Packaging Cost Components
E-commerce packaging costs span multiple elements, many of which are charged separately or are easy to forget when building a cost model. A complete packaging cost should include:
Materials
- Outer packaging: Corrugated cardboard box, postal tube, poly mailer, padded mailer, or jiffy bag. The single largest packaging material cost.
- Inner protection: Tissue paper, bubble wrap, foam inserts, air pillows, shredded paper. Protects the product and contributes to unboxing experience.
- Packing tape: Often overlooked — a roll of quality packing tape covers ~100 boxes. At £3–£5 per roll, this is £0.03–£0.05 per box.
- Stickers & seals: Branded seals, "Fragile" stickers, GDPR-compliant address labels.
Printed Inserts
- Delivery note / order summary: Required for most orders; can be combined with returns slip
- Returns slip / form: Printed returns process instructions
- Marketing inserts: Discount vouchers, product care cards, referral cards, thank-you notes — typically £0.05–£0.25 each
Labour
Packing labour is the cost of the time taken to pack each order. In-house: typically calculated as packer hourly wage ÷ orders packed per hour. Via 3PL: a per-item pick-and-pack fee (typically £0.80–£2.50 per order for standard e-commerce products).
Wastage Allowance
Packaging materials are damaged, mis-cut, or incorrectly used at a rate of 3–7%. Build a wastage factor into your unit cost calculation — typically 5% of materials cost.
Calculating Packaging Cost per Unit
WORKED EXAMPLE — Health & Beauty Product
Cardboard mailer box (100-pack purchase, £38): £0.38 per unit
Tissue paper (2 sheets, 500-pack at £12): £0.05 per unit
Branded sticker seal (500-pack at £18): £0.04 per unit
Packing tape allocation: £0.04 per unit
Delivery note + returns slip (A5, printed in-house): £0.04 per unit
Thank-you insert card: £0.08 per unit
Sub-total materials: £0.63
Wastage allowance (5%): £0.03
Packing labour (in-house, 3.5 min per order at £12/hr): £0.70
—
Total packaging cost per unit: £1.36
On a product selling for £24.99 with a COGS of £5.80, packaging adds 5.4% more variable cost — taking effective COGS from £5.80 to £7.16.
Include Packaging in Your COGS, Not as a Footnote
Many brands treat packaging as a separate overhead rather than a direct variable cost per unit. This understates their true COGS and inflates their apparent gross margin. Packaging is as much a direct variable cost as the product itself — it scales exactly with units shipped.
Sustainable vs Standard Packaging
Sustainability in packaging is increasingly a brand expectation, particularly for younger demographics and premium product categories. The trade-off is cost and availability.
| Packaging Type | Standard Cost | Sustainable Alternative | Cost Premium |
|---|---|---|---|
| Poly mailer (A4) | £0.08–£0.15 | Compostable mailer | +25–40% |
| Corrugated box (small) | £0.30–£0.55 | 100% recycled cardboard | +8–15% |
| Bubble wrap (per sheet) | £0.04–£0.08 | Recycled paper padding | +10–20% |
| Tissue paper | £0.02–£0.06 | FSC-certified tissue | +5–10% |
| Packing peanuts | £0.03–£0.07 | Starch-based biodegradable | +15–30% |
Sustainable Claims Require Evidence
Be careful about "eco-friendly" packaging claims without certification. Some "compostable" plastics require industrial composting facilities and are not suitable for home composting or standard recycling. Misleading environmental claims (greenwashing) are increasingly scrutinised by regulators. Only claim what you can substantiate.
How Packaging Costs Affect Your ROAS Target
Packaging is a variable cost that applies to every order. When calculating the minimum ROAS needed to be profitable, it belongs alongside COGS, shipping, and payment processing fees.
ROAS IMPACT OF PACKAGING COST
Product selling price: £32.00 | COGS: £10.40 | Packaging: £1.35
Outbound shipping: £3.95 | Payment processing (1.8%): £0.58
Target net contribution: 12% = £3.84
—
Total non-ad cost: £10.40 + £1.35 + £3.95 + £0.58 + £3.84 = £20.12
Available for ad spend per sale: £32.00 − £20.12 = £11.88
Minimum ROAS = £32.00 ÷ £11.88 = 2.69×
If packaging cost was omitted: Available for ads = £13.23 | Min ROAS = 2.42×
A 2.42× ROAS target looks profitable but silently consumes the £1.35 packaging cost on every sale.
