Profits in a Pretty Package

Gift baskets adapt to broader business trends from online to eco to pricing pressure.

By Shirley George Frazier -- Gifts and Dec, July 1, 2008

The appeal of gift baskets for retailers is clear: there's no easier way to ensure sales of multiple items at once. In addition, creative grouping and packaging can rescue items that were unsuccessful on their own, or convince shoppers to take a chance on an unusual combination.

For entrepreneurs looking to stick a toe in retail waters without the expense of a storefront, gift basket design remains a viable home-based business, particularly for a savvy Internet user. For customers, the broad selection in a single gift helps ensure that the recipient will get something they want, while the prevalence of consumable gifts like gourmet food and personal care products makes them reliable choices for those whose homes are full or, as in the case of corporate gifting, unknown to the giver.

In the 1980s, gift baskets' popularity was honed in large retail stores, and women's magazines increased consumer awareness by featuring basket-making articles. This focus helped jumpstart the home-based gift basket revolution, which continued throughout the 1990s and maintains its strong presence today. Although gift basket statistics are difficult to ascertain due to private retail operations, the niche has kept pace at a consistent four percent of the entire gift industry. Still, the niche's value may be understated, as many wholesale clubs and discount superstores sell gift baskets year-round.

CONTAINERS ELEVATE CUSTOMER APPEAL

The basket maintains its position as the vessel of choice when new designers begin learning how to make a complete gift, and some have made it part of their brand. “Our signature line of gifts is always in a large white basket with our royal blue ribbon,” says Kendall Morris, CEO of The Blue Top Hat, Richmond, VA. Her customers are individuals and corporate clients who buy mid to high-end gift baskets. “Everything is always wrapped with our signature blue ribbon that distinguishes our gifts and looks perfect for any occasion,” she tells Gifts & Decorative Accessories.

But baskets are just one option. Unique containers turn gift baskets into elegant masterpieces, and that's what convinces customers to buy. Susan Baker, president of Louisville, KY-based Tastefully Yours, keeps an extensive inventory of containers on hand for her Fortune 500 clients. “Traditional baskets are part of our inventory, but by far, we choose more re-usable containers.” These include leather and faux suede bags, top hats, silver trays, hat boxes and coolers, she explains.

Dianne Southwell of Plaudits!, Orlando, FL, made it her goal to go beyond baskets. “I have been unique in creating baskets out of golf bags, baby strollers, barbecue grills and fishing tackle boxes. I've even done a 'basket' in an Adirondack chair with a full size pool umbrella intact,” she adds.

Every imaginable container with an open center is a candidate for adding foods, snacks and gifts, closing with cellophane or shrink wrap and topping with a bow.

ONLINE ORDERS COMPLEMENT STORE SALES

One look through an Internet search engine's results will uncover more than 29 million gift basket websites. It's a category that dominates the online landscape, and retailers continue to discover the link between e-commerce and revenue.

“Our Internet site is one of our best methods to bring customers to us,” says Honey Jones, owner of Make a Memory. Her 1,200-square-foot shop caters more to corporate clients than individuals in the resort area of Marco Island, FL, and she's mastered a method that appeals to customers online. “Although we have a storefront and specialize in corporate and convention gifts, we find that companies and individuals now research vendors by comparative shopping.”

Making connections online is just the beginning. From there, it's critical to convince visitors to order. That's when customer service skills make the difference. “Follow up and asking for the job has brought us great rewards,” explains Jones. “We find that treating each customer individually, listening to what they want, working within their budget (especially in this economic downturn), and providing extras such as personalization sets us apart from our competition, and it also results in referrals,” she notes.

HEALTHY FARE

While the 'green' movement has yet to make a significant impact overall on gift baskets — requests are few, retailers say — the 'health food' trend is definitely gaining ground; especially since baskets that include foods are most popular. Orders for healthy choices such as granola and low-calorie treats can easily be fulfilled. Spa baskets are also at the top of customers' lists, with soaps, lotions, candles and bath pillows among the favorite inclusions.

For some retailers, however, 'green' demand is becoming noteworthy. “The green movement has had a huge effect on our business,” says Shelly Holbrook, owner of Spoiled Rotten Baby, Bellevue, WA. Her customers lean toward earth-friendly products because of the end user. “Our baby clothing is 100 percent organic Egyptian cotton, and the personal care products are also certified organic,” she adds.

The Blue Top Hat's Morris has also tried her hand at 'green' themes. After researching organic options for a wedding gift basket, the customer chose products from both ends. “The organic items were so expensive; she opted for the organic and non-organic items I suggested.” Southwell agrees about the high price associated with earth-friendly items. “Unfortunately, when they learn the prices are higher to help save the environment, they usually back away. Also, recycled or environmentally friendly products are not as attractive. Because clients are trying to make an impression, they usually go for the brighter packaging,” adds Southwell.

Green, however, goes beyond which gifts go into the basket. Retailers can help by re-using packaging products. Jones, for example, uses recycled paper as a basket filler, and Holbrook's gift boxes are recyclable, making it less likely that the recipient will throw them away when empty.

PRICING KEEPS PROFITS HIGH

Each designer sets markups by using a formula that allows their business to flourish without gouging clients. Some designers set prices to reflect a 3 to 3.5 time markup of wholesale costs, while others stay in a lower range. “Our customary markup is 2.5” times the wholesale cost, says Southwell, and Holbrook concurs with that number.

Store owners using shelf products whose prices already reflect a markup often add a design fee to make a completed basket. This charge incorporates the price for the basket or container, shred, filler paper, enhancements, closure material (cellophane or shrink wrap), and bow for the requested basket size.

Neither pricing method is set in stone. Designs made with elevated height can command more than the customary markup, as customers equate taller designs with a higher perceived value.

Whether baskets are the bulk of a business or a sweet sideline, building gift assortments can pump up profit margins and per customer dollars spent. Storeowners without the time or inclination to go it alone may want to pursue partnering with a local home-based gift basket creator, giving the designer a new sales channel and the customers something they won't find in any other store.

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