Loop Commerce lassos $16 million to make gifts more personal

UPS's Income Rises 90 Percent
GLENDALE, CA - JULY 22: A United Parcel Service (UPS) driver delivers packages on July 22, 2010 in Glendale, California. UPS said its second quarter profit nearly doubled posting a net profit of $845 million, or 84 cents a share, compared to $445 million or 44 cents a year ago. (Photo by Kevork Djansezian/Getty Images)
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Gift cards are a flexible and easy-to-buy present for that special birthday, holiday or wedding. But they’re not exactly the most personal way to show that you care.

Loop Commerce, an e-commerce start-up, is trying to help retailers like Macy’s and cosmetics maker Lancôme make gift cards more personal. On Tuesday, Loop said it has raised $16 million in new funding from several investors with ties to online retailing.

Loop’s technology works behind the scenes by letting shoppers buy gifts without having to make final decisions about every detail about the item. It’s a sort of half-way step between gift cards — a business that generated $31 billion last year for retailers, according to the National Retail Federation — and a present handpicked online.

For example, Suzy wants to buy her friend, Mary, a cashmere sweater for her birthday, but doesn’t know Mary’s size, favorite color, and shipping address. If shopping with a retailer partnered with Loop, Suzy would merely have to pick out and pay for the gift. Loop then arranges to send an email to Mary that lets her know about the present and asks her to fill in the gaps about size, color and address. In the end, if Mary doesn’t want a sweater, she can exchange it for something else.

Loop co-founder and CEO Roy Erez told Fortune that his company eliminates some of the annoyances customers typically encounter when buying a gift online. People can show that they made an effort while still giving the recipient some flexibility in what they ultimately receive.

Loop’s competes against a range of vendors like JDA, Epicor and Oracle that sell software for managing online orders and fulfillment. Web sites and apps like GiftPlan that suggest gift ideas are also rivals.

For retailers using Loop, there is potential benefit of saving on the cost of returns and exchanges, Erez said. Typically, 10% to 15% of online purchases are returned, The Washington Post found. Loop can help avoid fraudulent returns, which cause retailers to pay out money for purchases that weren’t made from their businesses, by keeping tight control over the return and exchange process entirely online. Retailers lose more than $9 billion in fraudulent returns every year, according to the National Retail Federation.

Loop, a three year-old company in Menlo Park, Calif., also pitches itself to retailers as a way for them to attract new customers. Just over half of the people who receive gifts through Loop are new to the retailer responsible, Erez said. After getting their gift, recipients are more likely to become return customers. He added that gifts purchased through Loop are more generous – about twice the cost, he said – than the average value of gift cards shoppers usually buy. It’s extra business that any retailer would welcome.

After more than a year of working with partner retailers and getting funding, Loop hopes to spend the next phase signing up more retail customers. It’s also working on more ways to extend its e-commerce business beyond handling gifts on retailers’ own websites, although Erez declined to share more details as to how his company will do that.

Well-known commerce investor Oren Zeev and Wicklow Capital co-led this latest round, with additional participation from PayPal, Andrew Fine, Silas Chou, Amazon’s Don Katz, former eBay CTO Mark Carges, and Facebook VP of partnerships and strategy Dan Rose, among others. Erez founded Loop with Alex Sirota, and the new funding brings the company’s total to $30 million.

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