Gift Wrapping: A Simple Way to Boost Average Order Value This Holiday Season

Gift Wrapping: A Simple Way to Boost Average Order Value This Holiday Season

Did you know that there is an simple add-on service which is easy to implement, has shown to increase average order value and makes your customers lives easier during the holiday rush? 

Big retailers on- and offline have been offering this service for years.

The add-on on service in questions is of course gift-wrapping. It might seem like a small or even an insignificant thing but it can have a big impact on your sales and increase average order value per customer.

Things get especially interesting when you take into consideration that not only will customers buy more stuff when you offer the service and thus make more money that way, but you’ll also be making money by the margins that gift-wrapping allows. On average, gift-wrapping has ~50% profit margin per item.

Looking at the industry of gift-wrapping, it’s huge. Back in 2011, Hallmark estimated that the gift wrapping industry in the US alone generated $3.2 billion in retail sales. This number includes sales of things like wrapping paper, wrapping tissues, ribbons, gift bags, gift boxes, etc. Wow, $3.2 billion. That’s a lot of wrapping material!

While it’s true that most people plan to wrap their own presents, the truth is that gift wrapping vendors always have a huge queue during the holiday shopping season.

Wrapping your own presents also comes with added complications like making sure you have all the needed supplies, finding the time to do it, the gift never looking as special as it should, etc.

Data via OnePol and Royal Mail

These reasons are where offering online shoppers the opportunity to get their gifts wrapped before shipping comes into play. It’ll save your customers the hassle of doing it themselves while at the same time making you look like a business prepared to go the extra mile.

To properly understand what goes into offering a gift wrapping option, we’re going to be looking at everything you need to keep in mind when considering gift wrapping as a sales tactic.

Offering Gift Wrapping Is Not New

Gift-wrapping as a service has been around almost as long as people have been wrapping gifts.

In online commerce, it’s hard to find a big player who is not offering it. Amazon has it, Nordstrom has it, so does Pottery Barn and a host of other players. But they are all large retailers with their own huge warehouses and delivery networks. It's really hard to compare your situation to theirs.

This article was written to take a closer look behind the scenes of offering gift-wrapping. What you’ll need to do it right, the costs involved, etc. After going through this post, you’ll have a much better understanding of what you need to keep in mind when launching a gift-wrapping service for your online store.

First, let’s take a look a closer look at the required finances for a gift-wrapping service with some real-life, back-of-the-envelope calculations to get a better sense of the costs involved.

The Cost of Offering Gift-Wrapping

One of the first factors when it comes to offering gift-wrapping is who is handling your logistics. Are you running your own warehouses or is a third party (3PL provider) responsible for shipping and handling?

When you’re running the show, you have more freedom to decide how and when you want to tackle gift-wrapping. When someone else is running the show, the chances are that they already offer some kind of gift-wrapping service (and have years of experience with it). No matter who is running your logistics, there are always possibilities to at the very least consider gift-wrapping.

When you’re using a logistics partner, all you need to do is simply ask your partner about the service that they offer and how much it costs. From there, you can do your own calculations and figure out if it makes sense for you.

When it’s you running the show, things get a little more complicated. Yes, you’ll be making bigger margins but you still need to plan and calculate everything carefully. Not only will you have to price out all the needed materials, you also need to factor in possible workforce increases and costs. It all sounds a lot harder than it really is, so let’s just get into it.

To estimate how much buying all your gift wrapping gear can cost, I simply Googled “bulk gift wrap” and clicked on the first link.

First off, I chose a nice looking faux printed pinstripe kraft paper and a sticky pull bow (no mess, simply stick it on) to make it look more elegant. Being very generous and calculating that it would take ~2 feet of wrapping paper per gift, we arrive at a total cost of materials of 51 cents.

For gift boxes, I chose a medium sized high gloss one plus the same sticky pull bow as before, along with some decorative tissue paper to fill the empty space left in the box. With all of that, the total for cost of materials was 76 cents.

