Franchising How to start a gift basket business

They could well be the closest thing to the perfect gift because they can be totally customized to suit the giver, the recipient, the occasion and the desired price. For some people, creating them is the perfect business: an opportunity to be artistic, creative and entrepreneurial.

There's also a respectable profit potential. As popular as they are, the market for gift baskets is still wide open and the sales opportunities are virtually limitless. But this isn't a game; it's a serious business. It doesn't require a great deal of startup capital--many successful gift basket businesses were started with just a few hundred bucks. What it does require is thoughtful planning, preparation and commitment fueled by a strong dose of excitement and enthusiasm.

Target Market

Just about everybody has the potential to become your customer. But if you try to sell to the entire world, you'll end up not selling much at all. You need to research and identify the market, choose a niche, and then develop a plan to serve it.

The market for gift basket businesses is no longer limited to a single consumer looking for a unique gift. At one time, women made up the largest segment of the industry's market, both as customers and basket recipients. But that situation is changing. The two primary gift basket markets are now the individual gift-giver and the corporate client. Both can be lucrative and fun to serve.

Individual Buyers

The individual gift-giver is more likely to be a woman. This is because men may order a gift basket, but they typically only think of it after they've seen one. Women are more likely to have seen, sent or received gift baskets. Therefore, they're better able to picture the basket they have in mind for someone even if they don't actually have one in front of them as they might in a retail store. Also, women are more likely to know that custom baskets make great gifts.

Another reason women buy more gift baskets than men is that wives, mothers and girlfriends often assume the responsibility of buying gifts on behalf of the men in their lives, even when the recipient is the man's friends, relatives or co-workers.

Gift basket buyers tend to be in the moderate- to upper-income levels, so your market research needs to include finding out where people in this particular demographic shop.

Business Customers

Corporate clients can be some of your best customers. Most businesses have long gift lists, plus they buy year-round, not just during the holidays. They regularly recognize employee anniversaries, promotions, retirements and birthdays throughout the year. Many also give gifts to customers during the year.

Like individual gift buyers, business customers frequently don't have the time or personnel available to shop. A savvy gift basket business can function as a customer's personal shopper, so all the client has to do is make one phone call and a special gift is on the way.

What Will You Sell?

Having identified your market and determined what potential customers are likely to buy and how much they'll spend, you need to decide on your standard basket offerings. Even though you may promote yourself as a custom basket maker, you need an internal structure of standard baskets to use as a guide for marketing and purchasing.

Most gift basket businesses offer a combination of standard and custom baskets. Custom baskets can be a made-from-scratch arrangement, or a variation on one of your standard offerings. A wonderful way to showcase a special gift--perhaps a family heirloom, photograph or piece of jewelry--is to include it in a gift basket.

Custom baskets will often include items you purchase specifically for that basket, and most of these items will be bought at retail, which means they'll be more expensive than your standard offerings. You'll need to explain this to your customers, find out beforehand how much they want to spend, and work within that budget.

Standard baskets--including gourmet food, toiletry and bath, and wedding and baby shower baskets--can serve as samples you can show to prospective customers. If the contents are nonperishable, you can assemble and store a number of them fairly quickly, lowering your labor costs and allowing you to charge lower prices for these selections.

Consider offering anywhere from six to 20 standard baskets in a wide range of sizes and prices. For example, your chocolate lover's basket (a must for any gift basket business) may come in several sizes and price ranges to suit your customers' needs and budgets.

Startup Costs
(Note: In Philippine market setting, the startup cost is relatively cheaper. It can be 1/4 of the estimated price quoted here in US$, or even lower.)

One basketeer we talked with started her business with just $300 cash; another plunged $25,000 into her new company before ever opening the doors. Both companies are profitable today.

Calculate how much you need to start your ideal business, and then figure out how much you have. If you have all the cash you need, you're very fortunate. If you don't, you need to start playing with the numbers and deciding what you can do without. The checklist below will serve as a guide for creating a startup budget for your gift basket business. Prices for supplies and equipment are estimated ranges and will vary depending on features, sources and whether they're new or used. What you spend may vary because you may already own some items, such as office equipment or a computer. Don't forget to also factor in rent (unless you're homebased), business license, utility deposits, insurance, any legal and accounting services and your grand opening advertising.

• Specialty equipment (including work space fixtures, work tables, crafting tools, shrink wrapper, heat gun, signage and security system): $980 to $14,030
  
• Storage fixtures and hardware (including storage shelves and cabinets): $100 to $500
  
• Store equipment/fixtures for retail operations (including special displays, display shelving, cash register, counter, marking guns, floor gondolas, pegboard, hooks, showcases and wall gondolas): Anywhere from $0 if you already have these items to $9,895
  
• Retail supplies (including cash register tape, shopping bags, gift boxes and sales tags and/or labels): up to $1,510
  
• Office furniture, equipment and supplies (including computer and peripherals, fax, phone system, furniture, business stationary and miscellaneous supplies): $3,800 to $13,670
  
• Packaging/shipping equipment (including hand truck, high-speed tape dispenser, carton stapler, electronic scale and paper shredder): $350 to $1,490
  
• Packaging/shipping supplies (including sealing tape, boxes, mailing labels, cushioned mailers and packing materials): $505 to $1,200
  
• Gift basket supplies (including baskets/containers, packing materials, decorative materials, shrink-wrap and/or cellophane and product/gifts): $1,675 to $28,500. The range is based on how much you spend on the products and gifts you put into your basket.
  
