Wantful’s Customized Catalogs Aim to Bring Back Thoughtful Gift Giving

5/2/12Follow @wroush

I’m not the kind of person who loves to flip through retail catalogs. I’m very goal-directed when it comes to shopping, and to me, a typical catalog is just a confusing mish-mash of miscellaneous merchandise that takes too much time and effort to sift through.

But if somebody gave me a catalog where every item had been selected by somebody I know, with my specific tastes in mind—and better yet, if they’d paid the retailer in advance—I think I’d react very differently. You probably would too.

Well, that’s the exact idea Wantful is bringing into the world. The San Francisco startup operates a website where a gift-giver can say how much she wants to spend, browse hundreds of items in that price range, and choose 16 items to be included in a customized gift book. The recipient gets the book in the mail and chooses his or her favorite item, which is then delivered directly by the supplier.

More than just a mini-catalog, each elegantly printed Wantful book is like a gift in itself—the startup even wraps the books in Japanese washi, or rice paper, to enhance the “reveal” moment when a book is first opened. It’s a deliberate nod to gift-giving rituals in Japan, where great care goes into the selection and presentation of most gifts.

All in all, Wantful’s service represents a clever hybrid of convenience and personalization, and an advanced example of mass customization. A Wantful book is like a gift card, in the sense that the giver only has to pony up the money and isn’t responsible for the ultimate gift choice. But the giver has to take some time to figure out which items the recipient might like, so there’s also an element of thoughtfulness and curation. (The giver even chooses the image for the book’s front cover.) And behind it all is some sophisticated technology, from the recommendation engine that helps givers narrow down their gift options to the printing process that makes it affordable for Wantful to print thousands of gift books, each a unique one-off.

John Poisson, founder and CEO of Wantful

“If you aren’t a big shopper but you want to give a thoughtful gift, our goal is to help you discover interesting products and put them together into an experience that feels good for you and the person you are buying for,” says John Poisson, Wantful’s founder and CEO. “But if you love to shop, and you really enjoy the hunt of finding the perfect gift and presenting it in an inspiring way, and upping your game from the gift you gave last year, then we represent the chance to discover products that even you wouldn’t have come across, and present them in a way that is as good or better.” Poisson says both kinds of customers are flocking to the site.

Startups marrying gift-giving with curation on Web and mobile platforms have been popping up at a rapid pace lately—the market research firm TrendWatching.com calls the phenomenon metail. Right here in San Francisco, for example, there’s Karma, which has released a social gift-giving app for iPhones and Android phones, and Sincerely, which makes a variety of iPhone and Android apps for sending greeting cards and photos. But Wantful is a more elaborate and audacious bet. Unlike his competitors at app development startups, Poisson has had to solve major practical business questions such as how to find and recruit wholesale vendors, how to get them to drop-ship items directly to customers, how to print the gift books, and what kinds of retail margins to charge.

So far, the bet seems to be paying off. The company collected seed funding from angel investors like Foursquare’s Dennis Crowley and Path’s Dave Morin, and has been growing fast since unveiling its service last November. It’s now got 20 employees—five in New York and 15 working from Poisson’s overcrowded Haight Street apartment—and just last month it collected $5.5 million in Series A financing from Polaris Venture Partners, Harrison Metal, Greylock Partners, and Forerunner Ventures.

I sat down with Poisson yesterday and asked him to walk me through Wantful’s story, starting with his own varied background, which doesn’t actually have much to do with product merchandising. Poisson studied film production at Boston University, developed digital editing technologies for Avid, ran two large visual effects and animation studios in Montreal, researched camera phones for Sony in Tokyo, and created the early media sharing service Radar and sold it to Shutterfly. “I have always been interested in photography and filmmaking and design—those are the through-lines in my career,” he says. “I’m not sure any of it translates directly to retail, except that when it came time to design what we were building, I had an obvious bias toward the tangible experience—the quality of the photography and the print piece.” An edited transcript of our conversation follows.

Xconomy: Where did the original idea for Wantful come from?

John Poisson: I took some time off after Shutterfly and moved to Europe for an indeterminate period. I wanted to see some friends and not think about what to start next. I have seen a lot of people assemble their friends and say ‘We’re smart and we have some capital, let’s think up a startup,’ and those things usually come across as disingenuous and they often don’t succeed. I wanted to experience a bit of life.

In the course of doing that, I realized I was spending a fair bit of my time bouncing through all of the amazing cities in Europe and looking for product and meeting with designers. Being fascinated by retail has been part of my personal interests for a long time—thinking about where trends come from. I also happened to have a pressing need to buy some wedding gifts for a friend. Actually, I was there for nine months and in the course of that I had a whole bunch of gift occasions. And as much as I was spending time going through the most amazing boutiques in Europe and meeting amazing designers, I still struggled with 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?

