From the April 1998 issue of Startups

Christmas, Mother's Day, birthdays--at one time or another, everyone needs to buy gifts. When consumers can't find the perfect present, who comes to the rescue? Gift-basket entrepreneurs, of course.

"A great thing about running a gift-basket business is that you're always in the position to create just the right gift for every shopper--one that matches the specific tastes of the person who will receive it," says Sally Nichols, co-owner with son, Grant; daughter, Sarah; and son-in-law, Vince, of The Gift Horse, a gift-basket service in Beaumont, Texas. Nichols' customers can choose from standard baskets, which range from birthday and graduation gifts to specialized creations for golfers and teachers. Others prefer to build baskets from scratch, providing lists of the contents they want.

Nichols is among the many creative entrepreneurs nationwide who enjoy satisfying work--and impressive profits--by preparing attractive gift baskets for clients. Gift-basket entrepreneurs buy gift items and baskets, use an artistic flair to package them attractively, then find creative ways to market their eye-catching creations to others.

The gift-basket industry has been going strong for nearly 15 years, and the outlook continues to be bright. "Annual sales for gift baskets totaled about $800 million in 1996, up from $700 million in 1992. It's certainly a growing industry," says Kathy Horak, editor of Gift Basket Review. A recent survey by the magazine reveals the majority of American gift-basket designers in business at least one year boast annual sales of $50,000 or more; approximately 30 percent enjoy sales of at least $100,000 annually.

Basket of Profits

The most typical gift-basket buyers, according to the Gift Basket Review survey, are women between the ages of 35 and 49, who account for more than 76 percent of gift-basket sales. Next in line are corporate customers, who account for approximately 20 percent of sales. Because prices for gift baskets run anywhere from $15 to $1,000, customers tend to come from the moderate to upper-middle income levels.

Despite the baskets' widespread appeal, running a successful gift-basket business can pose a few challenges. "This is an incredibly competitive business," says Jo Masterson, owner of Mountain View Gift Baskets in Redmond, Washington. "The main thing that surprised me when I entered this industry five years ago was the amount of competition that's out there. In my area, for instance, we have more than two pages' worth of gift-basket provider listings in the local telephone book, and there's another gift-basket shop just three blocks down the street from mine."

Other gift-basket services aren't your only competitors. Masterson notes that florists offer similar convenience and prices and target the same market. Masterson has succeeded in this competitive environment by focusing her marketing efforts on corporate rather than individual clients.

"When I started out, I targeted my offerings to individuals rather than to businesses, because that's who I already knew. But my intention from the beginning was to gradually shift my focus to the corporate market," Masterson explains. "That's because a company that uses your service regularly tends to place five or six gift-basket orders a month, whereas most individuals order only one or two times a year. In short, for the same amount of marketing and physical effort, you generally get a bigger return with the corporate market."

This doesn't mean, however, that Masterson turns her back on individuals. "Today, I sell about 20 percent to 25 percent of my items to individuals," she says, "many of whom learn of my business through the workplace."

Making it Work

Anyone operating a gift-basket service should be prepared to spend much of the holiday season working long hours, especially during the weeks before Christmas. "The demand for our baskets is steady all year long, but it's during the last few months of the year when things really heat up and we work very, very hard," Nichols says.

Still, operating a gift-basket service offers a variety of distinct advantages. The market for gift baskets is sizable, with repeat business being not the exception, but the rule. Start-up costs can be as low as $3,000.

It's possible to make substantial profits running this business part time, as Masterson did. "I ran this as a part-time homebased business for my first two years and had some success that way, but once I realized I really enjoyed the gift-basket business, I decided I needed to move things up a notch," Masterson says. "So I quit my day job as a nurse and moved into a retail spot with a showroom and a warehouse. That definitely took the business to a whole different level, converting it from a hobby into a full-time `real job.' " Sales also reached a new level: Mountain View Gift Baskets brought in sales of more than $100,000 in 1997.

For gift-basket entrepreneurs, the rewards are more than financial. "Being creative, seeing your visions come to fruition, and [seeing] the responses of [people] who receive your baskets--that makes all the difference," Nichols says. "When you get a call from someone who tells you how happy one of your creations made them, it just makes you feel so darn good."

For More Information

  • Contact the Gift Association of America, 612 W. Broad St., Bethlehem, PA 18018, (610) 861-9445.
  • Subscribe to Gift Basket Review ($29.95 for a one-year subscription), Festivities Publications Inc., 815 Haines St., Jacksonville, FL 32206, (800) 729-6338.
  • Order Entrepreneur's Business Start-Up Guide #1306, Gift Basket Service, $59, from Entrepreneur Media Inc., 2392 Morse Ave., Irvine, CA 92614, (800) 421-2300, http://www.smallbizbooks.com

Kylo-Patrick R. Hart is a freelance business writer in Ann Arbor, Michigan.