Internet retail giant Amazon tapped into this market last week by investing in online bridal registry Della & James, which has plans to launch an all-occasion gift registry in November to take advantage of holiday sales. Amazon, along with Neiman Marcus, Crate & Barrel, and Williams-Sonoma, invested $45 million for roughly 35 percent in the start-up, with Amazon taking a 20 percent stake in the company.
And based on its success in the gift registry business, upscale home-furnishing retailer Williams-Sonoma is expected to launch a full-scale e-commerce store in about a month.
Forrester Research projects online gift sales to grow from $1.2 billion in 1998 to $17 billion in 2004, which represents about 10 percent of total e-commerce sales.
Luring in customers
For retailers such as Amazon and Williams-Sonoma, an online gift registry is an effective marketing tool to lure new customers and limit customer returns. Yet they can also present many technical challenges to online retailers during and after the set-up process. Retailers can avoid these challenges by partnering with such sites as Della & James, which provides product choices from many traditional and online retailers.
The disadvantage, however, is that customers may end up buying from the competitor.
Amazon, for its part, isn't worried about the competition, company spokesman Bill Curry said. "We're not about just selling goods. We're about helping people find the right thing," he said.
Della & James spokeswoman Cathleen Thomas said her site acts like a virtual shopping mall, bringing together many leading retailers. Consumers like having all the retail sites in one place, as do the retailers themselves, she said.
"Retailers benefit to be among other brands and take advantage of the traffic that's coming through the place," Thomas said.
In return, aggregator sites such as Della & James and WishClick gain an opportunity to link to well known retail stores and share in their sales.
WishClick chief executive Scott Sangster said the amount his site receives from each sale is similar to what Amazon and other retailers pay through their affiliate relationships, which is roughly 10 percent of a sale.
While many companies--including eWish and the Wedding Network--have set up aggregation sites to offer consumers a broader selection of gifts, retailers such as Williams-Sonoma, Macy's, and eToys have set up their own registries.
But online gift registries are just beginning to take off for a number of reasons, said analyst Geoffrey Bock of the Patricia Seybold Group.
One reason is that a critical mass of shoppers is just now coming online. Jupiter Communications estimates by the end of the year, some 29 million Net users will have bought something online, up from 19 million last year. And Forrester Research estimates that 10 percent of these sales are from gift-buying online.
"Any site that doesn't offer a gift registry will be at a disadvantage," said e-commerce analyst Martin DeBono, who works with Gomez Advisors.
In addition, just as increasing numbers of customers are coming online, more retailers are setting up online shops. To stand out and draw customers, sites need to have more than "a quick, colorful Web site," Bock said. Instead, sites are turning to all kinds of different strategies to draw in customers, one of which is developing an online registry.
"It's important that the sites have tools that will help us with our shopping," he said.
An end to the returned gift
One of the chief advantages of registries for retailers is that they help limit returns, Gomez's DeBono said. Because recipients get to draw up their own gift lists, registries should help cut down on the number of gifts that are returned because the recipient didn't like the gift or had already received it.
"By eliminating those reasons, the number of returns will drop," DeBono said.
According to Gomez's estimates, returned items account for about 5 percent of the Internet's gross sales, a figure that cuts in to e-retailers already slim margins.
The online registry model could translate well to other categories such as books, apparel, consumer electronics, and toys, said Ken Cassar, e-commerce analyst with the Jupiter Communications.
"There's an awful lot of potential for registries to cash in," Cassar said.