The Wantful "reveal"

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 drop shipping, so that when you chose the hammock or the earrings, we pass the instructions to that partner and they package it up and send it directly to you and invoice us. The shipping is built into the cost.

X: On the Wantful site the gift amounts are in specific denominations like $100, $150, $200, $300, and so on. How does that fit with your hunt for new merchandise?

JP: We find products that fit those denominations. If I am buying a gift for $200, the wholesale price might be $97 or $102, but it’s a very narrow band. If we found a product with a wholesale price of $165, that is an awkward number for us, so we would tend to skip it.

X: So you’re mainly profiting on the retail markup. But is that the whole idea, or is there another business embedded in here, such as analytics? You must be gathering a lot of data about which products people are choosing for the gift books, and which ones gift recipients are choosing from the books.

JP: I wouldn’t say there is an analytics play. What is most interesting to our partners is that we are selling their products to customers who are perfectly suited for them. And we are presenting their product beautifully, shot by us, in this book alongside other equally brilliant products. We are not in the business of selling user data. We are starting to understand some very interesting things about how people buy and give and so forth, but that is not what our business is all about.

X: But surely, you’re able to see which products aren’t selling well, and make decisions about what options to offer to givers.

JP: Our recommendation algorithms take care of that for us. And because we don’t own any of the inventory, there is no risk to having items that don’t sell well. There might only be one person who would want a product. If we can discover them and present it to that recipient, we have done a great job. That is what mainstream retailers cannot do. They can’t afford the risk.

X: You showed me around the office before we sat down, and it looked like the biggest part of your team were the merchandise people. Do you think of finding great products as one of your big strengths?

JP: If you look at some of the other plays, the mobile-focused gift giving sites, they are basically gift cards. They are using affiliate models that are not going to make them a lot of money. A big part of what we do is help the gift giver find the perfect gift. We have six or seven people on that. We have one woman who wanted to join the team when we first started, but she was about to go on a year-long honeymoon. We engaged her to be a buyer while she was on her honeymoon, so she spent time in every country she visited finding great products for us. Likewise, we do that in San Francisco and New York. We ask people for recommendations. We stop people on the street and ask ‘Where did you get that scarf?’ So it’s equally that, and crafting a really thoughtful, meaningful experience around gift giving.

X: Yes, speaking of that—how do you pull off the mass customization of the gift books? They have an expensive feel to them.

JP: Without saying too much about who our partner is and how they do it—it’s not Shutterfly, but the time I spent at Shutterfly taught me a lot about what is possible in the world of mass-customized printing. When I first found a partner to manufacture the books, they were skeptical. They said ‘That is a low price point and a quick turnaround and a very high level of fit and finish.’ But knowing what is possible, I was able to push our partner in a direction that they are quite excited about. The problem was, how do you find that balance between something that feels super-high-quality, but comes in below a certain price point.

X: You said you were inspired by the Japanese gift-giving culture. What do you think that culture is all about, and what elements were you able to appropriate for Wantful?

JP: It’s a big question. Japanese gift-giving culture is very different from what we do in the West. But one of the things that has always inspired me about Japanese culture is the care with which they present things. I think it’s all about ritual. It’s very easy to interpret it as being transactional, because it’s very codified—‘In this context, you bring the $100 melon, and it’s the most perfect cantaloupe with the perfect stem and the perfect box.’ But it’s not about the melon. It’s about the ritual of having given this perfect gift and knowing the rules and being generous and kind in that way. That’s a little bit different from the Western style of gift-giving, which is more focused on the individual and their interests, but I think the presentation and ritual of it is something that we want to bring back to the mass market, as opposed to the Hallmark or Walgreens approach to gift-giving.

X: What will be the big challenges for Wantful as you try to scale up to 10 times your current size, or 100 times?

JP: Holding true to our standards on the merchandising side is quite important—making sure we are following through on our promise of delivering a great gift and helping you give well, so the recipient is actually happy. We see that manifest in the number of people who discover us first as a recipient, and then become gift givers, and in the number of gifts each individual gives. Those numbers are much higher than we anticipated, given how early we are.

The way we have designed it, we can scale very quickly. Our vendor relationships work as a sort of capillary system, so that with even our smallest, one-person design partners who are only able to handle a small number of orders, we can throttle their presence so they don’t get overtaxed. Beyond that, there are essentially no restrictions.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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