  

Operations

The flexibility of a gift basket business gives you a lot of choices in where to locate your operation and how to get it set up. You can opt for a retail store, a warehouse location, or to work from home. Regardless of your location, you can sell face to face, via mail order or on the internet--or use a combination of these methods.

Though industry surveys indicate that more than half of all gift basket businesses have retail locations, the locations of basketeers who participated in the research for this book showed just the opposite--more than half of them are homebased. Solid research is limited, but anecdotal evidence suggests an abundance of successful homebased gift basket operations.

Because of the room required to store inventory and assemble baskets, homebased gift basket businesses will find their growth limited by the available space. Whether or not this is a problem for you depends on your own personal goals. If you're looking to create a sizable company with several employees and generate hundreds of thousands of dollars each year in sales, you'll need a commercial location. But if your goal is a small business that generates a comfortable income for you, being homebased may be the ideal situation.

Inventory

Your initial inventory should be focused on baskets and other containers and the items that will go in them. As your business grows, you can expand your inventory to include other specialty gifts, such as local arts and crafts, personalized linen, jewelry and so on. You may find suppliers through various trade publications and may even find them listed in your local Yellow Pages under "wholesalers."

Your inventory will consist of items you buy at both wholesale and retail prices. Wholesale purchases will include items and supplies you use in large quantities for your most popular basket arrangements and as filler items. Retail purchases will typically consist of the merchandise you accumulate when you go shopping for customized basket materials.

For a gift basket business, shopping is a major behind-the-scenes activity. Depending on your volume, expect shopping and ordering to take anywhere from one to four hours a day on average.

Income & Pricing

Your revenue will be limited only by how hard you want to work and how much you want your business to grow. You can easily gross $10,000 or more annually working part time from home, or $1 million and up operating a retail store or mail order business full time.

About half of your business will be holiday-based, and the majority of that will be Christmas-related. One of the fastest-growing segments of the gift basket industry is corporate holiday orders. When the Christmas rush is over, Valentine's Day, Easter, Mother's Day, Thanksgiving and Secretaries' Day are the most profitable holidays.

Pricing Your Creations

Pricing can be tedious and time-consuming, especially if you don't have a knack for juggling numbers. If your prices are too low, you rob yourself of profits or are forced to reduce the quality of your product to maintain your profitability. If your prices are too high, you may lose business.

Theoretically, you should price every item you carry to cover its wholesale cost, labor costs, freight charges, a proportionate share of your overhead and a reasonable profit. In reality, some items will warrant a high gross profit and others will require a low or no gross profit for you to move them quickly.

Gift basket business owners often short-change themselves on labor when setting prices. Be sure you know how long it really takes you to assemble, package and deliver or ship a basket; put together several of varying complexity, and time yourself--don't estimate. Then figure out how much you want to earn for your labor, and add that to the cost of the basket.

Most gift basket business operators expect to net 15 to 30 percent of their gross revenue, and they typically reach this goal by applying a 100-percent markup to the cost of the items in the basket.


Marketing

Marketing is something many people don't like to do, but it can be as creative and as much fun as actually making the baskets. And no matter how clever and attractive your baskets are, they won't sell themselves--you need to market them.

According to Gift Basket Review magazine, the preferred types of advertising among established gift basket businesses are networking/word-of-mouth; telephone directory (Yellow Pages listing); direct mail; brochures; and newspaper advertising.

There's probably no business where customer service works better as a marketing tool than in gift baskets. You'll have a lot of opportunity to interact with your customers; take advantage of each contact to demonstrate your superior service. Then take it a step further. For example, one business owner we know sends handwritten thank-you notes to new customers, customers she hasn't heard from in a while, and customers who place special orders.

Here are other ways you can market your business:

• Carry a handful of brochures and business cards to hand to people in elevators, hallways and even on the street who will stop and comment on the basket you're carrying.
  
• When you meet someone with the potential to become a good customer, send them a complimentary basket with your brochure and several business cards.
  
• Rewarding customer referrals with a discount or small gift can be a smart investment--one that builds client relations and encourages future referrals.
  
• Christine M. periodically schedules a day to make cold calls in industrial parks or office buildings. She takes a brochure, her business card and any pertinent seasonal information, and visits as many businesses as she can.
  
• Be sure gift basket recipients know how to reach you when they need to send a gift by including your company name and telephone number in or on every basket you prepare at least three times.
  
• Help your customers find reasons to send gift baskets by promoting lesser-known holidays. Just about every occupation has a "day" to honor it.
  
• Direct-mail advertising is an excellent tool for gift basket businesses. One business owner sends a postcard to her entire database at the beginning of every month. If there's a holiday during that month, the card focuses on gift ideas for that holiday. If it's a no-holiday month, the card might focus on birthdays or an area of her business that's been slow.
  
  

source: www.entrepreneur.com, picture from www.kelhampolishpottery.com