IMB 673

QWIKCILVER™ and WOOHOO™

(Abridged)

R SRINIVASAN, SANDEEP LAKSHMIPATHY, AND PADMAVATHI KORIDE

R Srinivasan, Professor of Strategy, Sandeep Lakshmipathy (Research Scholar, BITS Pilani) and Padmavathi Koride (Post-Doctoral Research
Scholar), prepared this case for class discussion. This case is not intended to serve as an endorsement, source of primary data, or to show effective
or inefficient handling of decision or business processes.

Copyright © 2018 by the Indian Institute of Management Bangalore. No part of the publication may be reproduced or transmitted in any form or
by any means – electronic, mechanical, photocopying, recording, or otherwise (including internet) – without the permission of Indian Institute of
Management Bangalore.

This document is authorized for use only in Prof. Pratap P. Thoppil 's Entrepreneurship and Family Business Management TrimesterIV at Rajagiri Business School (RBS) from Jun 2024 to Dec
2024.
 QwikcilverTM and WoohooTM Developing a Complementary Platform

INTRODUCTION

Qwikcilver was a venture born out of the passion of two BITS Pilani alumni – Kumar Sudarshan (Kumar)
and Bhaskar Vasudevan (Bhaskar), who were soon joined by a third BITS Pilani alumnus Pratap TP
(Pratap). As an end-to-end solution provider for gift card management in India, Qwikcilver,
headquartered in Bengaluru, had revolutionized the gift card market through its technology and platform
offering. While exploring multiple avenues to build a new product, the one that struck a common chord
with the founders was the opportunity to revolutionize the gifting market in India. The founders started
off by building a gift card processing technology for the merchant side. Gift cards for the merchants
represented an opportunity to acquire a new customer who may not have yet experienced the brand and
thus have a captive new customer.

GIFT CARD INDUSTRY

Gifting posed several questions to the givers. What to buy? Where to buy? And how much to spend? If
the intent was to make the recipient feel special, in many instances the opposite was true. Inappropriate
gifting created transactional inefficiencies, making the recipient worse off. Social taboos prevented cash
to be used in lieu of a gift, often taxing the imagination of the giver. By gifting a card, the giver
essentially transferred the burden of choice to the recipient, saving himself the stress of choosing, and
saved time in the process. The system further allowed the gift receiver to have the flexibility of buying
based on his/her needs. Gift cards added the allure of flexibility and convenience to the giver and the
recipient.

Traditionally, gifting has been a social activity and no family event in India missed the opportunity of
being an occasion for gifts. Gifts have been largely in the form of cash or household items. Usage of gift
cards for family gifting was a recent phenomenon and as technology penetration increased in India, there
was more openness to explore new forms of gifting. Propelled by categories such as hospitality and
fashion, gift cards were also designed for the well-travelled and market-savvy customers. Gift cards were
handy when loyalty points from a retail store did not score. For a single retailer, the problem of storing
gift cards, in lieu of cash was a hassle as cards were unaccounted for in the books, and yet were as
valuable as cash.

MARKET SIZE – INDIA AND THE USA

The United States, for instance, registered a growth of 6% in the gift card industry in 2015-16, taking the
market size to a staggering USD 131 billion1. It was predicted to reach USD 160 billion by 2018, out of
which e-gifting would constitute USD 18 billion. In the UK, the gift card market was expected to reach
USD 13.1 billion by 2020. In India, where the minimum gift card value can be as low as ₹500, 2the
growth of the market has been far higher than the western counterparts. In the four years from 2012 to
2016, gift card sale increased by 20 times1 above, with the average gift card value rising from ₹850 to

1
Indians taking to gift cards over cash, physical gifts. LiveMint E-Paper. Source: https://goo.gl/iHHnHm Accessed on: 20 October 2017
2
1 USD= INR 63.66 as on 2nd January, 2018

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 QwikcilverTM and WoohooTM Developing a Complementary Platform

₹3400. Offline gift cards increased to 25%, and the gift card market grew by 40-45% in three years3. Over
70% of the corporate employees preferred gift cards over gifts. As a response, some corporates developed
gift card centric engagement programmes for their employees, customers and partners. Sensing the
opportunity, retailers jumped on to the bandwagon and launched innovative gift card programmes.
Nevertheless, the actual growth of this segment appeared to be propelled by e-gifting.

QWIKCILVER BUSINESS MODEL

The year 2008-09 was a period of growth for the organized retail industry in India as e-commerce portals
such as Flipkart and Amazon had not yet overtaken the brick and mortar stores. Big retail brands such as
Shoppers Stop, Croma, Westside and others were looking at scaling up their retail operations. It was not
easy to convince the retailers to allow Qwikcilver to handle gift cards for them. Some of the stores were
perturbed to learn that all the gift card related data would be stored on the cloud servers along with data
from other competitors.

