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What a Good Gift "Costs"
• Sam Davidson

What a Good Gift "Costs"

We are on a mission to find and share incredible artisan gifts made by small businesses all across America. We aim to provide a high level of service, customization and branding solutions, and we can curate gifts that reflect the authentic tastes any requested city or state. 

And of course, we try to do all of it within your budget so you send the perfect sentiment without breaking the bank. 

But, what does a gift box really cost when you use us? Inspired by this article, detailing the costs and profits (or lack thereof) of a popular local restaurant in New York, I want to lay out all of our costs when it comes to helping you send local gifts nationwide.

Everything Nice Gift Set

Let's look at our most popular gift: Everything Nice.

This gift set features four Nashville-made sweets and retails for $49.00. That price includes all the handcrafted goodies inside, wrapped in tissue paper, sealed with a sticker, protected with crinkle fill, packed in a gift box. That box is then placed in a shipping box for added protection. Shipping and a handwritten gift note is included. 

Here's the simple COGS (cost of goods sold) breakdown:

The goods themselves total $18.96, or about 39% of the total gift set price.

But, we've got to pack that up for you so we can mail it. More COGS for you:

  • Tissue paper: $0.05
  • Crinkle paper (adjusted and calculated based on taxes and inbound shipping): $0.47
  • Gift box: $0.67
  • Shipping box: $0.61
  • Shipping label: $.05
  • Insert card (handwritten note or not): $0.70

And don't forget the credit card fee to process the order (2.4% + 30 cents).

And we're proud to donate at least $1.00 for each gift set sold online to our friends at Make-a-Wish.

So, that adds another $5.03, bringing our total to $23.99, or nearly 49% of the purchase price. But, the gift isn't hasn't even been packed or mailed yet.

Let's talk shipping. This is where our costs can vary the most. If you choose our free shipping option, we'll send your gift set in the most economical way possible (aka, the way that costs us the least) based on our negotiated rates with FedEx and USPS. There's a big difference between sending a gift to a Nashville business and a rural Idaho home and we have no way of knowing who will be ordering what and where it should be sent ahead of time. 

Thus, for the sake of our discussion, I averaged the shipping costs of our last 10 Everything Nice orders and the total came to $8.69.

Ok, time to pack the box.

We're proud to use humans at Batch (no robots!) to pack each of your orders. Our friendly, hard-working humans like to be paid for their time and we happily oblige. Based on their responsibility level, tenure, and other factors, their hourly wage varies, as does their benefit package and other associated labor costs (payroll processing, time tracking, payroll taxes, workers comp, etc.). 

So, the best way to offer an average labor cost for packing an Everything Nice gift set is to factor in the average employee wage in our warehouse as well as the time it takes to pack this gift set of four items. In this case we'll assume they're packing just this gift set (we gain a lot of labor efficiencies when we're packing 20 or more for a corporate order) to be mailed.

It should take no more than 12 minutes to pick, prep, pack, and ship this set from start to finish. So, taking one-fifth of an hour, we're looking at $3.60 all in. 

Lastly, let's talk fixed costs. A little tougher to calculate the impact on a single gift set, given that so far this year we've shipped an average of 2,900 boxes a month. But, with that figure in mind, our monthly fixed costs include:

  • Lease
  • Software (NetSuite, Shipstation, Shopify and related apps)
  • Company insurance
  • Management
  • Marketing

Again, tough to get a detailed sense of this, especially since November and December production far outweighs the rest of the year (with no increase in fixed costs), but for the sake of argument, we'll say this adds about another $5.00 to each package. 

So, let's get a grand total here:

  • COGS = $23.99
  • Shipping = $8.69
  • Labor = $3.60
  • Fixed Costs = $5.00

And where does that leave us? A total cost of $41.28 on this one gift set for a total margin of around 15%.

If someone pays full price. And that's a big if. Sign up for our email list and we'll give you 25% off to give us a shot. Or if you actually read the other side of the card that accompanies your handwritten note, you'll get 30% off your first order. We're willing to concede that amount if you'd like to give us a try because we're banking on the fact that you'll come back again and again (sans coupon). It's also not hard to find a 10% deal somewhere, so one last round of math:

  • Full price profit amount: $7.72 (15.8%)
  • 10% off profit amount: $2.82 (5.8%)
  • Email sign up (25% off) profit amount: loss of $4.53 (9.2% loss)
  • In-box promo (30% off) profit amount: loss of $6.98 (14.2% loss)

In other words, it takes a lot to make a little. Not all of these costs are the same across each gift set, and you can see why our high volume corporate orders help us improve profitability and create jobs while saving small businesses.

Just keep in mind that when you keep it local, you're helping keep folks employed and local economies growing.

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