Packaging plays an increasingly important role not just to preserve the good condition of products but also to make them more recognizable and to increase brand awareness. When it comes to packaging costs, they have seen an increase in recent years. Among the main reasons for the growing prices of packaging materials are global supply chain disruptions and inflation. Furthermore, the increased demand for eco-friendly and sustainable packaging has also led to price hikes in the packaging industry. In this article, we’ll share more details about packaging costs as well as some packaging tips aimed at reducing them.
Key takeaway: Packaging costs are not the right place to cut costs as this might significantly reduce the final result of the product. However, there are ways businesses can reduce spending on packaging without reducing the quality. This can be done by automation of the packaging process, improving warehousing, and investing in modern packaging machinery. The design of the packaging is crucial for brand awareness and recognition.
What Is the Cost of Packaging
Generally speaking, there are two main categories of packaging costs: fixed and variable ones. Let’s see what they include.
- Fixed packaging costs. These costs include initial investments such as machinery and design. Costs such as rent for the extra warehouse space where packaging is done are also part of the fixed costs category.
- Variable packaging costs. They include paper, tape, ink, and other material costs. Labor costs for employees who handle the packaging are also part of the variable category.
These costs are only present when the packaging is done in-house. Instead, your business can partner with a contract packaging company or purchase all packaging materials from suppliers of wholesale food packaging.
How to Reduce Packaging Costs
There are multiple ways to save on packaging. Let’s examine some of the popular ones.
- Order in bulk. Whether you need sustainable eCommerce packaging or wholesale plastic containers for a restaurant, it’s recommended to partner with a supplier who can sell them in bulk. Ordering in large volumes can reduce packaging costs but it can increase storage costs.
- Use the right types of packaging and materials. A lot of businesses purchase packaging materials that are not optimal for their needs. Make sure you discuss your business’s packaging needs with your supplier. Packaging wholesalers can recommend the right food or eCommerce packaging.
- Minimize the design. A lot of brands choose to invest in eye-catching and colorful packaging. That’s not always necessary though. For example, an eCommerce website that sells products online can reduce its packaging costs by designing boxes and other packaging materials to have little or no colors. Not only is this minimalistic approach trendy, but it will also reduce the cost of goods sold.
- Invest in sustainable packaging solutions. Although they often come at a higher price, sustainable products have become increasingly important in recent years. By implementing eco-friendly packaging options, your business will be prepared for the upcoming legislation changes related to sustainability. Furthermore, an increasing percentage of consumers aim to reduce their ecological footprint. Thus, they might prefer to buy from businesses that have integrated eco-friendly packaging. This will result in a reduction of the final cost of goods sold.
Most Common Types of Packaging
Packaging materials come in hundreds of different varieties. We’ll see the main categories as well as some examples of packaging materials from them.
Primary Packaging
That category includes packaging solutions that come in direct contact with the products. Laminated pouches, plastic containers, and tin cans are just some examples of such packaging materials. The majority of food packaging and retail packaging is done by primary packaging solutions. Here are other popular packaging varieties in this category:
- Thermoformed plastics
- Monocartons
- Composite cans
- Glass containers
- Shrink wrap
- Paper bags
- Bubble wrap
Reduction of packaging costs for primary packaging is possible. However, this is the layer that goes into direct contact with the products. Thus, make sure the cut costs don’t lead to unsatisfactory packaging quality.
Secondary Packaging
This category includes solutions that help secure the products after they have been packed in their primary packaging. Plastic crates and trays are excellent examples of secondary packaging products. Every packaging warehouse has an abundance of these solutions as they help streamline the process.
Tertiary Packaging
These products are the third layer of the three-layered packaging system. They protect the products alongside with their primary and secondary packaging during shipping and transportation. Examples of tethered packaging products include plastic and wooden pallets as well as polyester strapping. Tertiary packaging solutions are used in B2B sales and retail customers rarely see them as they are removed by retailers before the products hit the shelves.
Ancillary Packaging
These products ensure the efficiency of the three layers of packaging and add other benefits. Examples of ancillary packaging goods include lids, crown corks, cushions like air packets, and adhesive products like tape.
These products are consumables and cost reductions in this category are possible. For example, some employees might use too much tape when they pack goods. Keep in mind that not using enough cushions when packaging goods might lead to an increased eCommerce return rate.
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Frequently Asked Questions about Packaging Costs
The BlueCart team has answered multiple questions in our blog posts. If you’re interested in packaging and shipping, check out our articles on packaging tips for shipping, how to ship a package, and overnight shipping costs. Below you can find some of the commonly asked questions regarding packaging costs and their role in businesses.
How Are Packaging Costs Calculated?
Packaging cost = (cost of materials + cost of labor) x quantity. This is the easiest formula to calculate packaging costs. The cost of materials includes not only boxes and tape but also filler paper and other materials such as packing slips.
Packaging cost per unit = total packaging cost / number of items. This is another formula that can be used to calculate packaging costs.
What Are the Trends in Packaging?
Biodegradable, sustainable, and recyclable packaging is probably the most popular trend in the field. Various businesses focus on eco-friendly packaging as a way to reduce their ecological footprint. Here are some additional packaging trends.
- Internet of packaging. Also known as intelligent packaging, it uses various warehouse scanning technologies such as NFC, QR codes, or RFID to enable registration, updates, and tracking of packaging.
- Packaging automation. AI and automation are among the hot trends in most industries. Packaging automation helps reduce labor costs and increases accuracy.
- Active packaging. This means employing various technologies to increase the shelf life of products. Ethylene absorbers and moisture regulators are good examples of ways to maintain food freshness.
- Custom packaging. Design plays a huge role in packaging. That’s why eye-catching and custom packaging options have become more popular. Custom packaging can be helpful in establishing a brand identity.
Are Contract Packaging Costs Lower than In-House Packaging Costs?
In the long run, in-house packaging comes cheaper compared to contract packaging. However, in order for this to be true, the business needs to scale and grow to a point where it’s economically viable to invest in packaging equipment and machinery. One of the cons of packaging products on your own is that it requires a big investment. The upfront costs associated with machinery and personnel can be very high. Businesses might decide to find a contract packager in the beginning and then switch to in-house packaging. Companies that aim to outsource different business processes might prefer to work with a contract packager and also outsource shipping and handling to a 3PL company.