This article is part of a larger series on Starting a Business.
Starting a gift basket business involves finding a niche, choosing a sales channel, registering your business, designing your baskets, and developing a solid marketing plan. To start a gift basket business from home or a storefront, you need a carefully crafted business plan, a flair for creativity, and as little as a few thousand dollars.
Here’s how to start a gift basket business in seven steps:
1. Find a Gift Basket Niche
Finding a niche helps differentiate your business from the competition. A niche targets a specific audience or fills a specific need. The narrower your market is, the easier it will be for your gift baskets to become the go-to solution for that audience. For example, edible arrangements has a strong hold on the general fruit gift basket market. But, you could start a fondue gift basket, which would have a smaller audience, but distinguish your brand from competitors.
Our guide on how to find a niche market and profit from it outlines three steps for finding your niche:
List your interests: Starting your gift basket around something you are genuinely passionate about will help keep the business exciting. As the owner, you will be spending tons of time on your business, so building it around one of your interests will help keep you engaged.
Determine the audience potential: If you’re opening a storefront, make sure your gift basket has a lot of local interest. For online businesses, use tools like Google AdWords or Google Trends to see how many people are searching for the kinds of products you want to offer.
Research the potential profits: Once you have an idea and have verified customer interest, make sure the idea is profitable.
Who Buys Gift Baskets?
According to Entrepreneur, people who buy gift baskets tend to have the middle- to upper-class income levels, so that is important to consider in planning where to sell, especially if you want to open a storefront. Business or corporate buyers could also make up a larger portion of your sales. Businesses often buy gift baskets as holiday presents for clients and employees, to celebrate employee milestones, and other major life events.
2. Create a Business Plan
Creating a business plan is essential for laying out the nitty-gritty details of how your business will operate, and, as importantly, how you will make money. Having a plan for becoming profitable this early in the process will give you a better understanding of how long it will take for your business to turn a profit, what funds you need to sustain your business until that point, and what ideas are actually viable. Your business plan serves as a model for how you envision your business to grow, and is often a requirement for securing a small business loan or other funding.
Your business plan should include the following sections:
- Business description: Describe the gift basket industry, the outlook and future possibilities, your concept and theme, and other markets and industries that can directly impact your business.
- Market analysis: Identify market trends in the gift basket, your target market, and analyze competitors. For example, be sure to include other gift basket businesses in your area, and any other possible competitors.
- Organization and management: Explain how you plan to run your business, including standard operating procedures, staffing, and responsibilities of each employee.
- Product line: Detail your gift baskets, the themes, what products will be included, how you are sourcing your products, how much each basket will cost to make, and what you will sell them for.
- Marketing plan: Describe how you plan to market your gift basket store. Be sure to include social media marketing. Also account for any seasonality in your business, such as slower summer months and a bigger rush during the winter holidays.
- Funding request and proposal: Figure out how much you need to start and run your gift basket shop, including how much capital you have ready, how much you will need from outside sources, and how you plan to acquire those funds. If you’re applying for a business loan, specify how much money you need to borrow and a repayment strategy.
- Financial projections: Break down your projected expenses, profits, and losses for at least your first three to five years.
You can create your plan on whatever medium is most comfortable for you, whether that’s a Google or Word document, a slideshow, or using business plan software. When preparing your business plan, make sure that you include all the details wherever possible. If you are applying for any loans, the bank or financial institution will need to see your detailed business plan.
Costs of Opening a Gift Basket Business
The funds you need to start a gift basket service will vary wildly depending on whether you are opening a storefront or operating an online business from home. If you are opening a retail store, your startup costs can be as high as $100,000 depending on your location and rent prices. If you’re opening a store, you will also need to design and outfit the interior, which is an expensive process.
If you are starting an online business from home, costs will be a lot lower. You could start an online gift basket store for a few thousand dollars. You’ll just need to invest in a quality website and ecommerce platform, online marketing, gift basket supplies, and shipping tools.
Choosing a Legal Structure
Another part of setting your business plan is choosing a legal structure for your business. Choosing a legal structure for your business is important because it determines how you will collect and pay taxes, how you will get paid from your gift basket business, and your level of personal liability. There are many types of legal structures, but the two most commonly used for small gift basket shops are sole proprietorship and limited liability companies (LLCs).
