The role of packaging has significantly changed over the years. In the past, its sole purpose was to contain the products and protect them during transportation. Nowadays, packaging is part of the overall D2C marketing of businesses. The growth of online sales has also led to many innovations in the field of eCommerce packaging. Business owners of online stores use packaging as a way to improve the overall experience of their customers. In this guide, we’ll share more about what is packaging’s role in businesses and the different ways to improve the packaging process.
Packaging Costs
There are two main types of packaging costs: variable and fixed. Here’s what these categories include.
- Variable packaging costs. This category includes paper, ink, and other materials used in the packaging process. Labor costs are also considered to be variable.
- Fixed packaging costs. Investments in machinery and design are part of the fixed costs category. Other examples of fixed costs include warehouse rent for packaging operations and printing plate costs.
A lot of businesses don’t have the capital required to do in-house packaging. In these cases, they might turn to co-packers or order wholesale food packaging.
Reducing Packaging Costs
Businesses that aim to maximize profits can cut their packaging costs. Here are some ideas on how to do so.
- Minimalistic design. It is not only trendy but it also leads to packaging cost reductions.
- Purchasing large quantities. Bulk ordering is one of the easiest ways to reduce material costs. You can partner with wholesale plastic container suppliers or distributors of wholesale paper products who also offer packaging solutions.
- Invest in sustainable eCommerce packaging. This idea can sound somewhat controversial as eco-friendly packaging solutions are often more expensive compared to non-sustainable options. However, sustainable packaging can be part of the overall marketing strategy and help increase sales and profits.
How to Calculate Packaging Costs
The formula for calculating packaging costs is packaging cost = (cost of materials + cost of labor) x quantity. It includes not only materials but also labor. If you wish to calculate packaging costs per unit, simply divide the total packaging costs by the number of units.
Types of Packaging Materials
The increased demand and innovations in the packaging industry have led to the development of new and improved packaging solutions. Most companies in the packaging market focus their efforts on creating new packaging materials that combine sustainability and low cost. Packaging solutions can be categorized into three main categories.
- Primary packaging. This category includes packaging that is in direct contact with the product itself. Aluminum and tin cans, glass bottles, and various types of plastic and paper packaging are used to make primary packaging.
- Secondary packaging. What is packaging if not protection of the products? The main role of secondary packaging is to offer additional protection. Cardboard boxes are good examples of secondary packaging. It’s especially popular in the eCommerce niche.
- Tertiary packaging. End customers rarely see tertiary packaging of products. That’s because this category of packaging products is primarily used in warehousing and during transportation. Tertiary packaging includes wooden crates, pallets, and other solutions that help businesses transport goods between warehouses.
Popular Packaging Products
As virtually all products we use come packaged, we are surrounded by various packaging products on a daily basis. That’s why packaging from the food and beverage industry is the biggest polluter worldwide. So let’s examine some common types of packaging.
- Plastic bags;
- Plastic containers;
- Laminator bags;
- Tin cans;
- Aluminum cans;
- Paper bags;
- Bubble wrap;
- Cardboard;
- Glass bottles and containers;
- Wood;
- Shrink wrap;
- Tetra pak;
- Pillow packs;
- Pouches;
- Blister packs;
- Foam packaging;
- Plant-based packaging.
Wholesale Packaging
What is packaging’s role in the wholesale industry some may ask? In fact, even though packaging is mostly associated with the primary packaging of products, secondary and tertiary packaging plays an important part in the wholesale niche.
Pros and Cons of Buying Wholesale Packaging
Businesses that don’t make their own packaging usually order it from wholesalers. There are both advantages and disadvantages to that. Let’s briefly examine them.
- Pros of buying wholesale packaging. Lower wholesale prices are the biggest advantage of buying in bulk. What is packaging used for? Literally everything! That’s why you might as well order large quantities of it and cut costs. An additional benefit of bulk ordering is that manufacturers are more eager to offer custom designs and functionalities if the order is large.
- Cons of buying wholesale packaging. The main disadvantage of purchasing packaging in bulk is that it requires a lot of storage space. Furthermore, as some suppliers have high minimum order quantity (MOQ) requirements, ordering in bulk can prove to be a big upfront investment.
What Is Contract Packaging
Although we established what is packaging in the rows above, allow us to share what is contract packaging. This term refers to the practice of outsourcing the packaging and labeling process to a third-party provider. These businesses specialize in packaging and have the machinery, equipment, and know-how in the field to offer high-quality services to their customers.
Some co-packing companies can provide additional services related to logistics and warehousing.
Benefits of Contract Packaging
- Lower labor, storage, and initial costs. Companies that prefer to handle the packing process in-house might need to invest in equipment and machinery. Furthermore, in-house packaging also leads to labor costs and increased storage costs as the packing process requires some warehouse space. Outsourcing the process to a co-packer can make more fiscal sense in the short run.
- Better know-how. Co-packaging companies specialize in this field. They are up to date with the latest trends and can help a business increase sales through optimal packaging design.
- Focus on the important aspects. Business owners often prefer to focus their businesses based on their strengths. One of the reasons why the dropshipping business model has become so popular is that it gives entrepreneurs the chance to focus on things like marketing and finding dropshipping products. The same is true for outsourcing the packaging process. This can help maximize profits by focusing on sales.
Disadvantages of Contract Packaging
- Scalability problems. Companies that outsource different business processes might find it difficult to grow and scale.
