Posted on March 15, 2024 by Dennis Salazar

Calculating the True Cost of your E-commerce Shipments

Every e-commerce company ever launched will eventually discover their packaging cost goes far beyond the price of a mailer box or mailer envelope. Unfortunately, this realization usually comes long after business plans are written, resale pricing is determined, and profit projections are calculated. We find that most new companies, and even many successful, well-established ones, do not have a firm grip on their costs. Understanding and managing your true and total cost can make a profitable company even more profitable, or help an unprofitable company correct course and stop the bleeding of red ink.

Part of the reason e-commerce shippers struggle is because overall cost is not always easily understood or calculated. Below are four of the most commonly overlooked e-commerce expenses.

How packaging items are used?

We recently received a clothing item my wife ordered, and it was packaged in an expensive plastic mailer envelope. Inside, we found a second, identical envelope and inside that there was a poly bag. That is three layer of plastic and aside from the obvious sustainability issue, chances are the brand owner is not including all three when adding up their internal packaging costs. Perhaps a corrugated mailer box would be a more efficient, lower cost and greener option?

Another very common example is the way tape is used. For decades I have witnessed buyers who reduce the cost of their box sealing tape, by changing to a less expensive tape option. Often times, that new, lower cost tape is not sticking as well so the packers in the plant are applying multiple strips of tape to compensate for it. The cost-saving measure ends up doubling or even tripling the per order tape cost.

What is the cost of E-commerce void fill and cushioning?

Many products require a higher level of protection such as fragile glass bottles or jars. To make sure they arrive in one piece, foam wrap, bubble wrap, or even loose fill foam peanuts are often used. Calculating cost on these types of products is difficult but the best way to determine the total cost per order shipped is to open boxes that are ready to ship. It is the only way to determine how the protective product is actually being used by your packers and how much it is costing you.

Remember this material cost does not include an even greater expense, which is labor.  Internal packaging is usually very time consuming, adding additional cost, especially if you are utilizing a 3PL or co-packer/shipper to fulfill your orders. An easy to assemble corrugated insert may save you money and time!

Check out our gallery to see examples of protective, eco-friendly inserts we have created for customers to reduce labor by eliminating messy loose fill, or time-consuming bubble or foam wrapping. Another cost reducing design option is peel and seal closures to eliminate the cost of tape, but more importantly, reduce the time it requires to apply it. There is always a way to do almost anything better or faster.

Shipping cost is probably your single largest cost per order.  

Years ago, I first asked a customer “Would you rather save twenty cents on your box cost, or two dollars on your shipping cost?” The answer is fairly obvious but our objective, if possible, is to provide our customers with both. During the last seventeen years we have written many times about right sizing and dimensional weight. When shippers like FedEx, UPS and USPS adopted dimensional weight, it was to charge the customer for the amount of space any given package takes up in their system and truck. There are many reasons why packaging is oversized, including lack of order history, a product change, etc. but even a small reduction in box size can result in a substantial savings. When was the last time an experienced packaging designer took a close look at your packaging and gave you an honest, unbiased opinion?

The truth is, I am just glazing over the whole packaging experience and cost. However, one of our packaging experts will be glad to give you all the time you need to help us understand your needs and application. Give us a call at 630-551-1700 or contact us through this web site to schedule a no cost and no obligation review. We love saving customers money and there are many ways we can do that for you.

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