eCommerce Packaging: What is its Significance and How to Optimize Costs?
Packaging is going to be very important in eCommerce logistics in 2023 for several reasons:
- Increased e-commerce sales: With the continued growth of e-commerce and online shopping, the demand for packaging materials and services will also increase. This is particularly true as more people are shopping online due to the pandemic, and this trend is likely to continue.
- Personalization: Customers expect a personalized and unique shopping experience, and packaging is an important part of that experience. Personalizing and customizing packaging can create a memorable brand experience and increase customer loyalty and repeat business.
- Brand differentiation: With more e-commerce companies vying for customers, packaging can be used as a way to differentiate a brand and make it stand out from the competition.
- Safety and security: As e-commerce logistics become more complex, the safety and security of packages during transit will become increasingly important to ensure that products arrive in good condition.
- Cost and efficiency: Packaging costs and efficiency are becoming increasingly important as e-commerce companies seek to control expenses and streamline logistics processes. Automation and new technologies are being developed to help companies reduce costs and improve efficiency.
What are the Factors that Govern Packaging?
When deciding on packaging options for logistics, several factors should be considered:
- The type of product being shipped
- The distance and mode of transportation
- The handling and storage conditions during transit
- The cost and durability of the packaging
- The packaging regulations and requirements of the destination country
It is recommended to consult with a packaging expert or conduct testing to determine the most suitable packaging option for your specific product and logistics needs.
Factors That Affect Packaging
Product type, mode of transportation, storage conditions, packaging durability, and packaging regulations all play a role in determining the most suitable packaging option for eCommerce logistics.
- Product type: The type of product being shipped can determine the necessary level of protection needed during transit. Different types of products may require different types of packaging for eCommerce logistics.
- Perishable items, like food or plants, may need temperature-controlled packaging and insulated liners to maintain freshness.
- Fragile items, such as glassware or electronics, may require extra cushioning and reinforcement to prevent damage during transit.
- Items with irregular shapes, such as furniture or artwork, may require custom-fit packaging or additional wrapping to protect them during transit.
- Clothing or other soft goods can be packaged in folded or rolled format and shipped in boxes or poly mailers.
- Hazardous materials, such as chemicals or batteries, may require special packaging and labeling to comply with regulations for safe transportation.
- It’s important to consider the specific product requirements and regulations for packaging and shipping before making a final decision.
- Mode of transportation: The mode of transportation can affect the amount of shock and vibration that a product may be exposed to during transit. Packaging materials and designs may need to be adjusted accordingly to provide sufficient protection.
- Storage conditions: The storage conditions during transit can also affect the type of packaging required. For example, if a product is going to be stored in a cold or hot environment, packaging materials and designs may need to be adjusted accordingly to maintain the product freshness.
- Packaging durability: The durability of the packaging is another important factor to consider. When shipping a product repeatedly or for a long distance, durable and reusable packaging may be more cost-effective than disposable packaging.
- Packaging regulations: There are certain regulations and requirements for packaging that must be followed, depending on the destination country. These regulations can vary depending on the type of product being shipped, and it is important to ensure that the packaging used complies with these regulations to avoid any delays or fines.
By considering all these factors, you can determine the most appropriate packaging option for your specific product and logistics needs. And it’s always good to consult with a packaging expert to make sure that the packaging you choose is suitable for your product and the shipping conditions
An example of how product type, mode of transportation, storage conditions, packaging durability, and packaging regulations can affect eCommerce logistics packaging is the shipment of fragile and expensive glassware from the United States to Germany.
- Product type: The glassware is fragile and requires extra protection to prevent damage during transit.
- Mode of transportation: The mode of transportation will be by air freight, which can expose the glassware to more shock and vibration than if it were shipped by ground.
- Storage conditions: The glassware will be stored in a warehouse before being shipped, and the warehouse has a controlled temperature and humidity.
- Packaging durability: The glassware is expensive, and the packaging needs to be durable enough to be reused for multiple shipments, this will decrease the packaging costs in the long run.
- Packaging regulations: The packaging must comply with the regulations set by authorities such as FSSAI
To meet these requirements, the glassware will be wrapped in bubble wrap and placed in a durable and reusable wooden crate. The wooden crate will be able to withstand the shock and vibration of air transportation and provide extra protection for the glassware during storage.
How to Calculate Packaging Cost?
Calculating the price of packaging in logistics can be a complex process that depends on various factors such as the type of product, the volume of the shipment, the type of packaging, and the cost of materials and labor.
One way to calculate the price of packaging is to use the following formula:
Packaging cost = (Cost of materials + Cost of labor) x Quantity
The cost of materials includes things like boxes, tape, labels, cushioning materials, and any other materials used to package the product. The cost of labor includes the time and wages for the employees who are responsible for packaging the product.
Another way to approach the calculation is to use a packaging cost per unit of product. This method is useful when you have a large number of items that are similar in size and weight. You can calculate the cost per unit by dividing the total packaging cost by the number of items.
Packaging cost per unit = Total packaging cost / Number of items
It’s also important to consider the cost of packaging for transportation, for example, if you’re using a pallet, you need to consider the cost of stretch wrapping, shrink wrapping or strapping.
When considering the cost of packaging, it’s also important to take into account the cost of any potential damage or returns that may occur due to inadequate packaging. By investing in appropriate packaging, you can decrease the risk of damage and returns, which can ultimately save you money in the long run.
