Just over four years ago, Husain Makiya was invited to a birthday party. The birthday girl told him not to bother buying her a present, saying: “Just get me a gift card for Mall of the Emirates [in Dubai]."
Loath to visit the mall, Mr Makiya – who is a partner at incubator Honeybee Tech Ventures and co-founder of the Zawya business portal that he sold to Thomson Reuters in 2012 – went online and attempted to buy a digital gift card for his friend.
He failed. "I couldn't find anywhere online that allowed me to buy a gift card for shops at the mall," he tells The National.
This failure struck him as perverse, he says, while nursing a strong coffee in a café in Dubai Media City, where his office is located.
Gift cards are tokens or vouchers worth a certain amount of money that are redeemable at specified retailers. They take the pain out of choosing a gift for someone because recipients receive the means to choose a gift themselves, from a retailer’s entire stock.
It is estimated the gift card industry will double in size to be worth $698 billion globally by 2024, according to Persistence Market Research. Growth is expected to come from digital channels, as more and more people favour shopping online than battling crowds at malls and shopping centres. In the US, the digital gift card industry is growing at around 200 per cent annually, compared to 26 per cent a few years ago, says Persistence.
Believing the concept to be a no-brainer, Mr Makiya set about building an “online mall” for gift cards for a host of retail brands – specifically, digital gift cards delivered by email or SMS.
“We wanted to stay away from the physical world because we understood that managing logistics, inventory and shipping was a challenge for e-commerce players – there are a lot of costs, a lot of layers. This particular product lent itself very well to being digitalised."
Within weeks, Mr Makiya and the firm's co-founder, business partner Abed Bibi – who co-founded the branding consultancy Wolff Olins in the UAE and India before it was sold to Omnicom Media Group – had named their venture Yougotagift.com, after being inspired by the classic Meg Ryan and Tom Hanks film You Got Mail. "We wanted the brand to be simple and straightforward, does what it says on the tin," Mr Makiya says.
Yougotagift.com was incubated within Honeybee, which had the staffing, technology and marketing resources to hatch a new start-up, as well as access to funding. At the time, Honeybee had launched ventures including the restaurant listings site Roundmenu.com, and Laimoon, which matches people to jobs, courses and events.
The duo raised $1 million in an initial funding round comprising the founders and two private investors they decline to name. “These were individuals with very strategic roles within the industry,” says Mr Makiya. “We chose people we thought could influence this project down the road.”
The business model hinged on sourcing and aggregating a catalogue of client firms – “anybody with gift cards to sell”, the founders say – then digitising their offers and packaging them in an appealing way. “We started to understand the whole gifting psychology, how to make the experience memorable and fun,” Mr Makiya says. “We added personalised features, e-greeting cards to accompany the voucher, videos – anything to make it nice and well received.”
The first clients included the UAE gift shop Boutique One and other local retailers. The breakthrough – achieved within the first six months of launching in 2013 – was securing Virgin Megastore, and it grew from there.
Today, Yougotagift.com has a catalogue of about 150 brands operated in the Middle East by retail groups such as Landmark, Chalhoub Group, Azadea, Majid Al Futtaim, Al Futtaim Group and Al Tayer. “We were after the big names, the ones that everyone trusts and are well established in the region,” says Mr Makiya.
The company operates through a revenue sharing model. “For all our efforts to go out and sell your gift cards we take a cut on that,” he says. The exact proportion varies depending on client, service and category, he says, but ranges between 5 and 20 per cent.
While Yougotagift.com began as a consumer business, it quickly gained traction in the b2b space as well. In particular, the venture was a compelling proposition for companies seeking to grow their employee rewards schemes.
“We started adapting our service from consumer-facing to the business segment,” Mr Makiya says. “Businesses liked our proposition because it was a one-stop-shop that took care of the pains of rewarding employees and customers without having to go out and purchase merchandise, store it and distribute it.”
