Many people find that it’s difficult to find that perfect gift for a friend or loved one, or they may simply not have the time that it takes to search out an ideal gift. If you have a knack for always putting together memorable gifts, then you might put those talents to use in a gift basket business of your own. When you’re creative and find giving others the perfect gift rewarding, chances are that you’ll enjoy the work you do in starting and running this type of business.

Business Overview

Gift basket businesses offer pre-arranged baskets for a variety of occasions. Many businesses create baskets for special occasions, like birthdays, anniversaries, and baby showers. Other businesses focus on corporate gift-giving, providing corporate buyers with a streamlined and easy gifting option.

These businesses may specialize in certain types of baskets. Some businesses focus on food-centered baskets, while others may focus on baskets based around certain items like candles or flowers. While many of these businesses exist, they face competition from some large retailers, like flower stores. However, it’s possible to start these businesses on a smaller scale, growing the business based on its success. This lower barrier to entry makes starting a gift basket business a practical option for many entrepreneurs who are creative and who appreciate the art of gift giving.    

Industry summary

Detailed data about the gift basket industry isn’t widely calculated, but 2016 data from Packaged Facts reveals that since 2010, consumers have increasingly sent food as gifts. As of 2016, consumer and corporate food gifting sales neared $18 billion, which is a 3.5% increase over the sales in 2015. Brandon Gaille reports that, since many gift basket companies targeted specific industries, like real estate companies, the recession effects from 2007 to 2009 resulted in a decline in sales for the gift basket industry.

There are many signs that the industry is growing, too. According to Entrepreneur, the gifting industry may be worth as much as $31.63 billion by 2021. This growth is due to a growing gifting culture, the expansion of online retail channels, and an increase in innovative gifting solutions. In 2019, Quartz reported that 1-800-Flowers.com made more money selling gift baskets than it did selling flowers. The second-quarter earnings reported $440 million in revenue from baskets and food, whereas consumer flowers brought in just $108.1 million and flower wire service brought in $23.4 million. Gift baskets and food brought in four times as much revenue as flower sales, the foundation of the business.

Industry trends

Many trends continue to shape the gift basket business. The Statesman reports that there’s more demand for convenient delivery options than ever before. This is particularly important in the gift basket industry, where consumers may want to purchase baskets online and have them shipped directly to recipients.

There’s also more demand for personalization. Rather than traditional gift-giving, customers are looking for gifts that make meaningful connections. The ability to customize elements in gift baskets can give them a more personalized feel and may help to drive sales.

Customers are also increasingly shopping online, which means businesses need to ensure that their websites are easy to use and that they provide a great customer experience. The same is true of a business’ social media pages.

The gift giving business is also strongly driven by holidays, with Christmas being one of the largest sales-driving holidays. While customers will have need for other gifts, such as for birthdays or thank-you occasions, businesses need to be prepared to withstand the holiday-centric rush in this industry, while sustaining themselves during times when sales are slower.

Who is the target market for your gift basket business?

The gift basket industry traditionally has two different target markets: Individuals and corporate consumers. Individuals are customers who are looking for a gift to give to someone in their life. They’re looking for an easy shopping experience and a gift basket that the recipient will appreciate. Corporate consumers are usually making a purchase to give to someone within their corporation, or to give to a recipient at another business. They are also looking for an easy gift buying and giving experience, especially since they’re often pressed for time.

Skills, experience, and education useful in running a gift basket business

While starting a gift basket business doesn’t require a business degree, certain skills and experiences can increase the chances of the business becoming a success. 

Creativity. One of the most important skills for a business owner to have is creativity. By creating unique, surprising, and one-of-a-kind baskets, an owner can position their business as offering something that consumers can’t find anywhere else.

Resourcefulness. A business owner may run into many challenges in running a gift basket business, like finding new sources of items. An owner who is resourceful will be better able to deal with these challenges.

Attention to detail. There’s a lot of detail that goes into every basket, and a business owner needs to monitor inventory, basket quality, and shipping dates to keep the business operating smoothly. Attention to detail is an important skill here.

Knowledge of aesthetics. Appearances matter in the gift basket industry. A business owner who has an eye for aesthetics can make sure that everything looks good, including the product photos and the gift baskets that go out.

Customer service skills. Strong customer service skills will be an advantage for any gift basket business owner, and they can play an integral role in developing a returning customer base.

Multitasking skills. From processing orders to handling marketing and preparing for big holidays, gift basket business owners will benefit from strong multitasking skills.

Costs to Start a Gift Basket Business

One major benefit of the gift basket industry is that the financial barrier to entry is low. It’s possible to start a business out of your home for as little as $5,000, and to then scale and expand that business based on its success. Plan to spend closer to $20,000 to start a larger business out of a retail location.

