Evan Schuman's StorefrontBacktalk

Amazon.com, which arguably has one of the most extensive retail CRM databases and purchase recommendation engines, envisions a Catch-22 future for gift cards. The key is making them more personalized, more customized. And yet, anything that hints of privacy violations is off-limits. It’s like a starving man being given the keys to a well-stocked food locker as long as he agrees not to eat anything.

Such is the plight of Michal Geller, Amazon’s director of consumer gift cards. From Amazon’s perspective, the good news is that online giftcards are potentially a lot more flexible than their physical store counterparts, which need some way to interact with POS systems, be that magstripe or an RFID chip.

That limits customization options, although some retailers—such as Target and Best Buy—have been playing with adding electronics into gift cards so they can play music or take photographs.

Amazon on Thursday (Nov. 20) announced a deal with a company called HDGreetings to send digital greeting cards with its gift cards. The digital cards would allow consumers to place a photograph and words into an animated scene and to personalize it, similar to what video humor site JibJab has been doing with its video satires.

Down the road, though, Amazon is toying with other ways to truly customize cards. But avoiding privacy issues, Geller said, is non-negotiable. "Anything related to privacy is off the table," he said, forcing Amazon to focus on "some creative ways (that are) not creepy."

Creative But Not Creepy

The safest initial approach is to limit personalization to data the gift-recipient has signed off on releasing, such as wishlists and the like, coupled with recommendations based on gift-giver-supplied demographics (What should I give an 18-year-old female who lives in Barrow, Alaska?).

The temptation is to allow gift givers to ask for truly personal recommendations for gift recipients based on that recipient’s history of Amazon purchases. Not only would that potentially violate privacy issues, but those recommendations may be misleading—especially if the intended gift recipient often buys gifts for others.

The goal is "to tie the giver and the received even more closely so the giver can give something that is very meaningful," Geller said. But he wouldn’t commit to how Amazon plans to do that.

Geller compares Amazon’s HDGreetings deal—which itself is just part of an older Amazon program to share its APIs with companies that want to integrate Amazon giftcards with their offerings—with the value of "a six-year-old drawing a picture for you rather than buying you a card in the store" in that it takes more time and shows effort.

Another possible avenue of gift card customization and personalization is leveraging the ton of information consumers—especially younger consumers—are freely sprinkling all over the Web, particularly on social networking sites such as MySpace, Facebook, YouTube, Twitter and LinkedIn.

There again, convenience battles privacy. If a vendor used software to gather, analyze and coordinate that information and delivered reports about a gift recipient to a gift giver, that could push the privacy envelope. But if the vendor pointed the gift giver to those sites and suggested they search themselves, it could avoid the privacy risk at the cost of forcing the gifter to do more work. Then there’s the grey middleground, where a vendor might offer the user the tools to find and interpret that data.

Jennifer Sharp, HDGreetings’ CEO, said her company is starting to mine social networking sites, but only to help create better greeting cards. "We are looking into creating a video profile where you could take information about a user from their social networking site or pictures of their friends and people in their network," she said. "You could combine that with our animated templates."

A Huge Source Of CRM

Beyond using CRM and available data to help sell more focused gift cards, gift cards themselves can be a huge source of CRM data. Various gift card exchange sites have cropped up—including Plastic Jungle and Leverage—focused on collecting that information.

For example, a Target gift card is given to Consumer Smith. Consumer Smith doesn’t have a Target near him, so he goes to an exchange site to try and swap it for a Wal-Mart gift card. How much would Wal-Mart pay to learn about that transaction?

It’s not uncommon for someone using a gift card—as long as they stay within the card’s dollar limit—to stay anonymous. And yet the card exchange sites know who is exchanging one card for another and what specific consumers would prefer to get. If you want to buy the perfect gift for someone, isn’t that valuable data to have? Leverage has even tried to match advertisers with their gift card exchange consumers.

The National Retail Federation reported this week that it is seeing a drop in gift card purchases this holiday season. Although that may be short-lived, retailers looking for ways to craft better and more targeted gift cards may want to double their efforts.

Additional Reporting by Fred Aun.