It’s always good to consult with a packaging expert or conduct testing to determine the most cost-effective packaging option for your specific product and logistics needs.
An example of how to calculate packaging cost in Indian Rupee (INR) in eCommerce logistics is for a small e-commerce company that ships 200 units of a single product per month. The product is a small electronic device that requires special packaging to prevent damage during transit.
The company uses the following materials for packaging:
- Corrugated boxes: ₹5 per box
- Bubble wrap: ₹2 per foot
- Tapes: ₹1 per yard
- Labels: ₹0.50 per label
The company pays its packaging employees ₹1000 per hour, and it takes them 30 minutes to package each unit.
The cost of materials for packaging one unit is:
- Corrugated box: ₹5
- bubble wrap: ₹4 (2 feet are used per unit)
- Tapes: ₹1 (1 yard is used per unit)
- Labels: ₹0.50
The cost of labor for packaging one unit is:
(₹1000/60) * 30 minutes = ₹500
The total cost of packaging one unit is:
₹5 + ₹4 + ₹1 + ₹0.50 + ₹500 = ₹510.50
The total cost of packaging 200 units is:
₹510.50 x 200 = ₹102,100
So the packaging cost per unit is:
₹102,100 / 200 = ₹510.50
This is just an example, in reality, the cost of packaging can vary greatly depending on the product, the volume of the shipment, and the cost of materials and labor. It’s always good to consult with a packaging expert or conduct testing to determine the most cost-effective packaging option for your specific product and logistics needs.
How to Optimize Packaging Cost?
Optimizing packaging costs in eCommerce is important for several reasons:
- Cost savings: By reducing the cost of packaging, eCommerce companies can increase their profit margins and become more competitive in the market.
- Environmental sustainability: By using eco-friendly packaging materials and reducing waste, eCommerce companies can improve their environmental footprint and appeal to customers who are environmentally conscious.
- Brand reputation: eCommerce companies can create a positive brand reputation by providing high-quality packaging that is both protective and visually appealing. Additionally, by using eco-friendly packaging, companies can appeal to consumers who are environmentally conscious.
- Shipping cost reduction: By optimizing the packaging design and materials, eCommerce companies can reduce the size of the packages and the weight of the products which will result in reduced shipping costs.
- Customer satisfaction: By providing adequate protection for the products and creating a positive customer experience through personalized packaging, eCommerce companies can increase customer satisfaction and loyalty.
- Compliance: By staying up to date with packaging regulations and industry standards, eCommerce companies can avoid costly fines and penalties.
Overall, optimizing packaging costs in eCommerce allows companies to increase their profits, improve their environmental footprint, and enhance the customer experience while staying compliant with industry standards.
eCommerce companies can optimize packaging costs by implementing the following strategies:
- Conduct packaging assessments
- Utilize cost-effective packaging materials
- Optimize packaging design
- Use automation and technology
- Outsource packaging
- Reuse and recycle packaging materials
- Negotiate with suppliers
Here is an example:
Let’s take the example of an e-commerce company that sells clothing.
They currently use branded boxes that cost ₹150 each, custom tissue paper at ₹2 per sheet, and custom labels at ₹1 each. They ship 500 units per month.
Using the above tactics, here is what they do:
- Conduct packaging assessments: The company conducts regular assessments and evaluations of its packaging materials and methods. They find that the custom-branded boxes are costly and the tissue paper is not necessary for the product.
- Utilize cost-effective packaging materials: The company switches to using plain, unprinted corrugated boxes at ₹100 each. They also switch to using biodegradable bubble wrap at ₹2 per foot instead of traditional plastic bubble wrap at ₹5 per foot.
- Optimize packaging design: The company implements void-fill materials such as biodegradable loose-fill peanuts at ₹1 per 100g to take up less space in the box. This reduces the size of the boxes needed, resulting in cost savings.
- Use automation and technology: The company invests in an automated box-sealing machine to improve efficiency and reduce labor costs.
- Outsource packaging: The company outsources packaging to a third-party logistics provider that specializes in sustainable packaging solutions, which helps them to take advantage of economies of scale and specialized equipment.
- Reuse and recycle packaging materials: The company implements a recycling program for its packaging materials. They also use returnable packaging, such as crates, for multiple shipments.
- Negotiate with suppliers: The company negotiates with suppliers to get better prices for packaging materials and buys in bulk to take advantage of volume discounts.
It’s important to note that this is just an example, and the actual costs and savings will vary depending on the specific materials, methods, and logistics involved for each company.
How can WareIQ help?
WareIQ is a rapidly growing eCommerce fulfillment company that provides a vast amount of services to meet every requirement that online sellers can have.
We support eCommerce brands by providing them with the exact packaging requirements needed to fulfill their orders safely and securely. At the same time, we ensure we adhere to the guidelines shared with us by brands and create a delightful unboxing experience for their end customers.
We use a variety of packaging materials – air wraps, bubble wraps, foam sheets, heavy-weight kraft paper, etc. and can customize packaging as per the online seller’s specifications in order to balance cost, safety, and experience.
For brands across categories, we have curated kits and created combos by themes and specific use cases, which included thank you notes, cards, branded packaging etc. all aimed to excite and delight the customers.