Reducing Packaging Costs
Right-Sizing
Audit your top-selling products and measure the dimensional gap between product and packaging. For each product, identify the smallest box or mailer it can safely ship in. Stock a range of 4–6 standard box sizes rather than one-size-fits-most. This reduces both material cost and carrier dimensional weight charges.
Bulk Purchasing
Packaging suppliers offer significant volume discounts. Ordering 6–12 months of packaging at once typically reduces per-unit cost by 15–25% versus monthly ordering. Forecast your packaging requirements based on your sales velocity and order accordingly.
Simplify Inserts
Printed marketing inserts (vouchers, catalogues, welcome cards) cost £0.10–£0.50 each but have measurable conversion rates. Audit which inserts actually drive behaviour (use unique discount codes to track redemption rate). Eliminate inserts with zero measurable return.
Private Label Packaging
Custom-printed branded boxes ordered in high volumes (5,000+) are often cheaper per unit than buying generic boxes and applying branded stickers. At scale, a custom-printed box at £0.45 can be less expensive than a generic box (£0.32) plus branded sticker (£0.08) plus time to apply it.
Supplier Packaging Negotiation
If your supplier provides packaging as part of the product cost, negotiate packaging out of the product price and source it independently. Supplier-bundled packaging is often marked up 30–50% versus direct sourcing from packaging wholesalers.
Kitting & Bundling Packaging Costs
Product bundles and kits typically increase average order value and can improve margins — but they introduce packaging complexity that needs to be costed accurately.
Kitting Packaging Factors
- Larger or more complex outer box: A kit containing 3 products needs a box that fits all 3, likely larger than for any individual product
- Additional inner packaging: Each component may need its own protection to prevent damage during transit
- Additional kitting labour: Assembling kits takes longer than picking single items — factor in the extra time cost
- Dedicated SKU management: Kits need their own SKU, barcode, and inventory management — a hidden operational cost
KIT PACKAGING COST EXAMPLE
3-product gift set: individual packaging cost £1.20 per component if sold separately = £3.60 total
Kit box + tissue + ribbon + label: £1.85 | Kitting labour (8 min): £1.60
Kit packaging cost: £3.45 — less than separate packaging but requires careful sourcing and dedicated assembly time.
Ensure your kit selling price reflects the full kit packaging cost, not just the individual product costs.
Frequently Asked Questions
What costs make up e-commerce packaging?
E-commerce packaging costs include: primary outer packaging (box or mailer), void fill, packing tape, a delivery note or returns slip, any brand inserts or marketing materials, packing labour, and a wastage allowance (typically 3–5%) for damaged or mis-sized materials.
How do I calculate packaging cost per unit?
Add up all material costs per shipment (box, fill, tape, inserts), add packing labour cost per order, add a wastage % allowance, then divide by the number of units per shipment. For multi-item orders, divide total packaging cost by average items per order.
Is sustainable packaging more expensive?
Typically yes, but the gap is narrowing. Recycled cardboard boxes cost 5–15% more than standard. Compostable mailers cost 20–40% more than poly mailers. However, sustainable packaging may improve brand perception and repeat purchase rates, partially offsetting the cost premium.
How does packaging affect my ROAS target?
Packaging is a variable cost per order. Including a £1.35 packaging cost in your ROAS calculation on a £32 product (4.2% of revenue) increases your minimum viable ROAS meaningfully. Omitting it means your ROAS target leaves less profit than you expect — the packaging cost eats into your assumed net margin.
What is right-sizing and how much does it save?
Right-sizing means using packaging that closely matches your product dimensions — eliminating excess void space. Benefits include lower material cost, lower carrier dimensional weight charges, and lower void fill cost. Combined, right-sizing typically saves £0.30–£1.50 per order depending on current over-packaging.
Next Steps
Audit your current packaging cost for your top 10 products by volume. Build out the full component cost including materials, inserts, labour, and wastage. Compare against what you're currently using in your margin calculations — for most brands, the true packaging cost is 20–40% higher than their assumed figure.
Include Packaging in GROW Platform's Cost Stack
GROW Platform's COGS+ feature includes a dedicated packaging cost field in your per-product cost stack. Every penny of packaging cost is factored into the minimum ROAS calculation for each product's Google Shopping campaign — so your bids are based on true economics, not approximations. Create an account →