- Less control. A big reason why companies might opt for in-house packaging is that they retain full control over the process. They can improve quality or switch packaging designs with ease.
- Higher cost in the long run. Investments in packaging equipment and staff can be high but if the business has enough turnover, it makes more fiscal sense to do in-house packaging.
Warehouse Packaging
What is packaging in warehouses? An important process that needs to be carefully considered when planning warehouse operations. Here are the steps of the warehouse packing process.
- Choosing packaging based on the size and weight of the items;
- Wrapping and sealing the package to better protect it during transportation;
- Weighting and measuring the package;
- Calculating overnight shipping costs and generating an invoice and a packing slip;
- Sending the package to the next step - fulfillment.
How to Improve Warehouse Packaging
In order to make packing in warehouses more efficient, we must first ask ourselves what is packaging’s role in the business. Is it primarily to protect products or to help with branding and marketing? Here are some ideas for improving warehousing packaging.
- Equip packaging stations properly. Employees should have easy access not only to the primary and secondary packaging but also to ancillary packaging materials like loose fill and adhesive tapes.
- Invest in training. Frequent training and a comprehensive training program for new employees can significantly reduce human errors and costs related to them.
- Clutter-free environment. Clutter near warehouse packing stations can reduce efficiency.
- Rely on modern technology and automation. With the help of a warehouse management system, packaging operations can easily be optimized.
Recyclable Packaging
Recyclable packaging means packaging solutions that can be recycled or reused. What is packaging that’s non-recyclable? That usually refers to biodegradable packaging solutions that break down naturally in a few weeks.
As packaging for food and drinks is the cause of pollution worldwide, businesses gradually switch to sustainable alternatives.
Types of Recyclable Packaging
- Paper and cardboard. Paper is among the most popular packaging materials. It’s lightweight and easy to recycle. Cardboard boxes are a popular secondary packaging solution. It’s optimal to reuse them if they have retained their structural integrity. Paper is also biodegradable. Its cheap price makes it a preferred packaging choice for many businesses.
- Some plastics. Sadly, not all types of plastics are recyclable. However, most varieties are. The low price and durability make plastics an important material for the packaging industry. Their major disadvantage is that a lot of people don’t recycle plastics and they end up in landfills.
- Glass. As it’s infinitely recyclable, glass is one of the most popular options when it comes to recyclable packaging. Although it's commonly used for beverages, glass packaging is also used for food, cosmetics, and other goods. The weight of glass is its main disadvantage.
- Metal. Tin and aluminum cans are recyclable and have multiple applications.
Packaging Trends
Like every other industry, packaging is also changing. What is packaging’s future? What are the main trends in the field? How will packaging change? These are all questions that we will attempt to briefly answer.
Hot Packaging Trends
- Sustainability. As packaging is one of the biggest reasons for pollution worldwide, a lot of socially responsible companies invest in eco-friendly packaging. Government agencies also change the packaging industry by introducing new legislation related to packaging. This has led to a large increase in the sustainable packaging market size. New packaging materials have also been introduced in recent decades. Examples include cornstarch, seaweed, and synthetic biodegradable plastics.
- Smart packaging. The term refers to a combination of technologies aimed at increasing the functionality of packaging. Some technologies improve the user experience. Examples of such functionalities include QR codes printed on the packaging or custom packaging design that makes it easier for customers to enjoy the product. Another goal of smart packaging technology is to help businesses automate warehouse scanning or other business processes like shipping and handling.
- Contract packaging. Outsourcing various processes has been a major trend in various industries. Co-packers offer reliable services for companies that wish to outsource the packaging. Some contract packaging businesses also offer other services like third-party logistics (3PL). This allows companies to reduce their operational work and focus on other business aspects such as manufacturing, sales, and marketing.
- Active packaging. This term is part of the overall smart packaging category. Active packaging has various properties that help increase the shelf life of products. Thanks to active packaging, food waste can be reduced significantly.
Design Trends in Packaging
What is packaging’s most important role nowadays? Brand awareness! Although packaging was introduced as a way to protect products, its most important role in today’s market is to help with brand recognition. In addition to that, good packaging design can increase sales and improve the user experience after purchase. Here are the top trends in packaging design.
- Minimalism. One of the benefits of this packaging design trend is that it leads to lower costs per unit. Furthermore, as our minds filter out what we see too often, minimalist designs might be more likely to convert some customers. Minimalist packaging is especially popular with eCommerce. When it comes to online sales, packaging design is not as important as the overall experience.
- Interactive packaging. Things like scratch-and-sniff labels on cosmetics or plantable biodegradable packaging with seeds can improve the customer experience.
- Retro design. Modern packaging designs are still used frequently. However, retro designs can trigger nostalgic feelings in consumers. That’s why they’re making a comeback, especially among products bought primarily by older generations.
- Elements of nature. The strive towards more organic and eco-friendly products can also be seen in packaging design. If the products are made in a sustainable way, the packaging often corresponds with that.
- Transparent packaging. Although it’s common for food packaging to be transparent, this trend is often used for packaging other products as well. The ability to see the product has a positive impact on D2C sales.
Custom Packaging for Businesses
Innovations in the packaging sector have led to the development of various custom packaging solutions. They improve the unpacking experience, help with branding, and reflect a brand’s values. Here are a few examples of custom packaging solutions.
- NFC tags that enhance consumer engagement;
- Stackable takeout containers that make transportation easier;
- Salad packaged in a container that resembles a lunchbox;
- Plantable single-use coffee cups with seeds inside.