Aramex was one of the first companies to use the service to provide gift cards for its employees. Other clients include airlines, telecoms companies, banks and more. Mr Makiya says the company is “constantly identifying” new b2b segments beyond employee rewards - for example, it works with research firms and FMCG brands to run sales promotions and incentivise consumers.
“Companies have realised they can create so many marketing campaigns using Yougotagift.com,” he says. “Say a big brand wants to influence customer behaviour. They can tell people to do the following activity and they’ll get a reward – say, a Dh100 voucher for Babyshop or Sharaf DG. Or market research firms: “Fill in this questionnaire and you’ll get a Dh50 voucher for X,” says Mr Makiya.
“Brands can administer this through their corporate apps, and link customers to Yougotagift.com so they can redeem the voucher. It keeps customers loyal.” UAE state telecoms major Etisalat uses Yougotagift.com for its Smiles customer loyalty programme, he adds.
Today, 85 per cent of Yougotagift’s businesss is b2b and just 15 per cent is consumer. “We weren’t aiming for that – we didn’t see that massive pivot along the way,” Mr Makiya says.
But the significant growth is in line with global trends. Approximately 25 to 35 per cent of any merchant’s gift card revenues is driven by b2b sales of gift cards, according to the figures from Persistence Market Research, published last April.
“The gift card industry in this part of the world is maturing, it’s still in its early days – especially when it comes to consumer gifting,” says Mr Bibi.
“But that doesn’t mean B2c is not considerable. We’ve seen a change in the past year. Retailers are waking up to the power of online commerce and realised retail is going through a transformation towards digital channels, driven by millennials, technology and the desire for instant gratification," he says.
“This will drive the consumer side of our business. Things are changing and it will pick up.”
In the early days, Yougotagift.com saw limited growth as it built its portfolio of brands. Now, its catalogue is a sizeable asset. It started recording sales in 2014, its second year of business, then witnessed four-fold year-on-year growth in 2015 and 2016, and 2.5-fold growth in 2017, Mr Makiya says, while declining to reveal figures.
The company completed a second funding round in 2015, raising “a few million dollars” from Dubai-based venture capital firm Middle East Venture Partners (MEVP). Revenues run into double-digit millions and it expects to become profitable by the end of this year, Mr Makiya says of his firm.
The platform is available in the UAE, Oman, Bahrain, Saudi Arabia, Lebanon and India, among others, and it hopes to further expand in 2018 and beyond. In particular, Yougotagift.com expects to complete a third funding round this year to finance expansion in Saudi Arabia, the biggest market in the GCC, which is opening up to foreign investment as part of economic diversification plans.
The business already has a local partner in the kingdom and its clients include AlAhli NCB bank, Saudi Arabia’s biggest lender. “We are very heavy on Saudi right now,” Mr Makiya says. “We’ve started seeding it well and foresee that in 2018 we will need some cash financing to set up a massive operation there. It’s a huge market.”
The company is also in discussions with a Scandinavian firm that, should talks prove fruitful, would help Yougotagift.com expand in Sweden, Finland and Denmark. Mr Makiya says he would avoid western markets with highly mature digital gifting industries, but caveats that by saying that many established gifting companies may be interested in using Yougotagift.com’s technology, and partnerships could be formed on that basis.
The company also seeks to grow its catalogue by partnering with companies with huge client databases, such as Globalforce, which runs employee rewards programmes for multinationals across the world, including GE. To achieve this, Yougotagift.com plans to grow its 25-strong team from this year with a focus on sales and business development staff.
“We will work with partners who can give us access to clients, and we’re looking for different channels that will allow us to distribute our gift cards in a bigger way,” Mr Makiya says. Yougotagift.com hopes to gift the masses, with an ever-increasing slice of the global gifting market.
Name/date started: Yougotagift.com/2013
Founders: Husain Makiya and Adeb Bibi
Based: Dubai, UAE
Sector: Digital gifting
Size: (employees/revenue) 25 staff; undisclosed revenues reaching "double-digit millions", the company says
Investment stage: 2
Investors: Middle East Venture Partners (MEVP) and Honeybee Tech Ventures and co-founders