What is the answer to know is the gift basket business profitable? This article reveals what it takes to make money and have creative fun.
“I spent $19 to make a gift basket and sold it for $25. Is that good?”
This question was posted many years ago by an aspiring designer on the now-defunct AOL gift basket board. Here’s a partial answer.
Gift baskets are profitable, but not if you spend $19 and sell the gift for $25.
This person probably did not account for her time (how long did it take?), enhancements (what items did she forget in her calculation?), and expenses (did she factor in lighting needed and the space used for designing?). That means her $25 gift basket cost upwards of $40 to make. No profit there.
Big players, big picture
There’s money to be made in every industry, and gift baskets are no exception. If this was not a profitable business, sellers such as Harry & David, 1-800-Baskets, and wholesale clubs Costco and BJ’s would not participate. They’d stick with fruit, flowers, and other gift items. They would not advertise aggressively in print, on broadcast television, and online.
The gift basket business is profitable as long as you:
- Locate the people who buy often
- Market every day without fail
- Calculate expenses to the penny
- Consistently pursue industry education
- Charge customers the right price for value and income
- Stay aware of and charge correctly for shipping and delivery
- Adjust costs as supply and transportation prices rise
- Stay updated with industry and buying changes
What does profit mean to you?
Hobbyists who create gift baskets only for holidays and personal needs see profit differently than professional designers who pursue sales from corporations and similar large buyers.
Hobbyists buy from retailers when occasions occur. Retailers increase merchandise prices because they need to make substantial profit to pay for everything from building upkeep to employee salaries, so hobbyists pay high costs for the gift baskets they make.
Professional designers buy from wholesalers, the same places retailers buy. Full-time makers require merchandise at low costs in order to earn high profits to pay for their upkeep which includes similar expenses as retailers. Why? Because designers are retailers whether working at home, in a commercial space, or in a retail shop.
Here’s an example. A birthday basket with items purchased by a hobbyist from a retail store may cost $60. The same birthday basket items purchased by a professional designer from a wholesaler may cost $20.
How much will a hobbyist charge a customer? If there is to be profit, the cost will be much higher than $60, but how much higher? That depends on the hobbyist, who might not she add costs for time, labor, and expenses. The professional designer can charge $60 but may charge more due to calculations (time, labor, and expenses) already established within her business.
Profit for one person in the gift basket business is different for another. You realize, from the example and initial question ($19 versus $25), that if you’re not careful a profit can actually be a loss.
Do the math
Aside from that, the big issue for new gift basket makers, whether hobbyists or professionals, is determining what to charge. Thankfully, the answer is no longer a mystery. The article, Three Easy Ways to Calculate Gift Basket Pricing, provides insight. The same is true about the six week Start Your Own Gift Basket Business course that I teach online. In that course I help each student determine what to charge.
A standard profit rate is charging three times more than what you paid for everything, and I mean every piece of shred plus time, labor, and expenses. However, standard isn’t always the norm. Profit also accounts for location, customization, personalization, and last-minute orders.
If customers want gift cards, fruit, and other items you don’t normally stock, you have to buy those items. That’s under the customization banner, and profit goes up if you purchase such items due to research, time, and travel costs.
Is the gift basket business profitable?
Gift basket retailers, both independent and well-known stores, earn high income as long as they follow the eight bullet points listed above.
One problem that solo designers face early in business is family and friends wanting gift baskets for discounted prices, sometimes so discounted that gifts are made at a loss. That may be okay when you make one for mom but not great when everyone expects favoritism. There are ways to handle that. Look for articles on this site that address that dilemma.
Research and plan your money-making expectations before joining this creative and delightful industry. Profits are the goal, and you’ll receive much more when jumping in with your eyes wide open.