If you don’t set a legal structure, your business will default to a sole proprietorship. It essentially means you’re doing business as an individual, and therefore are not separated from your business in any way. Sole proprietorships are popular options for freelancers, project contractors, and other individuals conducting low-risk and low-visibility work by themselves.
Limited liability companies (LLCs) are legal structures for small businesses that protect your personal assets, such as your house, in the case of lawsuits or business bankruptcy. This is the most popular legal structure for small retail businesses, and the one we recommend if you are planning on opening a storefront or operating a sophisticated ecommerce business.
If you opt to form an LLC, we recommend working with a solution like Incfile to save money while registering your business. With Incfile, you can register your business for free plus the cost of state fees. Visit Incfile to learn more.
3. Choose a Gift Basket Sales Channel
Choosing where and when to sell your gift baskets is an important decision. Opening up a storefront requires a lot more upfront capital than starting an online store. You need to lease a space, outfit that space, design your store, and hire employees. But, having a physical space also makes your business more visible and allows for growth into other retail categories.
On the other hand, starting your business online requires less upfront investment, and allows you to ease into the gift basket business as a part-time or side job. Plus, if you are shipping nationwide, having an online business provides a much larger customer base.
Online Gift Basket Sales
If you are wondering how to start a gift basket business, but you are not ready to devote 100% of your time to running the shop, selling online is your best option. The startup costs are much lower than opening a brick-and-mortar storefront, and you’ll have more flexibility.
The pros and cons of selling gift baskets online are:
Pros of Selling Gift Baskets Online
- Flexible schedule
- Nationwide customer base
- Lower startup costs
Cons of Selling Gift Baskets Online
- Hard for new businesses to build visibility
- Don’t have the built-in customer base that a local store does
If you are looking to build a gift basket empire that brings in several hundred thousand dollars per year, you will need a commercial space to package and ship orders. But, if you are looking to run a small gift basket operation for supplemental income, then a home-based business may work for you.
Regardless of the size of your online gift basket business, you will need an ecommerce platform to build your website and manage orders. Shopify is an affordable and sophisticated ecommerce platform that also has built-in payment processing, inventory management tools, shipping discounts, marketing features, and more. Visit Shopify for a free trial.
In-store Gift Basket Sales
Opening a brick-and-mortar storefront for your gift basket business can be an ambitious endeavor. You will need to find a space, design and outfit that space, and probably hire employees.
The pros and cons of opening a gift basket store are:
Pros of Opening a Gift Basket Storefront
- Greater visibility with a storefront
- Local customer base
- Can easily expand into other retail categories
Cons of Opening a Gift Basket Storefront
- High startup costs
- High monthly costs (e.g., lease, employees)
- Smaller customer base than online store
If you open a storefront, you will need a point-of-sale (POS) system to manage your sales, track inventory, and view reports. Lightspeed has some of the best inventory management and reporting features available for small business POS. Plus, Lightspeed has built-in affordable payment processing. Visit Lightspeed for a free trial.
Choosing a Storefront
In the beginning, foot traffic could account for most of your sales, and will definitely be one of your most valuable means of advertising. So, it’s crucial to choose a location that has high visibility and lots of foot traffic.
When choosing a location, talk to nearby business tenants to get their feedback on foot traffic and how they feel about the area. Also be sure to consider other elements, like parking and signage. Some landlords or even towns have restrictions on the kind of signage you can use on the front of your space. Your storefront should also have ample parking for customers.
Seasonal Gift Basket Business
Another option to consider is opening a temporary or seasonal gift basket business. Gift basket sales tend to spike during the winter holidays, especially for food and wine baskets. Signing a temporary lease can be a great way to test the waters and take advantage of the busiest retail sales season.
4. Organize Your Business Finances
Before you open your business, another important step is separating your personal and business finances. If you opt for an LLC business structure, separating your finances is necessary for protecting your personal assets. Having your finances separated also makes it easier to monitor expenses and track tax deductions.
Chase Business Checking offers competitive fee structures, unlimited cash deposits, and you can open an account with no minimum deposit. First-time Chase Business Complete Checking account holders are being offered up to a $300 bonus for opening a new account. Visit Chase to sign up.
5. Source Products for Your Gift Baskets
At first glance, the easiest way to buy products for your gift basket may be to run to the nearest box store. But, in order to get the best profit margins on your baskets, you should purchase your basket products at wholesale rates. Wholesale prices are typically 50% of standard retail prices, sometimes even less.