PRICING MODEL

From their experience with one of their first customers, the founders understood that the retail stores
would be willing to pay a percentage share of the card value from the sales of gift cards. Over the decade,
the revenue model for Qwikcilver has remained mostly unchanged. With a slab-based pricing model
where the gift management solution received a percentage of the card value, the Qwikcilver team was
taking over the overhead of managing the life cycle of the gift card from the store. The cost for the retail
store was directly linked to the return on investment they earned. Shopping with gift cards also exhibited
a going-premium effect wherein a consumer, who would normally not shop at the store, would visit the
retail outlet to redeem the gift card and would end up exploring the store for other purchases too. This
model was also attractive as it was independent of the number of stores the retail brand had, or the
number of cards sold per brand, or the number of gift card programs running for a given retail brand. By
tightly linking the growth of their business with the growth of the gift card category, the founders were
pegging the future of the firm to the growth of their retail partners.

FORAY INTO DISTRIBUTION BUSINESS – GIFTBIG PORTAL

Consumers visiting Indian e-commerce portals could either buy e-gift cards which could be delivered to
them over email or buy physical gift cards which could be shipped to them. Other retailers including
travel portals began adopting this model to reward returning customers as part of promoting brand loyalty.
Rewards through gift cards instead of cash paybacks were seen to retain positive association with the
customers and this motivated retailers to switch to increased usage of gift card based rewarding. All these
prompted Qwikcilver to enter the distribution business as they saw an opportunity to directly promote
gifting experiences. With an intention to focus on both the enterprise and consumer sections of the gift
cards, Qwikcilver launched GiftBig.com portal in 2011 to directly sell gift cards.
3
Festive season may give Indian gift card segment huge boost: Qwikcilver Gift Card Survey. The Economic Times. Source:
https://goo.gl/rKWLMe Accessed on: 18 October 2017

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 QwikcilverTM and WoohooTM Developing a Complementary Platform

For the ease of processing, Qwikcilver issued GiftBig cards which the recipients could exchange for any
retailer’s card on the GiftBig portal. These GiftBig cards were more like catalog cards wherein, instead of
the employer (or any gift-giver) choosing the gifts for all the employees, the latter could exchange them
for any other card of their choice. Qwikcilver also provided micro-sites for the existing retailers to allow
customers to purchase and redeem gift cards. To address corporate demands, Qwikcilver introduced
customized corporate cards through existing partnerships with retail brands. Foray into the distribution
space helped Qwikcilver expand its offering from a pure SaaS offering to businesses to building a
consumer brand.

WOOHOO – QWIKCILVER’S MULTI-SIDED PLATFORM

With the GiftBig portal focusing more on the corporate gifting aspects, the founders were looking to foray
into building direct connect with the consumers. In early 2015, Qwikcilver decided to directly enter the
B2C segment with an entirely new brand called Woohoo. The Consumer-to-Consumer (C2C) side of
gifting was still a nascent market with immense potential for growth, as gifting was only getting bigger in
the Indian context. The GiftBig portal had become more synonymous with corporate gifting and microsite
usage, and the team felt the need to create a new consumer brand. By this time, the digital gift cards in
India were picking pace, and most of the retailers working with Qwikcilver had started issuing e-gift
cards, together with physical gift cards and mobile gift cards. These trends were aided by the increasing
mobile phone and internet penetration in India. The Woohoo mobile application was launched on the iOS
and Android marketplaces.

With the introduction of the Woohoo card, Qwikcilver provided its consumers complete flexibility in
expending their gift card points. With the ability to generate digital gift cards on the fly, Qwikcilver soon
realized the potential of consumer-based service such as Woohoo. The consumer card allowed Qwikcilver
to create a digital spending network for the end users who could convert the Woohoo card to that of any
other retailer to suit their shopping needs. Card personalization features of Woohoo were migrated on to
the B2B offerings from Qwikcilver. Ability to customize the look and feel, add audio and video
messages, scheduling delivery of a card for a future date were some of the popular features of Woohoo.
With backend integrations to a variety of e-wallets such as Mobikwik, Paytm, Oxicash and others, the
Woohoo mobile app had become the most personalized omni-potent mobile gifting solution.

Consumers had the opportunity to buy discounted gift cards that others were selling on the Woohoo
secondary marketplace; or sell partially used cards for cash; or exchange unused cards. Users could also
convert their partially used gift cards to cash or trade their unused ones for other cards that are of interest
to them. The secondary market place helped reduce the spillage rates4, while expanding the customer base
for the retailers.

Modeled as a super store, the Woohoo app gave the gift-receiver the choice to choose from over 150
brands that had partnered with Qwikcilver. Based on the level of integration with the retailer, Qwikcilver

4
Spillage rates referred to the ratio of gift cards that were not redeemed before their expiry.

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 QwikcilverTM and WoohooTM Developing a Complementary Platform

had visibility into the specific buying habits of the customers and what they spent the gift cards on. These
could in turn be leveraged by Qwikcilver to run specific promotional campaigns for the retailers based on
the needs. Although Woohoo sales accounted for less than 20% of the gross merchandise value (GMV)
for Qwikcilver in 2017, with additional features such as group gifting and secondary marketplace, the app
was growing. The Woohoo platform was soon made available to the retail stores on their micro sites,
which made it even more valuable for the retailers. With these innovations, it became easier to on-board
new retailers.

