How to price a gift set without giving away the margin.

The short answer

• A set is its own product: the items at unit cost, plus box, tissue and ribbon, plus the minutes to assemble one.
• That is more than the items cost apart, while the usual set price is less than they sell for.
• Fix a margin floor for the set, turn it into a lowest price, and pick the discount inside it.

Cost the set as a product, then price it from that cost. The usual rule is to add up what the items sell for and knock a dollar or two off, and it skips the set's own cost. A candle, a bar of soap and a lip balm that sell for $31 apart cost $7.40 apart. In a kraft box with tissue, a ribbon and a label, assembled in four minutes, the same three cost $10.90 as a set. Sell it at $29 and it earns $5.50 less than the three items did on their own, and only $2 of that is the discount. The arithmetic below is the same for a jam trio, a necklace-and-earring set or a box of six cookies. Only the box and the minutes change.

What does a gift set cost to make?

The items at their unit cost, plus everything the set adds: the box, the filler, the ribbon, the label, and the minutes it takes to put one together. A set is a product with its own recipe, and its recipe happens to list other products.

Start with the items. Each one already has a cost per unit, the figure you priced it from: materials, its own packaging and labour for one. Use that figure, not the price. When the add-up-and-knock-off rule talks about what the products cost, it means the sum of what they sell for, and that is the wrong number to start from, because it already has your margin inside it. The prices come back later, as the ceiling.

Time the assembly as a batch. Four minutes a set sounds like nothing until you fold the tissue, tie the ribbon and stick the label twelve times and look at the clock. If your rate is different, the sum is the same shape: rate, times minutes, divided by sixty, divided by the sets you made. The calculator guide walks through that labour line if it is new to you.

Why is "they add up to $31, so charge $29" the wrong sum?

Because it prices the set from the items' prices and never looks at the set's cost. The two dollars are visible, so they feel like the whole cost of the deal. The box and the minutes are not in the sum at all, so they feel free, and they cost $3.50.

At $29 the set earns $29.00 − $10.90 = $18.10, which is 62% of the price. The three items sold on their own earn $31.00 − $7.40 = $23.60, which is 76%. The gap is $5.50 a set, and it splits three ways:

Discount          $2.00
Box and ribbon    $1.90
Assembly minutes  $1.60
                  $5.50

The discount is less than the other two together: $3.50 of the $5.50 is the box and the minutes. Even at the full $31, with no discount at all, the set earns $31.00 − $10.90 = $20.10, which is $3.50 less than the parts, because the box and the minutes are still there. A set that "only" takes two dollars off is taking off five and a half, and the rule that produced the price never counted the other $3.50.

Margin here means the share of the price you keep, price minus cost divided by price. The calculator guide covers the difference between that and markup.

What is the lowest price a gift set can carry?

The set's cost divided by one minus the margin you need on the set. Decide that margin for the set as a product, not by copying the items' margin, and the discount question turns into a range.

Say the floor is 60%. The lowest price is $10.90 ÷ (1 − 0.60) = $10.90 ÷ 0.40 = $27.25. For a buyer who would otherwise buy the three apart, the ceiling is their prices added up, $31.00; above that the set costs more than the three inside it. So the room for a discount is $27.25 to $31.00, and $29 sits inside it comfortably.

Now say the floor is 65%. The lowest price is $10.90 ÷ 0.35 = $31.14, which is above the sum of the parts. There is no discount at that floor, however small. And the items earn 76% apart, so a set of them in a box can never match that without selling for more than they do apart, which is $10.90 ÷ 0.24, about $45.

Priced at or below what the items sell for apart, a set earns less than the items do apart, in dollars and in margin, so the percentage is never the reason to make one. A set sold as a present, to a buyer who wants the box, is a different case: it can carry the box and the minutes at margin like any other packaging, and then $31 is not the ceiling. The add-up-and-knock-off rule produces the other kind, sold at a discount to its parts.

Is a discounted set worth making at all?

Yes, when it changes what lands in the basket, and no, when it does not. The buyer who came for the candle and leaves with the set is the case for it. The candle alone earns $18.00 − $4.65 = $13.35. The set at $29 earns $18.10. That order is worth $4.75 more to you than the one they were going to place, and you sold a bar and a balm to someone who was not shopping for either.

The buyer who was going to buy all three anyway is the case against. They now pay $29 instead of $31, and you carry a box and four minutes on top, so that order is worth $5.50 less than it would have been. There is a third buyer, who came for a present and would have left with nothing, and that order is $18.10 that did not exist. Every set you sell goes to one of those buyers, or to someone between them, and you cannot tell which from the till. What you can do is keep the set inside its floor, so that the worst case is a thinner set and never a loss, and put the set where it does its job: next to the candle, for the buyer who has one thing in their hand.

Can you sell a gift set wholesale?

Only if the set was priced from its cost, and a set priced by adding up and knocking off was not. Wholesale is half the retail price by convention, and halving a price that was already discounted leaves very little above the cost.

There are two honest ways out. Price a wholesale set from its cost like any other product: at a 50% margin the wholesale price is $10.90 ÷ 0.50 = $21.80 and the retail price the stockist puts on it is $43.60, which is a different product from your $29 set, with a different box or a different third item, and should be listed as one. Or keep the $29 set retail-only and tell the stockist so. What does not work is putting the retail set on the line sheet at half price and finding out in January that a hundred of them earned $360.

What happens to your stock when you sell a set?

The items leave the shelf when you assemble the set, not when the set sells, and the box and the ribbon leave with them. Twelve sets assembled on a Sunday means twelve candles, twelve bars and twelve balms gone from their own counts, twelve boxes gone from the packaging shelf, and twelve sets on hand at $10.90 each.

If you only ever count finished sets, the item counts drift high, one item per set, and the drift compounds through November. The candle count says 40 on the shelf when 28 are in boxes, so you skip a pour, and in the second week of December you are out of candles with orders open. Take the items out when you box them and the counts stay true.

In Trackost, a gift set is a product whose recipe lists other products as components, next to the box and the ribbon, with the assembly minutes on the recipe. Its unit cost rolls up from what the items on the shelf cost, so when the next batch of candles comes in at a new wax price, the set's cost moves with it, and an assembly run takes the items out of stock and puts the sets in at that cost. The same recipe can be a sample pack, a refill set or a starter kit.

Questions

Should a gift set cost less than buying the items separately?

It usually sells for less, and it always costs you more, because the box and the assembly time are on top of the items. Work out the set's cost and the lowest price that clears your margin floor, then pick a price between that and the sum of the items' prices. If the floor is above the sum, the set cannot be discounted at all.

Do I have to discount a set at all?

No. A set at the full sum of the items' prices already earns less than the items apart, by the cost of the box and the minutes, so the buyer is already getting something for the same money. Discount only if the set needs it to sell, and never below the floor.

How much should I charge for gift wrapping a single item?

What the wrapping costs plus the minutes it takes, as its own line. A sheet of tissue, a ribbon and a tag at 55 cents and three minutes at $24 an hour is $1.75 of cost; charge it at your normal margin, not as a free extra, because free wrapping on two hundred orders is $350 by January.

Do the items come out of my inventory when I sell a set?

They should come out when you assemble the set, at their unit cost, and the finished set should go into stock at the summed cost. If your records only move when a set sells, the item counts run high by one per boxed set, which is what causes the surprise stock-out in December.