A slightly different take on a traditional gift box comes from a company called Lil, the manufacture of the Breezebox -- a high quality ecommerce mailbox that looks stylish (and is totally customizable), already includes integrated wrapping paper (also a customizable look) that is self-adhesive and provides retention packaging so that your valuables are tightly packed. Their prices start at $0.44 cents for small boxes and go up to ~$1.8 for the bigger ones.

 

Extra Manpower

Besides the cost of materials, you also need to think about who is going to do the actual wrapping of the gifts. The time needed per gift depends largely on the skill of your workers but also the method of wrapping.

Required wrapping paper materials are generally cheaper, BUT it takes more time to pack. On the plus side, as it’s just a big roll of wrapping paper, you can wrap gifts of varying sizes and shapes quite easily.

With gift boxes, the packing itself takes less time, but the cost of materials (the box) is slightly higher. You also have to think about the variety of box sizes that you need to have available as different merchandise is differently shaped and needs it's own box. Well, maybe not exactly its own box, but you at least need to have “standard” sized boxes that’ll fit most of your merchandise.

Unless your warehouse workforce is massively under-utilised, you most probably will need to hire new (temporary) workers. They need salary, so that’s another cost factor.

If we assume that you’ll pay gift-wrappers a $20 an hour salary and that they’re able to wrap at a minimum 20 gifts an hour (3 minutes per gift), we arrive at a total cost of $1.51 when using wrapping paper per gift and $1.76 per gift for the gift box.

Comparing that with how much other merchants are charging for gift-wrapping, Amazon asks $3.49 per gift (that’s one of the cheapest options I’ve seen anywhere), and you’ll find that our little gift-wrapping empire is starting to take shape. Pricing it similarly to Amazon, you would be netting on average ~$1.5 per gift. Pricing it higher and you’ll be netting even more.

Besides actually wrapping presents, there are other ways to make extra revenue with gift-wrapping. Norstrom, for example, has gone one step further and offers a “Gift Kit” for $2 that includes a gift box, tissue paper, a ribbon and a tag. This is brilliant as the only cost to them is the cost of materials. No need to wrap anything, simply add the kit to the order. Brilliant.

Now, all of these calculations must be taken with more than a grain of salt. There are many, many variables in offering gift-wrapping and it’s impossible for me to take into account all of them. The idea behind showing these calculations is to show what you need to consider and help you come up with a plan to make your own calculations and decisions.

Still, using these calculations as a basis, things are looking good to make some extra revenue from a service that is actually useful for the end consumer and has the added benefit of driving increases in average order value.

Screenshot via Nordstrom

Other Considerations

Besides financial calculations, there are a few others things to consider before you start offering gift-wrapping as a service..

Here’s a small list of those other considerations:

    • Timing: When should you offer gift wrapping?
      Only during the holiday season when customers are more likely to order it or throughout the year?
    • Offer gift-wrapping for everything or only on selected items?
      Different merchandise can take a wildly different time to wrap. Something like a book is quick and easy while a soft Teddy bear will take more time.
    • How much to charge for the service?
      Should it be $3, $4, $6? Only offer it for free when you order $X worth of stuff? Make it free for only your highest spending customers or for the ones that spend the least to incentivise them to spend more? Charge everyone the same? No right or wrong answers here.
    • Sending of gifts
      When a customer orders gift-wrapping, the wrapped gift can either be sent to the customer to hand over the gift themselves, or sent straight to gift receiver. In the latter case, you shouldn’t include any additional prices on the invoice, not just what’s inside. Are you set-up in a way that enables that?

When it comes to displaying gift-wrapping in your online shopping carts, you have a couple of options.

On Shopify and Shopify Plus you can either add a gift-wrap option manually via light coding with the help of this guide, or use apps like Gift Wizard, Gift Checkout or similar. On other platforms, you need to consult with their internal team.

Final Thoughts

Gift-wrapping, no matter how simple or elaborate is a tangible, decorative customer service. Brilliant customer service is something that is invaluable, and once a customer becomes loyal to you based on service it will be difficult for competitors to bring them back.

It can also be a great marketing tool, opportunity for add-on sales and an excellent way to build rapport with loyal customers. Not to mention, it can offer customers a convenience that is just plain pretty. When that convenience is also able to drive 50% net margin per item, that’s not bad either.

Are you offering it?