this year:

1. 2021 Gift Trends: as well as all the favourites, here are three themes set to be popular from my research:

• Pampering and wellbeing: gadgets that bring spa treatments or fitness to the home e.g. John Lewis have an electric face cleanser and massager, silk pillowcases and daylight SAD devices. Fitness kit continues to be popular and the traditional January fitness focus will come forward. Desirable fitness brands, such as Sweaty Betty and Lulu Lemon both have Gift tabs on their website but only Sweaty Betty offers a handwritten gift message.
• Cosy wear/ ware: Danish hygge is here to stay to get us through those short lockdown days and traditional categories such as cashmere and loungewear are getting a lot more wear this year. Fashion brands who have pivoted their collection to focus more on these categories will score. In the home, throws and sheepskin rugs and my personal favourite from John Lewis last year the Mongolian cushion, a definite pet substitute! Will the use of the garden as a home extension continue with fire pits and marshmallows?
• Home made: sourdough was a sensation in lockdown and added time at home makes baking from scratch more appealing so maybe a pasta maker or other desirable cook utensils? Specialist shops can benefit too, like my local Kitchen shop www.Seasoncookshop.co.uk, which has a fantastic curated offer for all cooks and has developed an online and click and collect offer this year with great success. Other home hobbies or useful ways to adapt home space for work and downtime, such as stylish office lights and storage solutions for work and crafting are also likely to be winners.

2. Presentation: if you are sending your gift directly to the recipient, then you want the overall experience to be exciting. The gift experience offered by many retailers is still poor:

• The Gift message: it varies where in the process you get this option, if at all. It is a fundamental requirement for a gift and should be as soon as you go into checkout, to give the customer confidence. If the customer can't see that option, they may abandon basket. Often it isn't clear how the message will be delivered. John Lewis print it on the delivery confirmation, which is purely functional. Some brands such as Hotel Chocolat and Fortnum & Mason print personalised cards. The best messages are hand written, as promised by Jo Malone.
• Gift packaging: if you want the gift to be a surprise, you want gift packaging. Despite their focus on Gifts, John Lewis don't offer any gift packaging, so you have to be content that the present stays in its outer packaging or is rescued and wrapped by someone else. Making all this clear is important to a gift buyer. The White Company offer paid gift boxes and allow the buyer to choose different boxes for different items/ recipients in the same basket. Brands like Jo Malone offer gift wrapping as standard and again offer the option to package items together or separately. Hotel Chocolat show the gift options on the product page including boxes and "build a hamper". They also go one step further and allow the basket to be split into different deliveries; an ideal one stop shop for sending multiple gifts.
• Brand values: Christmas is an opportunity to cement brand purpose. The John Lewis campaign occupies this space fully this year. This year, many people want to be giving back and increasingly expect brands to take a position on current issues such as the environment and diversity. Links to charities have to be relevant and authentic. A good example last year was ME+EM donating ￡10 to The Prince's Trust Women Supporting Women Initiative for every order over the Black Friday weekend rather than offer a discount.

3. Budget: if buying online, the customer's budget is likely to include delivery charges and gift packaging. Giving clear information on delivery and other add on charges, including gift packaging, on the product page helps the customer and stops abandoned baskets. This always strikes me when shopping for flowers, as often I've chosen a bouquet to then find a substantial on cost for named day delivery and started all over again.

A focus on the end to end experience can help brands capitalise on gifting

This year, the Christmas winners look likely to be those retailers with a highly developed digital presence, who have adapted their proposition to the current trends and whose execution of their brand values resonates with the zeitgeist. Well executed shops that are accessible, with some service adaptations to covid restrictions kept, are still likely to be a big asset. Surprisingly, even retailers who are traditional gifting destinations, such as John Lewis and lifestyle brands with wide gift appeal, have very variable execution of the gifting experience, particularly online. Equally in data management and customer segmentation, there is often little focus on gifting and the characteristics of the recipient, as well as the buyer. In contrast in luxury categories, such as jewellery and prestige watches, a personal relationship with a local salesperson has traditionally developed the lifetime value of a customer. This clienteling approach can be replicated digitally in many forms.

In summary Gifting is an often underplayed commercial opportunity. Using data to understand customer behaviour and analysis of sales can help target the proposition and customer contact. The insights gained, combined with solid retail principles, can be used to execute strongly across all channels. A focus on the end to end experience can help brands to capitalise on gifting, even if traditionally their products haven't been in core gifting categories. With sales hard to come by and many all year round gifting occasions, as well as Valentine's and Mother's Day after Christmas, a review of the gifting proposition is timely and can deliver results.