Gift Basket Business: 11 Steps to Start and Thrive
At a glance, a gift basket business might seem like a simple one. After all, it just requires repacking similar and even dissimilar products in a beautifully packaged container.However, don’t let the simplicity of the gift basket business fool you, it already has a market size of USD 26.3 billion as of 2019, beating out much more capital intensive and complex industries.
Also, it has been predicted that the gift basket industry would grow to 60% of its current 2019 market size by 2026. The industry has a really bright outlook.
Maybe you’re interested now to start one, so here are a few steps to starting and thriving in the industry.
Note: These information were derived from my own experience working at my family’s old sideline business before of gift basket packaging, as well as from online sources about the gift basket business.
11 Steps to start and thrive with a gift basket business:
1. Find a niche2. Create a business plan
3. Choose a sales channel
4. Organize your finances
5. Source your inventory
6. Design your gift baskets
7. Determine your pricing
8. Advertise
9. Sell related digital products
10. Solve recurring problems before they occur
11. Be aware of industry trends
Final Words
The Details:
1. Find a niche
The gift basket industry might seem simple, but its product range is broad. There are those that specialize in food like fruits, canned goods, chocolates, pastries and so on.
There are also those that specialize in non-edible products such as toys. Even electronics products are now being packed in gift baskets.
If you’re just in the beginning of your gift basket business, it is advisable that you find a niche. Here are a few pointers to finding your niche:
1.1 What interests you?:
There’s a few good reasons to base your niche based on your interests. If you are interested in something, there is a high likelihood that you know a lot of about it, You might even be an expert on it.
Your expertise is an invaluable tool in selecting the products for your gift basket business. You would probably know the best prices of the products and which products are popular.
Also, if you are interested in a product, you won’t be bored working with it day in, day out which means that you are likely to stay with your gift basket business for a long time.
1.2 Consumer demand:
You might be interested in your product but if there is no consumer demand for it, then your business would fail.
You could determine consumer demand by commissioning market research or if you are short on funds, you could use free tools like Google Adwords and Google Trends.
1.3 Profit potential:
You have found gift baskets that interest you and has good consumer demand, your problems are solved, right? Hardly, you still need to determine if you would be able to make a profit off your gift baskets.
To determine this, you need to know the market rate of gift baskets similar to yours, from there, you decide if you would price your gift baskets lower or higher than your competitors based on your market studies.
1.4 Target market group:
Lastly, you have to determine which group of consumers you would target. Gift basket buyers are divided into four groups: -Individuals- usually as giveaways to family and friends -Businesses- usually as giveaways to employees and clients -Event planners- usually as giveaways to occasions such as weddings and parties -Nonprofits- usually as giveaway prizes and gifts to donors
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2. Create a business plan
Going into business is like building a house where you need a blueprint. In this case, your blueprint is your business plan, and this are what you need for your business plan:
2.1 Business description:
“How do you want your gift basket business to be perceived by everyone?” This is should be the question you are asking yourself when you draft your business description.
A business description differentiates you from your competitors. It’s what your gift basket business is known for by everyone and not only by your customers.
2.2 Market analysis:
Business is also like going to war, but unlike wars, your enemy are your business competitors and your battleground is the gift basket industry.
No one is likely to go into war if they would lose, so is going into business. Market analysis determines if you are likely to win against your competitors and gain ground in the gift basket market.
2.3 Business structure:
You should also determine how your gift basket business would be organized, especially its management and legal structure.
How many employees would you need? Who would run your gift basket business? Would your business be a singly owned, family owned, corporation and so on?
Your business structure has a big effect on many aspects of your business like income sharing and legal responsibilities.
2.4 Product line:
At this stage, you would have already finalized what kinds of gift basket products you would sell. If you haven’t, you should go back to step 1.
2.5 Marketing plan:
Although it is possible to have a thriving business without doing marketing, this is a rarity. The business world is so competitive that almost all businesses engage in marketing to attract customers.
If you have a brick and mortar store, you should determine how you would attract foot traffic. Also, you should create a good online marketing strategy as many people today learn about products via the internet.
