Guide to Starting a Gift Basket Business

The Small Business Startup Guide

Starting a gift basket business can be a great decision if you’re looking for a business startup idea that is relatively affordable and easy to start. Anyone can start a gift basket business, but to be successful, you’re going to need to find a popular niche that’s not overly saturated. Don’t expect to earn much in your first year. In other words, don’t quit your day job. Think of this business as more of a great way to earn extra money while working from home. Then maybe in a couple of years, after you’ve established a loyal base of customers and have solidified your online presence, you can think about expanding and making this your full time job.

Guide to Starting a Gift Basket Business

What do you need to start a gift basket business?

First and foremost, you need to do some online research. If you just start putting together gift baskets just to say you sell gift baskets, you’re probably not going to be successful. Gift baskets are not necessarily a one size fits all gift proposition. Sure, there are gift baskets sold by the large gift basket companies that contain various selections of food items which appeal to a wide audience, however if you try to compete on this level with these types of baskets, you’ll lose. There are thousands of variations of the one-size fits all gift basket, and you’ll never be able to compete with the big guys on price, or online visibility.

Instead, what you need to do is find a niche within the gift basket business category that the big companies aren’t already doing or don’t already own. There have been many successful business startups over the past decade or so who came up with the idea of creating themed gift boxes and crates to target niche gift buying segments of the population. Nowadays, you can find gift boxes (and gift crates) specifically for people who like to camp, people who like dogs, people who like to read, people who like to bake, people who like coffee, people who love salsa, etc. You get the idea. While these gift niche segments represent a smaller audience, they are not over saturated with competitors, and this has allowed these smaller startups to be successful.

Themed gift boxes and crates appeal to younger gift-buying audiences who don’t want to necessarily give off the impression that they have turned into their parents by buying someone a traditional gift basket. Themed gift boxes (or baskets) are more thoughtful and much more appealing than the traditional generic and uninspired gift baskets containing the same over-priced crackers and gourmet spicy mustard selections.

Another popular approach to gift basket giving that’s not overly saturated is to include personalized gifts in the basket or box. Personalized gifts are exploding in popularity and there are very few such options available with gift baskets.

Once you have determined what type of gift baskets or gift boxes you want to sell, you will need to put together a business plan which lays out your startup costs, projected revenue, marketing strategy and tactics and more. It doesn’t have to be complicated, especially if you plan to start small. We have some more information regarding business set up and marketing below.

Purchasing inventory for your gift basket business

When purchasing inventory, don’t go crazy. Many business startups fail because they purchased too much inventory and discovered that they were unable to sell it. Start off small and manage your inventory well, so that you know when it’s time to re-order based on your projected sales volume. If it takes two weeks from the time you order a product to the time you get it delivered, make sure that you account for this shipping time when placing your inventory orders. When you are selling gifts, people expect delivery prior to the event they are buying the gift for. You don’t want your gift basket to arrive after mom’s birthday.

Buy inventory items in bulk when you have the opportunity, just make sure that you are not over-buying just to save a few dollars. Buying in bulk can help you keep the price of your gift baskets low enough so that your customers don’t feel like they didn’t get good value for their money.

People do expect to pay a little more for gift baskets or gift boxes over what they would pay if they were to buy everything themselves at retail. Buying a put-together basket or box, saves them the hassle of putting one together themselves, and they don’t mind paying a few extra dollars for the service.

If the retail value of the gift items contained within your gift basket or gift box totals $50, you should be able to price it at around $69.95 without people feeling that your product is over-priced. This would net you around $20 per gift sold. But, it you were able to purchase some of your gift box goodies in bulk, and lowered your actual cost per basket to $40 (while still having a retail value of $50), your net revenue would climb to approximately $30 per gift sold. 

Packaging

Make sure your presentation is nice and that the products are secured so that they don’t get damaged in transit. Add a personalized card for a special touch. Make it feel like a gift and not just something you threw together. Your packaging and contents should look similar to what you show on your product page when people are ordering.

Refund Policy for your gift basket business

Make sure you have a refund policy in place, should your goods arrive damaged. You will need to factor this into the cost of doing business. Most people will expect a full refund if they receive a damaged or incomplete product. Some people may also expect a refund if the gift is delivered late. Make sure you note approximate shipping times at the point of sale, and make sure you disclose your shipping policy. This will help set expectations in advance and reduce problems down the road. Keep in mind that the holiday season will be one of your biggest selling periods of the year, and that shipping delays generally do occur during this time of year.

A few things to keep in mind when adding food, beauty products, or alcohol to your gift baskets

Perishables: We recommend staying away from any product that is perishable or one that you think may be. The last thing you need is to be held liable for someone getting sick as a result of consuming items from your gift. There are plenty of great items to include in your gift baskets that are not perishable.

Alcohol: If you plan to include wine or another type of alcohol in your gift baskets. make sure that you are following all local, state, and federal laws with regard to the selling of alcohol. This applies to not only your place of business, but the location of the gift recipient as well.

Beauty Products: If you plan to include beauty products in your gift basket, note that you may need to disclose potential allergens that may be present in certain products. If you are purchasing beauty products from a reputable supplier, then any necessary disclosers and product warnings should already be labeled on the product. Just make sure they are. You may also need to pay attention to any products that you are including which may have been recalled.

Choosing a business structure for your gift basket business

For details about which business structure you should form for your startup gift basket business, check out our “choosing a business structure for you small business” page.

Naming and registering your gift basket business

Before starting your gift basket business you will need to come up with a great name and get it registered with your local state government. We have more details on how to do that on our “registering your small business” information page. 

State requirements for getting a business license for your gift basket business

Find out if you’ll be needing a state business license for your gift basket startup. You can find more details on our “business licensing requirements for small businesses” page.

Buying a domain name for your gift basket business

Do you need a domain name for your gift basket business? Even if you don’t have a website? See why we think it’s a good idea by checking out our “buying and securing a domain name for your small business” page. 

Setting up a business bank account for your gift basket startup

If you are wondering if you’ll need to set up a business account for your new gift basket business, the answer is yes. See why it’s important by visiting our information page on setting up a business bank account and credit card. You’ll be glad you did!

Getting business insurance for your gift basket company

Getting liability business insurance for your gift basket business is always a good idea. More information regarding business insurance is available here.

Setting up a website for your gift basket business

It’s not imperative that you immediately have a website built for your gift basket business. But if you do decide you need one, we have a great small business website resource page that will give you a few great pointers on getting one set up. Many ecommerce business startups selling direct to consumers choose to start selling first on merchant platforms like Etsy and Amazon. These companies take a small percentage of your sales, however they can bring customers that you may not otherwise get. 

Creating a logo for your gift basket business

Logos can be a great way to help your business stand out and look professional. Visit our “do I need a logo” page for business startups for information on how to go about this process.

Collecting sales tax on your gift basket sales

If you live in a state that collects sales tax, then yes, you will need to charge sales tax and file with your local or state government. More details can be found on our “small business sales tax” information page. 

Marketing your new gift basket business

There are 3 keys to running a successful business. These include great customer service, a quality product or service, and effective marketing. Without effective marketing, especially in the startup phase, you’re going to have trouble finding customers, and without customers, your new gift basket business that you worked so hard to set up, is doomed to fail. But don’t sweat it, we have a comprehensive startup marketing guide for small business startups that will get you pointed in the right direction.