There are several ways to source wholesale products, including:
- Using an online directory: There are several websites that gather many different wholesale suppliers in one place so you can order many kinds of products at once.
- Attending a merchandise trade show: Shop for wholesale products at a regional or national merchandise trade show. You can see the products for yourself before purchasing, and there are typically great deals if you buy at the show. Plus, most retail trade shows have complimentary educational seminars on different marketing and management topics.
- Purchasing directly from a wholesale distributor: Once you find a supplier you are happy with, purchasing directly from them will usually offer the best pricing. Some POS systems, like Lightspeed, have built-in product catalogs so you can order wholesale products directly from your POS.
6. Design & Price Your Gift Baskets
When it comes to what kind of gift baskets you want to sell, the options are endless. Popular gift basket categories include gourmet food and candy, bath and toiletry items, seasonal items, baby shower, and wedding themes. Many gift basket stores offer a variety of standard and custom baskets.
To start, plan about 20 baskets. If you’re working with non-perishable items, you can create the baskets upfront to save on labor down the road. If you are working with perishable goods, create one sample basket for photos or display.
In addition to the products inside your gift basket, you will need:
- Empty baskets
- Cellophane or other clear wrapping material
- Bows and ribbons
- Note tags for the baskets
- Paper shreds or other filler for the bottom of the basket
- Shrink wrap machine and heat gun for packaging
- Crafting tools
If you are shipping baskets, you will also need:
- Packing materials
- Temperature regulating packing materials for perishable goods
- Ability to print shipping labels
Gift Basket Pricing Strategies
Like with any retail business, the key to making a profit is to sell your basket at a price that is at least double what the costs are. This is called keystone pricing. When determining the costs of your basket, in addition to the items inside, take into account the cost of the wrapping and packaging materials, as well as any labor costs in building the basket.
7. Advertise Your Gift Basket Business
Once you have your location or online store all set, it’s time to start advertising. The best advertising strategies will combine both online and traditional marketing tactics to reach the largest number of customers.
Advertising online is often the most cost-effective way of reaching a large group of people. If you’re selling baskets online, digital advertising is a must. Here are the basics every gift basket business should follow:
Build a Website
You will need a website for your business. If you’re selling online, this is already taken care of. But, storefront businesses need to have a website, too. They should feature the different types of gift baskets you offer, an “About Us” section, contact information, and store location and hours.
Your website should be easy to use and navigate with crisp pictures and plenty of open space. Your website also needs to be mobile-responsive so it’s easy to navigate on any device. Also be sure to use lots of high-quality product photos. Go easy on the text and heavy on product or storefront photos. If you’re using a web builder or ecommerce platform, they will have mobile-responsive templates you can choose from.
Using a low-cost web builder and hosting service is the easiest way to build a website for your business. Bluehost has plans that let you register your domain name, host your website, access a WordPress web builder, and get a business email address for just $2.95 per month. Visit Bluehost to get started.
Use Social Media & Paid Ads
Facebook and Instagram are an easy way for new customers to find you. Start building your profiles before your business launches to get people excited about your products. Instagram marketing is the perfect opportunity to show off your baskets, since it is such a visual platform.
You can also create simple, low-budget Facebook ads to reach a large number of potential customers. Facebooks ads are a great option to advertise gifts for upcoming holidays, promote giveaways, or in-store events.
In addition to online advertising, you’ll want to use some traditional marketing techniques to encourage and reward loyal customers. Most retail businesses earn a large majority of their sales from a small percentage of their customers. So, it’s important to keep customers happy and coming back for more with loyalty and referral programs.
Implement a Loyalty Program
Loyalty programs are a simple, yet effective way of rewarding customers. Simple punch cards are a popular and effective option. Customers who keep your card in their wallets will think of you each time they see it.
There are also digital options for loyalty programs. Candy Bar is a digital punch card solution that customers keep on their phones, which means the card can’t get lost. And you can track who is using the loyalty program and how effective it is. Visit Candy Bar to learn more.
Starting a gift basket business requires a creative idea and lots of careful planning. You’ll need to find a profitable niche, choose a sales channel, and write out a detailed business plan. But having the right tools makes the job much easier.