Packaging Companies - How to Choose the Right Packaging Design Firm?

The two most prominent categories of packaging companies are manufacturers and brokers. And these two categories can also act as subcategories of all other kinds of packaging companies. But, when we do so, we must clearly remember that there is a very thin line between the manufacturer and the broker. A manufacturer makes and sells stuff that is ready to use, whereas a broker simply resells packaging that is already made and sold by another manufacturer. So, when we speak of a manufacturer, we clearly omit the second category.

Classification of Packaging Companies

So, what does this two-tiered classification of packaging companies actually tell us? Basically, it's like this: there are manufacturers who make stuff exclusively for other manufacturers, and then, there are manufacturers and packaging distributors who sell packaging made by other manufacturers. So, the manufacturing company produces packaging for other manufacturers, and the packaging distributor sells that packaging to retailers. Then, there are distributors who make their own packaging and then sell it to retailers as well.

In general terms, a manufacturer earns revenue from two sources. First, they earn revenue directly from the manufacturers. When a product comes out in the market, they sell a minimum number of boxes to retailers at a certain price. The amount of revenue gained depends on the demand and supply of the products at a certain point of time. When demand exceeds supply, manufacturers earn revenue from the additional boxes or packages they order from packaging companies or the manufacturers of their competitor.

Companies and Distributors

Second, the manufacturer earns revenue indirectly through their packaging companies and distributors. Let's say that the number of boxes being sold to retailers now is two hundred. And let's further assume that this number will be on an increase. Then, assuming that the profit margin of packaging companies is twenty dollars per box, we can safely assume that the manufacturer gets a hundred dollars per sale directly from high level packaging company like Premium Custom Boxes. Now if the packaging companies increase the production, the manufacturer now has to pay an additional five dollars to the packaging broker or distributor up to a maximum of ten dollars per shipment.

This means that the manufacturer has to invest ten thousand dollars for buying inventory, paying wages to workers, paying taxes, and so on. Further, they have to provide a thousand dollars to the stock packaging distributor up to a maximum of twelve months for inventory investments. Thus a business requires capital to operate stock packaging operations.

A few years back, a similar case occurred in the South African market when three packaging companies of (2-p), (3 p) and (4 p) sold the same box of toothpaste to the same customer at the same price. Then the company of (2 p) immediately bought back the boxes of toothpaste sold to the customer at the price they received them from the distributor. The same thing happened to (3 p) as well, except that in this case they sold more toothpaste than they purchased. Thus they declared themselves bankrupt and had to close down their retail business. The government found out about this and decided to introduce a minimum price of two South African Krugerrand Francs each to protect the retail business owners from these kinds of cases.

So, What Does this Mean for Us?

 For one, it means that we should always buy packing material from an established packaging design firm with at least three years’ experience. Moreover, we should always avoid any packaging companies without a proven and recommended system of web marketing. A complete web marketing package is a combination of website design, Internet marketing strategy, social media marketing, and search engine optimization. And all these strategies have to be integrated in order for your business to succeed.

In conclusion, always do your homework before choosing packaging companies of (1 p) or (2 p). Make sure that they have the necessary licenses, that they are a recognized and accredited company and that they are based in South Africa. By doing so, you will know that you have chosen a company that is reliable and legitimate.