How much of my price should go to packaging?

Many sellers ask for a magic percentage, something like "packaging should be five percent of price". I would not trust any universal number. What matters is how your fixed packaging cost behaves against the price of each product. Let us work through two items.

The same box, two very different products

Suppose your packaging comes to Rs 28 per order. If you want to see how that figure is built, our post on adding up packaging cost per order shows the steps.

Now compare:

• Product A sells for Rs 400. Rs 28 is 7 percent of the price.
• Product B sells for Rs 150. Rs 28 is about 18.7 percent of the price.

The box did not get more expensive. The price underneath it just got smaller.

What it does to your margin

Add some product costs to see the effect. Say Product A costs Rs 200 to make or buy, and Product B costs Rs 60.

For Product A:

• Margin before packaging: Rs 400 minus Rs 200 is Rs 200, which is 50 percent.
• After Rs 28 of packaging: Rs 172 profit, which is 43 percent.

For Product B:

• Margin before packaging: Rs 150 minus Rs 60 is Rs 90, which is 60 percent.
• After Rs 28 of packaging: Rs 62 profit, which is about 41.3 percent.

Notice what happened. Product B looked like the healthier product at 60 percent before packaging, yet once the box is counted, it ends up with a lower margin than Product A. Packaging reversed the ranking.

What this means for low-priced items

When a product is cheap, the fixed cost of a box, tape and label takes a big bite. You have a few options:

• Sell cheaper items in bundles so one box serves several products.
• Use lighter, cheaper packing for small things, such as a padded pouch instead of a rigid box, while still protecting the item.
• Set a minimum order value so tiny orders do not each carry a full parcel cost.
• Raise the price if the product can honestly support it.

Each choice trades something. A bundle raises the order total but needs thought about how customers buy. A pouch saves money but may not survive a rough journey. Our piece on bulk orders and lot pricing explains how selling in sets can change the economics.

Do not cut packing blindly

It is tempting to trim packaging on cheap items until the box is flimsy. But a damaged parcel costs far more than the Rs 10 you saved. If you want to see how a single broken delivery adds up, read about the cost of a damaged parcel. Sensible packing is insurance on your margin.

How to use the percentage

Treat the percent as a diagnostic, not a target. Once a month, list your products and calculate packaging divided by price for each. Anything that looks high, perhaps above one in six on your own scale, deserves a second look. You decide where the line sits based on your margins.

Then check the full picture with a target margin. If you want a given profit after all costs, the post on pricing from a target margin shows how to make packaging part of the formula rather than an afterthought.

The short version

Packaging is a fixed rupee cost, so its weight shifts with price. A Rs 28 box is 7 percent of one product and 18.7 percent of another. Work out the figure product by product, watch your margin after packing and not before, and let the result guide whether to bundle, repack or reprice.