News and Insights
E-commerce, Logistics, and Small Business Management
Unboxing is Overrated – Especially for Startups
Conventional wisdom seems to suggest that a memorable unboxing experience is a necessary condition for eCommerce success. On the surface, this makes sense as a thoughtfully engineered presentation can certainly help to make a great initial impression, increase perceived value, and build brand loyalty. But, should early-stage firms – especially those that are materially resource-constrained (which is almost all of them) – heavily emphasize this rather narrow aspect of marketing? In our experience, the answer is clear: absolutely not.
In this post, we leverage our nearly two decades of experience in the startup order fulfillment space to highlight the upwards pressure that ambitious unboxing experiences exert on several of the main operational cost centers:
- Packaging materials
- Order handling
Without exception, customized packaging materials cost more than off-the-shelf alternatives. Consider, for instance, a custom corrugated carton with a custom corrugated insert designed to hold the inner contents in place. Each of these materials requires the upfront purchase of custom tooling (one-time setup costs usually run $1,500 or more for each item). Further, both need to be purchased in quantities which allow for at least some measure of efficiency at the manufacturer level in order for the unit economics to even remotely approach those of generic options (assume 10,000-20,000 units per run). And these costs are not unique to cardboard; indeed, similar rules apply to other customized materials like polymailers, bubble mailers, tissue paper, etc.
Oddly enough, this catches a lot of eCommerce sellers by surprise: customized packaging materials increase storage costs at fulfillment centers. While storing an adequate supply of a variety of generic packaging materials is part of the fulfillment business which cannot be passed through to clients under most circumstances, as soon as customized packaging materials are added into the mix, the client should expect to be responsible for storage. All too frequently, we observe early-stage firms with uncertain volume procure large runs of custom materials in order to reduce the per unit cost only to lose a multiple of that amount over time as order volume is slow to materialize and storage fees add up month after month.
Another common surprise: customized packaging materials increase order handling costs at fulfillment centers. Except when at scale, it is difficult to create an efficient pick and pack setup when custom materials are utilized; however, even at scale, the complex packouts needed to create higher-end unboxing experiences involving custom cartons, inserts, tissue, etc. require a lot more labor and care – necessitating a very different pricing structure.
For many eCommerce sellers, this point ends up being make or break: customized packaging materials can significantly increase chargeable shipping weight – either by increasing the actual weight or the dimensional weight of orders – and, therefore, shipping costs. Higher-end unboxing experiences often bring added actual weight which is especially impactful if orders are near a major cost demarcation line (things get a lot more expensive, for instance, at one pound), but the effect of unboxing is frequently made worse by dimensional weight. It’s not uncommon for desired unboxing experiences to add two or three pounds (or more) in dimensional weight which can easily render shipping cost and transit time estimates woefully inaccurate.
A Few Suggestions
With these costs in mind, our advice to startups is simple: disregard the pressure to adopt a higher-end unboxing experience until such time as it is both truly necessary and affordable. If, however, branding is deemed essential, here are a few points for consideration:
- If possible, limit branding to product display packaging – manufacturers often have flexibility on this front and it minimizes (and, perhaps, eliminates) the upwards pressure put on the main operational areas by customized outer cartons, inserts, etc.
- If customized packaging materials are absolutely unavoidable, consider a deliberate phase in of new elements as volume materializes.
- Minimize the number of unique customized materials, but keep in mind that larger (and seemingly more versatile) options tend to exacerbate the issues outlined previously.
In our nearly two decades of experience in the order fulfillment space, we have never seen the lack of an unboxing experience cripple an eCommerce seller; however, we have watched numerous fail due in large part to customized packaging materials severely upending cost estimates.