Reader’s Digest Gives E-commerce Gifts.com

The Reader’s Digest Association (NYSE RDA) announced today that it has teamed up with Startek, Inc. (NYSE: SRT) to create gifts.com, an online gift shopping service. Reader’s Digest is the most widely read magazine in the world, with a paid circulation of about 15 million.

Reader’s Digest and its Good Catalog Company subsidiary will contribute property and financing in exchange for an 80.1 percent equity stake in gifts.com. StarTek will contribute property, including the gifts.com domain name, and financing for the remaining 19.9 percent of the new venture. StarTek will also provide order fulfillment services for gifts.com.

“StarTek secured the gifts.com name more than five years ago, and recently completed its evaluation of business models that best exploit the opportunity presented by virtue of its ownership of the domain name,” said A. Emmet Stephenson, Jr., chairman of StarTek.

A $20 Million Marketing Campaign

The gifts.com site will launch in time for the 1999 holiday season. The site will initially feature 400 products, including such brands as Laura Ashley, Lenox and Nautica. Gifts.com will offer a customized gift finder, a gift calendar with e-mail reminders and other personalization features.

The launch of gifts.com will be promoted with a $20 million (US$) marketing campaign that will include television, radio, print, direct mail and online advertising. Marketing firm Young and Rubicam will work with Reader’s Digest on the marketing.

Reader’s Digest believes that this move into e-commerce is just the beginning for the company.

“Gifts.com is part of Reader’s Digest’s strategy to expand our Internet presence and launch Web sites that will meet consumer needs, leverage our strengths and assets and create substantial e-commerce opportunities,” said Thomas O. Ryder, chairman and CEO of Reader’s Digest.

Rapid Growth For Online Gift Shopping

Spending for online gift buying is expected to grow from just more than $300 million in 1998 to $1.8 billion in 2003, according to Forrester Research. Sales are expected to pick up significantly this holiday season.

A Ziff-Davis Internetrak survey of U.S. adults older than 18 shows that 24 million people are likely to buy holiday gifts online this year, more than three times the 7.8 million people who did so during the 1998 holiday season.