2.6 Funding:
You cannot start a gift basket business without capital. Either you finance your business yourself or find funding from other people. This should be a major component of your business plan.
2.7 Cost analysis:
Many new and even established businesses fail because they failed to consider all the possible costs associated with their business.
For example, a business might be thriving but if they fail to consider all the costs of doing business like theft, even a one time major theft in their business can leave them bankrupt.
2.8 Profit projections:
This would determine the probable profit you would have from your gift basket business and when you would actually start profiting from your gift basket business.
This would let you know how long you can sustain business losses before you become profitable which is especially important if you have investors in your gift basket business who want their capital and interest paid predictably.
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3. Choose a sales channel
In the old days, your only sales channel is via a brick and mortar store, but the internet has made a brick and mortar store optional.
3.1 Advantages and disadvantages of an online store:
There are many advantages to owning only an online store: you don’t have to open and close at a set time unlike a brick and mortar store, but you get to sell on a 24/7 basis.
Also, you can sell to almost anyone in the world provided that you do interstate and international deliveries. With a brick and mortar store, your probable customers would just be walk-in customers and customers within your local territory.
That’s why besides opening a brick and mortar store, you should also open an online store. An online store might exist without a brick and mortar counterpart, but a brick and mortar store can accommodate an online store.
Also, an online store is much easier and cheaper to start and maintain not unlike a brick and mortar store. For example, real estate costs are one of the biggest expense of brick and mortar stores.
But an online only store has disadvantages too. For example, you don’t have access to walk-in customers who may or may not use the internet.
3.2 What to consider when choosing a brick and mortar store location:
If you do choose a brick and mortar store, you should ensure that there is good foot traffic in the area. You could ask the other businesses in the area for information and feedback.
You should also study if the location is accessible to customers, like if there’s plenty of parking in the area. You should also consider zoning laws like law mandated business openings and closings, the laws on business advertising & signage and so on.
But most of all, you should study competition. Are there other gift basket stores in the area which are better than yours? Are there other gift stores that conflict with your gift basket business?
3.3 Test the waters first:
Any business that sells physical product would probably need a fair amount of capital to begin with. That’s why it’s important that you test your business idea first and then refine it.
You could sell gift baskets only during particular seasons or events like Christmas time, Halloween or Valentine.
You could also start out small by selling initially at festivals, Sunday markets and so on. Once you have proven that your business idea has legs, this is the only time you should consider going full time with your gift basket business.
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4. Organize your finances
Speaking of capital and expenses, you should thoroughly plan your business finances. It is advisable that you separate your personal and business finances so you have a clear idea if you are making real money off your gift basket business.
Also, setting up your business like an LLC gives you financial protection if ever your business fails. With an LLC business setup, creditors can’t confiscate your personal assets to pay for your business losses.
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5. Source your inventory
There are already a lot of gift basket wholesalers (at least in the USA) who can give you up to 50% or sometimes even less of the standard retail prices if you have to pack your gift baskets on your own.
For example, if you Google Search the keywords: “gift basket wholesalers”, Google Search would show different gift basket wholesalers who could supply your gift basket business with premade gift baskets and supplies.
You can even be more sophisticated and attend trade shows where you can actually see the visual look of the gift baskets being sold to you.
The beauty of using gift basket wholesalers is that the more you sell their product, the more is the probability that you would get better terms from them like more discounts and even freebies.
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6. Design your gift baskets
Your gift baskets must stand out from your competitors. The more beautifuler is your gift basket, the more it would probably sell.
Also, the contents of your gift baskets is what makes your customers buy them. That is why you should carefully select the products that you would put in your gift basket.
The most common gift basket types are gourmet food and candy items, bath and toiletry items, seasonal items, baby shower items, and wedding giveaway items.
If you are selling non-perishable items, you can pack your gift baskets in advance, but with perishable items, it is advisable to create only one sample basket for photos and/or display.