SUSTAINING GROWTH

When Qwikcilver started operations, the gift card market was an opportunity that was ripe for disruption
and transformation. It had remained mostly paper based with very low penetration even in the Indian
metropolitan areas. From the outset, gift card management seemed to be an adjacency which any of the
major players in the financial products space or a retail software space could get into and disrupt. Over
the years, Qwikcilver had integrated with nearly 30 odd retail point-of-sale (PoS) systems in India and
abroad. Apart from regulatory licenses and technology challenges, these relationships with the retailers
across the country and abroad were significant entry barriers that helped Qwikcilver cement its leadership
position. Along with the tools needed for operationalizing the gift card programs, the entire order
fulfilment process had to be replicated by the competition to grab a share of the lucrative gift cards
market. Retailers also had access to rich reporting through real time dashboards and detailed reports with
analytics that helped visualize the progress of the gift card programs.

COMPETITION AND ENVELOPMENT THREATS

As of 2017, even though Qwikcilver owned 90% market share in India, the company had to be wary of
local and international competitors entering the Indian gift card market. Stellr was a prepaid gift card mall
headquartered in Singapore which was vending cards for global malls through a network of physical and
electronic outlets. Stellr vended cards for popular Indian brands such as BookMyShow, Hungama and
Cleartrip. Similarly, the network of Blackhawk Network Holdings was spread across 25 countries and
offered a large selection of branded value products such as gift cards, reloadable prepaid debit cards,
rebate cards, prepaid telephone calling cards, ticket and sports cards. InComm touted itself as a financial
technology firm that was transforming the shopping experiences through payments technology in the gift
card market space. Leveraging deep integrations into retailers' point-of-sale systems, InComm provided
connectivity to a variety of service providers allowing consumers to conduct everyday business at more
than half a million retail distribution points5. Launched in 2005 in partnership with Visa and MasterCard,
the InComm Vanilla gift card allowed customers the benefits of a pre-paid open loop card at all locations
that accepted Visa or MasterCard debit cards6.

5
Celebrating 10 Years of Vanilla Gift. Source: http://www.incomm.com/blog/Pages/Blogs/Celebrating-10-Years-of-Vanilla-Gift.aspx Accessed
on: 10 October 2017
6
AmEx’s $300 Million Prepaid Tech Experiment Ends in a Sale. Source: https://goo.gl/JFNQSj Accessed on: 3 October 2017

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 QwikcilverTM and WoohooTM Developing a Complementary Platform

Ceridian Stored Value Solutions (SVS) offered gift card solutions to large retail brands in the US by
working with casinos, fashion, supermarkets, airlines, retailers and enterprises to offer customized pre-
paid card solutions. Gyft aimed at disrupting the over $100 billion physical gift card market by
completely taking it to the mobile7. Being an early mover in the fully digital gift cards space in the US,
Gyft brought the plastic gift card industry to the mobile, as opposed to focusing on new “social gifting”
experiences that some of the other gift card start-ups operating in this space did.

INTEGRATING WITH POS

Very early in the enterprise journey, Qwikcilver realized the importance and challenges therein of
integrating their solution with the retailers PoS and back-end systems. Every retail store chain would have
a different proprietary, home-grown, or customized off-the-shelf IT system that needed special integration
to reconcile with the gift card transaction system. Most systems in those days were decentralized, and
inventory reconciliation occurred at the end of the day from each store to the central IT system. There
were no centralized authentication systems, where all stores could closely monitor who issued gift cards
and when. From the beginning, these aspects could be easily tracked on the Qwikcilver network. Even
after a decade of Qwikcilver’s operations, the integrations it had done with the variety of PoS variants in
the retail stores had remained a key differentiator and an entry barrier for competition. Although the PoS
variants have come down over the years, integration still remained more of a logistical challenge than a
technological one.

ROAD AHEAD

From being discouraged by the retailer storekeeper while attempting to buy a gift card, to buying gift
cards on Apps such as Woohoo, the gifting experience in India seemed to have come a long way. In 2017,
the size of the gifting industry in India was around $40 billion, and gift cards were predicted to take up a
lion’s share in the coming years. With RBI guidelines specifying exemption from FEMA to gift card
transactions, flexibility was no more an issue. The government’s focus on cashless transactions, coupled
with the increasing popularity of independent e-wallets held a promise for the gift card markets as well.
The consumer’s shift of focus from physical gifts to gift cards to e-gifts meant the market was set to grow
further.

7
Gyft Unveils New Tech for Blockchain-Powered Gift Cards. Source: https://www.coindesk.com/gyft-chain-blockchain-gift-cards/ Accessed on:
20 October 2017

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This document is authorized for use only in Prof. Pratap P. Thoppil 's Entrepreneurship and Family Business Management TrimesterIV at Rajagiri Business School (RBS) from Jun 2024 to Dec
2024.