Common startup costs for a gift basket business include:

  • Inventory, including baskets and gift items
  • Supplies like gift wrap and cards
  • Equipment like storage units
  • Vehicle for deliveries
  • Signage

Steps to Starting a Gift basket business

Step 1. Write your Business Plan

After coming up with the idea, the next step in starting your business should be to write a business plan.  Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.

Related:
How to write a business plan
Free sample business plans

Step 2. Form a Business Entity

A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from which include the sole proprietorship, partnership, corporation and LLC.  Each type of entity has its own pros and cons such as liability exposure, costs and administrative requirements. 

Related: Comparison of Business Entities

Step 3. Select your Location

It’s possible to start a gift basket business out of a spare room in a home, but as that business grows, it may be necessary to expand into a retail location. Rental costs will vary depending on the size and location of the space. A store located in a prime retail location can help to generate walk-in traffic and spread overall awareness of the business, though these spaces typically have higher rental costs, too.

Related: Choosing a business location

Step 4. Apply for Business Licenses and Permits

A gift basket business will need to obtain certain business licenses and permits. These permits and licenses can vary based on the state and town where the business is located.

Some of the common local, state and federal registrations most businesses need include a sales tax permit, Employer Identification Number, and Occupancy Permit among others. 

Related: Common business licenses, permits and registrations by state

Step 5. Find Financing

Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a gift basket business is another.  While the costs to start are small, funding to start a gift basket business business can be difficult as the majority of costs come from inventory and cash to pay employees and marketing.  In order to get a loan, the borrower(s) will need to have good credit and be able invest 15-25% of their money towards the total start-up costs. 

Related: Finding the money to start a business  

Step 6. Get your Marketing Plan in Place

Marketing is an essential ongoing activity for any gift basket business. These businesses can explore many different types of marketing, but some of the most popular include the use of social media, online marketing, print advertising, and email marketing. Businesses can also establish discount programs for returning customers to drive customer loyalty. The size of a business’ marketing budget will depend on the type and volume of the marketing activities performed.

Related: Low-cost ideas to market a new business

Step 7. Get Insurance

A gift basket business needs several types of insurance for full coverage:

  • General liability insurance protects the business if a customer is ever injured while on the property. This type of policy can help to cover expenses like legal fees and medical bills.
  • Commercial property insurance can help to cover expenses if the business’ inventory or building are ever damaged or destroyed through an event like a fire.
  • Workmans comp insurance helps to cover expenses like lost wages and medical bills if an employee is hurt while on the job
  • Commercial auto insurance helps to cover related expenses if a business-owned vehicle is ever involved in an accident.  

There are many factors that affect insurance policy cost, including the business’ location and the value of its inventory. It’s best to request quotes from multiple providers to get the most accurate idea of what insurance will cost. Be sure to look beyond how the premiums compare and consider other elements, like coverage limits, exclusions, and deductibles.

Step 8. Hiring Employees

A business owner may be able to run a smaller gift basket business entirely on their own. Larger businesses may need additional staff, especially during the times surrounding popular holidays. According to PayScale, sales clerks make an average of $10.61 per hour, or $30,000 per year.

In addition to budgeting for employee salaries, a business will need to cover additional expenses like paid time off, health insurance contributions, and workmans comp insurance.

 

Related: Hiring your first employee

How much can you potentially make owning a gift basket business?

Potential profits from gift basket businesses vary widely and can depend on the business’ specialty, profit margins, years in existence, and location. Gift Basket Business World reports that gift basket businesses earn an average profit of $65,700 before taxes.

Remember that there are many ways you can maximize your business’ earnings. With a thorough understanding of your target market, you can identify unmet need in the gift basket industry. That might be offering local deliveries or offering a number of personalized gift options that can be included in the baskets. Creative, themed baskets that tie into holidays can appeal to a broader audience and may bring new customers into your store. Sourcing gift basket elements in bulk and at low prices can also help to maximize prices.

Things to consider before starting a gift basket business

Customers who buy gift baskets are looking for an easy, fast shopping experience, but they’re also looking for value. An owner who has strong networking and negotiating skills can build relationships with suppliers and source quality items at a good price, allowing them to pass that value on to the customer and potentially drive sales.

Keep in mind that any gift basket business will face plenty of competition. Focus on what your business can do differently and what unique benefits it can offer customers. Many businesses offer gift basket options, so it’s important to give customers to buy from your business and to return again and again in the future.

Resources:
Association of Gift Boutique Retailers of America
The Gift Basket Association