Custom packaging can surely elevate a brand’s image. It can make products feel unique and high-end. However, the costs associated with custom packaging can also be significant, especially if you're just starting out as a business.
How Much Does Custom Packaging Cost?
There are many, many factors that impact how customized packaging can cost such as the type of packaging, design, manufacturing/manufacturer, quantity, and many more. On average, companies allocate 10-40% of a product's retail price towards packaging. For instance, a product selling for $100 could entail packaging costs ranging from $10 to $40.
Here’s a more detailed breakdown of costs involved, what to expect, and things to consider if you're looking into customized packaging.
In the packaging industry, understanding fixed costs, variable costs, and economies of scale is crucial for efficient operation and cost management.
1. Fixed Costs
Fixed costs are expenses that remain constant regardless of how much you produce. Examples in packaging include:
- Machinery: The cost of buying printing machines.
- Factory Rent: The monthly rent for the production facility.
- Salaries: Wages for permanent staff.
These costs stay the same even if no packaging is produced.
2. Variable Costs
Variable costs change with production volume. Examples in packaging include:
- Raw Materials: Costs for paper, plastic, or glassine. If you produce more, you need more materials.
- Energy Consumption: Electricity and fuel used during production.
- Labor: Wages for temporary or part-time workers.
These costs increase or decrease based on the number of units produced.
3. Economies of Scale
Economies of scale happen when producing more units lowers the cost per unit. For example:
- If you produce 1,000 units, the cost might be $5 per unit.
- If you produce 10,000 units, the cost might drop to $3 per unit.
This is because fixed costs (like machinery and rent) are spread over more units, and bulk purchasing of materials often comes with discounts. This makes packaging more cost-effective as production volume increases.
4. High Minimum Order Quantities (MOQ)
You will need to hire or outsource a packaging manufacturer to product your customized packaging. And chances are, you will run into the term MOQ.
High Minimum Order Quantities (MOQ) refer to the smallest number of units that a manufacturer requires you to order for custom packaging.
Why is there a need for a minimum order quantity? Producing large quantities of packaging at once allows manufacturers to maximize their efficiency and reduce costs on their end. The setup for a production run, especially for customized packaging, can be expensive and time-consuming. High MOQs ensure that these costs are spread over a larger number of units, lowering the per-unit cost.
Many manufacturers require large minimum orders for custom packaging, often ranging from 10,000 to 50,000 units per design. This can be a massive upfront investment, tying up capital that could be used elsewhere in the business.
5. Storage Costs
Once you've ordered your custom packaging, given the massive quantity, you'll need space to store it. Renting storage units or expanding your current storage space adds to the overall cost. Evidently, if you’re working from a small space, this can be a significant burden.
6. Design and Setup Fees
If you’re aiming for custom packaging with a specific look, size, or design, you'll need a detailed sample or design to show your manufacturer. If creating it isn't your forte, hiring a graphic designer will be necessary, but keep in mind that their expertise isn’t cheap. On top of that, manufacturers usually have setup fees for things like custom printing plates or molds. These costs can add up quickly, especially if you want several different designs. It's important to budget carefully for these expenses to keep your packaging project on track.
7. Error Costs
Mistakes in design in or printing can be costly too. A typo or color error means you either use flawed packaging or reorder a corrected batch, incurring additional costs.
8. Flexibility Issues
Large orders of custom packaging can limit your flexibility. If your branding changes or you want to introduce a new product, you’re stuck with outdated packaging until it's used up. This can stifle creativity and adaptability.
Conclusion
Yes, custom packaging can enhance a brand’s image. But, the costs are substantial. For small businesses, these expenses can be prohibitive, making it essential to carefully weigh the benefits against the costs before committing to custom packaging.
Ready to Make the Switch?
Impack aims to bridge the gap between businesses and good packaging. Our low minimum orders, eco-friendly materials, and versatile designs offer the perfect solution. Elevate your brand without breaking the bank. Contact us today to see how Impack can simplify your packaging needs and support your sustainable goals!
