Online Gift Certificates

IN A COUNTRY IMMERSED in gift giving, it's a wonder no one has offered this until now: a Web site where one can buy gift certificates -- electronic and real-world -- and have them sent to friends, family, and colleagues.

That's the idea behind giftken.com, Japan's first online gift certificate aggregator. The first company from New York-based Japan Internet Ventures (www.japaninternetventures.com), giftken.com was founded in May and launched its site in mid-July. Following the JIV strategy, giftken.com was modeled after the US Net company GiftCertificates.com.

"We look in the US to find attractive concepts, pick and choose what we think will be the most attractive for Japan, and emulate it here with our own team," explains Bruno Grandsard, a managing director at JIV.

GiftCertificates.com in the US serves as not only a model, but as a partner and investor as well. That's one of the unique angles, Grandsard says, to JIV's approach: "Essentially, we try to get something off the ground and get it moving, and, in parallel, identify a company in the US that we think would be a great partner. On the one hand, you get a company that has its own entrepreneurial culture. At the same time, you benefit from US technology."

Mikio Yamamoto, chairman of giftken .com and current managing director at JIV, expresses high hopes for giftken.com: "We researched the market and found that there are about 20,000 gift certificate--offering companies in Japan. We selected 100 of the major ones. The size of the Japanese market is about two-thirds the size of America's, but when we consider each country's population, Japan may be the No. 1 market."

Furthermore, Japanese, more so than their American counterparts, have a stronger tradition of reciprocating and re-reciprocating gifts, often leading to an akujunkan (vicious circle) of gift exchange. "You can easily return a gift certificate for a gift certificate," Yamamoto says.

Not everybody is sold, however, on the concept of online gift certificates in Japan. Katsunari Konya, president of gift-giving site Gifty Gifty, notes that the ecommerce revolution is happening more slowly in Japan than in the US, a phenomenon he blames on both higher transaction costs for credit cards (and other forms of payment) and higher transportation costs. "For relatively inexpensive items, one can pay up to 50 percent of the product cost on shipping." Konya also points out the low barriers to entry in online gift certificates. "Once giftken.com has a competitive strategy, most of the credit card companies will follow. They will decide not to compete directly, but to support each other using an ASP business model that can expand with much greater speed."

Yamamoto is confident that payment and transport issues won't be significant problems. "High transaction costs should prove to boost sales of our electronic gift certificates, and giftken.com will be the first company to enable Web sites to issue these."

Still, Koji Nagatsuna, a Gartner Group Japan analyst, doesn't think online gift certificate sales will become commonplace any time soon.

"Convenience is always a key to success in the B2C marketplace, but it's not the only one," he says. "The most important issue is whether or not Japanese people are willing to accommodate this new practice in their daily lives. I still cannot find a legitimate reason why they should do so."

Nagatsuna also questions the willingness of corporations to change the relationships they already have with gift certificate providers.

"They already have strong business relationships with companies and, in most cases, these relationships have been maintained for decades," he says. "It is difficult to imagine that they would purchase gift certificates online."

Yamamoto says giftken.com has developed strategies to combat this tendency, but offers no specifics.

In the meantime, Yamamoto says, the company is adding new features to the site, including a "Super Giftken" that lets customers buy from any of giftken.com's partners. It's also working on a technology for transferring certificates via cell phone that it hopes eventually to export to the US -- reciprocation at its finest.