You’ll also need these tools and supplies:
- A shrink wrap machine and heat gun for packaging
- Empty baskets and/or other containers
- Cellophane or other clear wrapping material
- Bows and ribbons
- Note tags or cards for the baskets
- Paper shreds and/or other fillers for the bottom of the baskets
- Crafting tools
- Delivery boxes
- Packing materials
- Temperature regulating packing materials for perishable goods
- Printed shipping labels
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7. Determine your pricing
Just like any retail business, and any business in general, you should be able to make a high enough profit to cover all your costs and at the same time give you a good living income.
The key with pricing is to sell your basket at a price that's high enough to make a reasonable profit and low enough to attract customers. If possible, much lower than your competitor’s prices.
Your pricing should also be flexible enough to account for periods where your gift baskets are not in season or when there is low customer demand for it. This entails still making profit despite lack of customer sales.
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8. Advertise
You should combine online and traditional marketing tactics to advertise your gift baskets:
8.1 Website:
Nothing builds a business presence these days more than having your own website. Your website should contain your business description as well as your contact information.
Your customers should be able to immediately see your gift baskets products and without being confused in your website.
More and more customers these days would also want to know your cancellation/return policies and your store location & hours (if applicable).
8.2 Social media:
You could use Facebook, Instagram and all the other social media platforms to advertise your gift baskets.
The advantage and the disadvantage of using social media is that people get to comment on your gift basket products, enabling you to make adjustments to your business and products policy.
The downside is that these same comments might be misleading which causes you to create bad adjustments to your business and products policy.
8.3 Paid Ads:
You can also pay for ads using Google Adwords, Facebook Ads and so on. Although paid ads are effective, the trick is not to overdo it, such that you exhaust all your advertising budget.
8.4 Loyalty programs:
It’s much harder to gain a customer than retain them. That is why you should not neglect your loyal customers as they are the reason why your business stays afloat.
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9. Sell Related Digital Products
These days, it is very easy to integrate digital products to your physical products. This applies too with your gift basket business.
You can sell courses about how to start a gift basket business, how to pack a gift basket, the history of gift baskets, and so on.
You could also post in Facebook, Instagram, YouTube and so on regarding your gift basket business and earn views which enables you to earn ad or even affiliate income.
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10. Solve recurring problems before they occur
As you progress in your gift basket business, you would naturally encounter problems and obstacles which may hinder or even bankrupt your gift basket business.
Here are some problems and obstacles you’ll likely encounter:
- Difficulty in finding and sorting products
- Bugs, insects and pests eating your food products
- Natural disasters like fire and flood
- Pesky and disappointed customers
- Family upset with your decision
- Family and friends wanting freebies
- Workers stealing, destroying and eating your inventory
- Lack of customer demand
- Product damage and spoilage
- Envious people around you
- Your products being banned
By finding solutions before these problems and obstacles even occur, you are better able to handle them when they do eventually occur.
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11. Be aware of industry trends
Lastly, the business world is very dynamic and can change in an instant which could significantly affect your business.
Customer preferences can instantly change and new technologies might suddenly appear that could render your gift basket business obsolete.
For example, even tech gadgets are being packed into gift baskets, which leave a lot of opportunity for the high end retailers of gift baskets.
Also, as of 2019, 40% of all gift baskets have been bought by corporate buyers. This trend should be enough to inform you that you should take extra effort selling to corporate buyers.
You should always update yourself regarding the trends in the gift basket industry so you’ll know where the industry is heading and the opportunities and threats it presents.
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Final Words
The gift basket business might look simple, but it is a fast growing industry. Maybe it’s time you consider entering it.
Just like all businesses, you need to take careful steps for your gift basket business: finding niches, business plan, sales channel, finances, sourcing inventory, product designs, pricing, and advertising.
To minimize your business risk, you should also find solutions to obstacles and problems you are likely to encounter before they happen.
You should also watch out for industry trends which could seriously affect your business like fast changing consumer trends and emerging technologies.
Lastly, you should consider selling digital products related to your gift basket business like courses and ad & affiliate income.
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