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Red Envelope Tailors Upscale Gift Giving for Corporate Market

Luxury gift sites have crowded onto the Web this year, each vying for a slice of the upscale market. But while most are going after the affluent consumer, some think that the real opportunity can be found in corporate gifts instead.

"Websites in the gift space are finding that the consumer market isn't as large as they hoped," said Ken Cassar of Jupiter Communications. "And so they are sliding into the business-to-business market." In this arena, a large selection is not nearly as important as one appropriate for most gift recipients, particularly the business-to-business customer.

It appears that Red Envelope agrees with this assessment and is making a transition from a primarily individual customer base to larger business-oriented clients Providing gifts from $20 to $1,200, this site is a corporate gift giver's dream. It provides high quality, unique gifts for upscale shoppers. Red Envelope has gifts for all occasions, running the gamut from chocolate covered Oreos ($25) to pashmina wraps ($295) to Paddington Bear crib mobiles ($28) to a complete home weather station ($400) to a spa-in-a-box ($150). Gift wrapping is an additional $4.50 per item. Although the inventory is limited, it appears to be carefully selected for the high end shopper. No discount deals here. Prices are comparable to brick and mortar boutiques and upscale catalogs. The enticement to customers is the quality of the products and the ease of purchasing them. More and more human resource departments are finding this a fast and effective way to reward employees and impress clients.

At Red Envelope, gifts are divided into categories such as "occasion," "life style" and "recipient." Each section is then further divided to focus the customer's search to specific items. The "life style" section breaks down into such categories as "explorer," "techno whiz," "kid at heart" and "handyman." Last minute shopping? The 911 section has gifts that can be ordered before midnight Eastern and shipped that same day. They also have a section dedicated to corporate gift giving.

This site is better set up to send gifts to others than for customer purchases. The ordering section is difficult to navigate unless the item is sent directly to someone else. However, they have an efficient e-mail system to let the customer know when their gift has been sent and gifts appear within a reasonable time frame (based on your shipping instructions).

Red Envelope, located in San Francisco, began in September 1997 as 911gifts.com, then was relaunched in October as Red Envelope. Inspired by an Asian tradition, each gift comes with the customer's own personal message in a red envelope. The company was founded by Pete Baltaxe who was director of product marketing for commerce at America Online prior to starting 911gifts.com. He was also a business consultant for Apple Computer's Online Services and spent two years as a consultant with the Boston Consulting Group. His background is as a computer hardware engineer.

Seed funding totaling $1.5 million was provided by Baltaxe and two friends, Ian Chaplin and Scott Galloway, who were founders and principals of Prophet Brand Strategy based in San Francisco. Red Envelope closed a second round of financing in March 1999 totaling $2.3 million. This round was lead by venture capitalist Henry Wilder and included investments from Roger Sippl, founder of Informix, and Ellen Hancock, CEO of Exodus Communications. The third round in September 1999 for $21 million was provided by Sequoia Capital and the fourth in November by Weston Presidio, Phillips-Smith for $10 million.

According to the company, revenues in 1998 were $1.4 million and are projected to be five to eight times that by year end 1999. Buyers for the company come from such retail giants as Macy's, Natu