Is Gift Wrapping for You? The Answer is — Maybe

With Valentine’s Day on the way, consider “gift wrapping” as an extra profit center. I know I would gladly pay for gift wrapping, and I bet many of your customers would as well.

Yahoo! makes it easy to offer gift wrapping during the purchasing process. The merchant must ask: “does my company have the ability to offer gift wrapping,” and “how much should we charge for it?”

Do “projections” to determine if gift wrapping works for your company.

• Do we have the warehouse space to offer gift wrapping services?
• Do we have qualified people to wrap the gifts?
• Can we route the orders that require gift wrapping to the proper workstations without causing a problem with our work flow?

Next, calculate estimates to see if gift wrapping would be a profit center.

• How many packages do we think we are going to wrap? We need to purchase the necessary supplies.
• Time our gift wrapping people on sample boxes to gauge labor costs.
• Factor in “extra” packing materials, as these wrapped boxes will need to be placed inside of another box, and securely packed to prevent damage.
• What price might our customers be willing to pay for gift wrapping?

Now let us create an estimate using our hypothetical company, the XYZ Jewelry.

We believe we will process 200 orders per day during our gift wrapping period. We think our demographic wants gift wrapping. We estimate that 50% of our customers would use our gift wrapping service from January 14 until February 14.

Using 31 days as a guide, we should ship about 6200 packages -3100 of them gift wrapped. Estimates tell us that a $1000 investment in gift wrap, bows, tape, etc. will cover our materials. Since our merchandise is pre-boxed jewelry we will not have the “added” expense of an outer box (we do this anyway).

We test our gift wrappers and determine that they can do one box every 30 seconds, but we double that estimate and allow a minute per wrap. We’re adding approximately 100 minutes (1.67 hours) of wrapping per day. Wrappers cost us $10.00 per hour. 1.67 hours of wrapping at $10.00 per hour means $16.70 in wrapping labor per day, and on a per package basis - our labor cost is $.17 cents. Packing materials based on our $1000 supply purchase average $.33 cents per unit, so our “estimated” wrapping cost would be $.50 cents. If we charge $5.00 per unit, we know that gift wrapping is a good idea.

But gift wrapping isn’t for everyone. If we estimate that boxes in large sizes cost more, that cuts into profitability. If larger boxes take longer to wrap, that means less profit. And if using large boxes require some packages to be shipped at UPS Oversize 1, it adds a substantial penalty. This model doesn’t support the gift wrapping model very well.

Another perspective is to offer gift wrapping as a breakeven customer service. “We don’t make a profit on our gift wrapping,” says Thom Moore of ParadiseBath.com. “We think we make more sales by providing gift wrapping; it increases our volume. We feel it helps us sell more of our products, and that does add to our bottom line.”

Gift wrapping could be a huge profit center, but there are many factors that come into play. Do the math to see if gift wrapping is right for you.