the question ‘What is the right gift for this person?’ Not because I couldn’t make a decision, but because I try to be a thoughtful gift giver, and I thought about all the occasions where I had gotten it wrong and how often that is the case for most people.
All of that accrues to the gift card business right now. Everyone has the intention to give thoughtful gifts but they don’t know what the person will want, and they don’t want to give another necktie that will be stuck in the back of a closet. Also, from a human perspective, the act of gift-giving—being thoughtful about the presentation—is a really interesting problem that also seemed like it would make for a very interesting business. It’s a massive, untapped market that retailers are all interested in, but only half serving.
X: It’s interesting that you would perceive a new, untapped market in retailing. To me it seems like we’re already inundated in shops and boutiques and catalogs and e-commerce sites and daily deals.
JP: There are almost too many choices. There are two principal problems. One is that mainstream retail is mainstream. If you are a large retailer, you need to make your merchandising decisions based on what you know will sell, because you are actually holding the merchandise. You have to cater to a lowest-common-denominator taste. So everywhere you go in the world, it’s the same products. The other problem is finding things—product discovery. With all of these choices, how do you find the thing that’s interesting?
X: Okay, so to go back to the story—you’re in Europe and you’re thinking about gifts and retailing. Is that when the idea hit you?
JP: Yes, it came to me while I was still there. I was talking with a friend who was interested in the gift-giving space, an old friend I had worked with in Japan. We were riffing on our time in Japan and the gift-giving culture there, and I walked away with the seed of an idea. I started sketching it out loosely and it was literally keeping me up at night. I’d sketch some more, and a week later it came together, essentially in the form in which we launched it in November.
X: Why did you launch the company here in San Francisco?
JP: It felt like home. I came back here and started catching up with friends, some of whom are investors, some fantastic designers, some product people. Everyone said ‘This is impossible, but you need to build it.’
X: What did they think was impossible about it?
JP: The drop-ship model; the retail margin structure; the cost model for this tangible experience [with the gift books]; the recommendation engine. To me, those were all tractable problems, and I felt like if the concept was interesting, I had better get to work.
People were skeptical about the drop-ship model, because people have tried this in retailing before and it hasn’t worked all that well. There were people who were skeptical about building a business around a proper keystone model [charging a full retail markup on wholesale goods] rather than an affiliate model. The economics are infinitely more interesting, but it’s hard to merchandise thousands of products in six months. With the recommendation engine, we were unsure if that was going to be a challenge, but we designed the experience not to require too much of the engine. And then everything related to the tangible experience—how do you get this thing printed and into people’s hands and make it special.
X: It sounds like you conceived the whole business and all its parts, including the revenue model, from the start. That’s unusual for a Bay Area startup these days—it’s much more common to see companies start out with just a product idea and keep iterating until they find something that resonates with customers.
JP: We designed the business model to the same degree that we designed the experience. I think they went hand in hand, and part of the reason we got off the ground so quickly and decisively is that we had thought through these pieces.
I think in San Francisco, in particular, we have this kind of startup heroism that encourages you to just place wild bets and figure out the business model later on. There have been a few companies that have managed to do that, but a lot of companies that never did, or that are still trying despite their massive success. There is this myth of startup culture where everyone is encouraged to be a cowboy and ‘go for growth’ and figure out the dollars later. And that is not the way I think about it. If you have just the seed of an experience, but you have not thought through the business model, it’s a lot harder for people to get behind. We knew what the challenges were and we said we would solve them in the right sequence.
And that is what we have done. We launched in November, just in time for the holiday season, and had a very strong November and December. We had an entire audience dying for some solution to their gift-giving challenge, and we presented them with Wantful, and they responded very well. It was equally possible that they would say ‘I don’t get it’ and we would have to go back to the drawing board. You are always refining the idea, and I would say that what we will have within two years won’t look like what we have today. But what we have today is working very well.
X: Can you walk me through the business model in more detail?
JP: It all starts from the keystone model. That is a wholesale-retail relationship where you take the wholesale price and roughly double it to get to the retail price, which gives you 50 percent gross margins. From there, it’s a matter of setting up relationships with vendors, and arranging for
