Unwrapping the $100 Billion Gifting Industry

When we decided to sit down and talk about gifting an industry, I thought there was not much to extract out of it. But the idea that it could be a $100 billion market made me look at it seriously.

Market size

Let’s start with the big question, how is it a $100 billion market?

When I budget my finances, I have a dedicated budget for gifting. So I just thought of using the same to estimate the market size. Idea being, what percentage of population spends how much on gifting in a year.

1. Top 1% Indians: This affluent group comprises approximately 10 million people who spend an average of Rs. 100,000 per annum on gifting.
2. Next 20% Indians: A sizeable middle-class population of around 250 million people allocates an average of Rs. 20,000 per annum for gifting.
3. Next 30% Indians: About 400 million individuals with a more modest budget of Rs. 5,000 per annum for gifting.

This diverse consumer base contributes to a staggering $100 billion USD market.

Yes, I have accounted for 51% of the country to cover for kids and the ultra poor of India. This further doesn’t cover corporate gifting.

There are various ways to segment the market further like what is being gifted:

• Cash in an envelope (50%)
• Regular products like clothes (40%)
• Out and out gifts like Greeting cards & personalised mugs (10%)

Another way to segment the market could be who is gifting whom:

• C2C: What we gift to friends & family. (80%)
• B2C: What businesses gift to their employees. (10%)
• B2B: What businesses gift to other businesses. (10%)

Take these numbers with a big pinch of salt because they are just huge assumptions.

Who is involved?

Let’s start with the simple ones, the end users. The one who is giving out the gift, Giver and the one who receives the gift, Recipient.

Gifts have a huge intangible value in building relationships. It defines how well the giver & the recipient know each other and often end up defining key milestones in their relationships. Let’s call this intangible value, perceived value.

For a giver, the goal is to deliver the highest perceived value within their budget & time. For a recipient, it is a moment of joy every time they receive a gift with high perceived value.

To build a successful gifting business, you want to increase the perceived value for amount & time spent in sourcing a gift.

Business models

Talking of businesses, Let’s talk about some business models around gifting out there.

• Value-added gifting: One of the most frequent business model that I have experienced around gifting is upcycling. This model focuses on enhancing the perceived value of products through thoughtful packaging, personalisation, and emotional connections, ultimately creating premium gift items that resonate with customers.Imagine archies from way back to something like Ferns n Petals or IGP today. Lately, personalisation here has been a huge market albeit too fragmented.
• Gift packs: One interesting model I have seen lately with D2C brands is that of gift packs/gift boxes. Where you can gift a curated & well packaged set of products (Typically smaller quantities than regular independent SKUs). This is interesting because this ultimately allows a brand to get a user to try out multiple products, and hence acquire them, at 0 cost. Sometimes even making a profit on the original sale too.
• Gift cards: While cash has been a major component of gifting, as we move towards a digital economy gift cards have slowly started picking traction. Typically, a platform would sell a gift card at 0 margin to the giver and earn margins on receiver’s spend.
• Affiliation: A very small but still relevant model is affiliation. Where people create content around gifting ideas and then recommend corresponding products. This model works essentially by reducing time spent by the giver in hunting for the perfect gift.

What’s the next big thing in gifting?

Is there a billion dollar gifting business out there?

• Social gifting: Typically, when people want to make a gift more meaningful for a person they rope in more people in the common network or search on the internet. Idea is to use a mix of both. A giver can create a profile of the recipient with simple interests, can rope in other people in common network to add interests and then get suggestions from the platform. If there is traction, one can easily add a layer of affiliate/marketplace/value-added gifting as a business model.
• Value boosted gift cards: This focuses on the idea that giver wants to deliver higher perceived value against the money they spent. Traditional gift cards tend to value the amount paid by giver & amount received by the receiver as 1–1. For smaller brands where acquisition cost is high, it makes sense to give more value to receiver than what the giver paid.
• Premium personalisation: While personalised gifts deliver high perceived value, they still do not capture a large market share due to the poor quality of underlying products used. It would typically make more sense if for a small amount one could get a branded product personalised. This shall shift market share from regular products to out and out gifts.

Can one build a billion dollar business in gifting? While contemporary gifting platforms like FnP & IGP are stuck around $25–50 million in revenue, Hallmark does $5 billion in revenue. Clearly, there is a large enough opportunity. But what?
If I were to bet my money, I would bet it on social gifting. Once you become the go to platform for discovering gifts, it is easier to develop other ideas mentioned above as business models to support the same.

Want to dive deeper, listen to the podcast using below link.

Unwrapping the $100 Billion Gifting Industry by Blue Lock