Institutional Shareholder Services Recommends RedEnvelope Shareholders Elect Two Dissident Nominees

Business Wire, August 16, 2004

NEW YORK -- The Concerned Shareholders of RedEnvelope, Inc.

--Finds Board Needs Strengthening "In Light Of The Company's Operational Struggles And Shareholder Performance..."

--"Company May Not Have Settled The Issues It Faced During The Prior Holiday Selling Season"

--Recommends Shareholders Approve Increasing Number Of Directors

The Concerned Shareholders of RedEnvelope, Inc. announced today that Institutional Shareholder Services (ISS), widely recognized as the nation's leading independent proxy voting and corporate governance advisory firm, recommended that RedEnvelope (NASDAQ: REDE) shareholders "... vote the dissident's blue card, " and vote for two of the Concerned Shareholders' director candidates.

By using the dissidents' BLUE proxy card for the August 27, 2004 Annual Meeting, ISS recommends that shareholders vote to return the size of the Board to eight members from six and elect Amy Schoening, former Chief Marketing officer at Gap, Inc, and Robert Perkowitz, President of Paradigm Management who previously held senior positions with Smith Noble and Cornerstone Brands.

ISS's analyses and recommendations are relied upon by hundreds of major institutional investment firms, mutual funds and fiduciaries around the globe.

ISS believes that these candidates will provide "strong experience in retail, operations and marketing in order to provide additional expertise on the company's strategies and oversight of management execution". The ISS report further stated that "...in light of the company's operational struggles and shareholder performance since going public, the board requires new voices and expertise."

Scott Galloway, a member of the Concerned Shareholders' slate of directors, who is co-founder of RedEnvelope and a current Director not renominated by the incumbent Board, commented: "We are extremely gratified that ISS recognized the real issue in this proxy fight - the need for Directors with retail experience and expertise who can hold management accountable. None of the incumbent slate, with the troubling exception of the CEO, Alison May, has the background to play that role, a role that is absolutely critical in restoring value to REDE shareholders who have suffered a 48% stock price decline since last September's IPO.

"In reaching its conclusion, ISS made two especially important findings: while management says that they have recovered from the 2003 Holiday Season fiasco, they continue to report higher distribution center costs. As ISS notes, 'maintaining higher staffing levels during the seasonally slow summer period indicates the company may not have settled the issues it faced during the prior holiday selling season'.

"Second, neither the Concerned Shareholder group, nor ISS finds acceptable management's self-professed inability to find two qualified directors in order to maintain the current 7-member Board, which they are proposing be reduced to six, upon elimination of my seat . The ISS report notes that the Concerned Shareholders were able to find eight such nominees.

"While ISS's recommendation is a black eye for RedEnvelope management and the board, it is very positive for RedEnvelope's shareholders. Bringing Amy Schoening and Robert Perkowitz onto the board would infuse some much needed retail and operational talent and would further the Concerned Shareholders' agenda, which all along has been to create board and management accountability and renew growth at RedEnvelope," Mr. Galloway concluded.

About The RedEnvelope Concerned Shareholders Group

For more information on the Concerned Shareholder investor group led by RedEnvelope founder and board member, Scott Galloway, who has filed a proxy with the SEC to nominate an alternative slate of directors at RedEnvelope's annual meeting on August 27, go to: www.saveredenvelope.com.