Packaging represents a significant but often overlooked opportunity to improve an online retailer’s profitability. While carrier negotiations and volume discounts reduce shipping rates, packaging optimization addresses a different cost driver: the amount you spend on materials, labor, and dimensional weight charges per shipment.
In this guide, we explore 13 packaging cost reduction ideas across material selection, box sizing, shipping efficiency, and carrier billing.
Key highlights:
- Packaging costs are a shipping expense that extends beyond materials to include labor, transportation, compliance, and warehouse overhead.
- Strategic packaging optimization delivers savings through improved material selection, intelligent cartonization, and automated carrier billing management.
- Shipium’s Packaging Optimization solution enables data-driven decisions that right-size every shipment, reduce billable weight, and improve space utilization across your entire network.
What are packaging costs?
Packaging costs are the direct and indirect expenses incurred to assemble protective packaging for products prior to shipment. These costs include compliance requirements, damage and returns, and equipment infrastructure.
Understanding the components of packaging expenses is key to identifying cost-saving opportunities.
| Packaging cost component | Specific expenses | How to calculate this cost |
|---|---|---|
| Materials |
|
Per-unit material cost × order volume × material type |
| Labor |
Time spent on:
|
Hourly wage × time per order × order volume |
| Dimensional weight (DIM) charges | Carrier fees based on package volume | (Length × width × height ÷ DIM divisor) × carrier rate × order volume |
| Damage and returns |
|
Product cost + return shipping + replacement labor |
| Compliance costs |
|
Certification costs ÷ units produced + ongoing audit fees |
| Warehouse overhead and storage |
|
Allocated per square foot × inventory holding period × volume |
| Equipment and infrastructure |
|
Annual equipment depreciation + maintenance contracts |
13 packaging cost reduction ideas
To help you improve delivery efficiency and protect your bottom line, we’ve compiled 13 actionable strategies to reduce packaging costs:
1. Digitize and centralize product packaging specifications
Ecommerce companies may manage packaging data across multiple systems, such as spreadsheets, PDFs, and email, making it difficult to identify consolidation opportunities. Digitizing specifications on a centralized platform enables you to compare similar box sizes, identify duplicate SKUs, and streamline purchasing, creating visibility for better discount negotiations.
2. Eliminate unnecessary packaging components
Every non-essential element adds cost and complexity to your packages, such as separate instruction cards, thank-you notes, promotional inserts, and branded tissue paper. Eliminate unnecessary components by printing information directly on packaging or by using QR codes to access digital content.
3. Build compliance into material selection
Regulated industries face compliance costs for U.S. Food and Drug Administration (FDA) certification, International Safe Transit Association (ISTA) testing, and sustainability certifications. Companies may treat these costs as separate from the packaging process, but integrating them saves money. By identifying compliant materials upfront and pre-approving them before packaging design begins, you avoid costly recalls, regulatory fines, and wasted inventory.
4. Switch to eco-friendly mailers for soft goods
Corrugated boxes are necessary for fragile items, but soft goods like apparel, books, and textiles don’t require boxes. Eco-friendly poly mailers are lighter, more compact, and cheaper. This reduced weight also lowers your DIM charges and shipping costs.
5. Implement just-in-time packaging inventory to manage packaging cost
Maintaining large inventory reserves ties up your capital, occupies warehouse space, and creates obsolescence risk if specifications change. Just-in-time inventory reduces holding periods by establishing supplier partnerships and using demand forecasting to receive weekly or biweekly deliveries rather than maintaining months of stock.
6. Adopt extended producer responsibility (EPR) compliance proactively
New packaging legislation, such as the extended producer responsibility (EPR), is pushing companies to balance cost reduction with environmental impact. Brands that proactively design packaging for recyclability and material efficiency can reduce compliance costs while meeting regulatory requirements.
7. Launch packaging reuse initiatives with customers
Single-use packaging drives continuous material purchases and creates disposal costs. Return programs shift this model by enabling customers to send packaging back for refurbishment and circulation, reducing the need for new materials while building brand loyalty.
8. Standardize packaging inventory to core sizes
According to Supply Chain Brain, most companies maintain 15 to 20 different box sizes. Standardizing to a smaller number of core sizes simplifies operations and strengthens your negotiating position with suppliers. Higher volumes of fewer SKUs enable deeper bulk discounts while reducing warehouse training complexity and picking mistakes.
Learn how to decide packing sizes and options per fulfillment center.
9. Optimize box sizing and void fill with cartonization
According to the Logistics Trend Report, packaging is often 40% too large for its contents, requiring extra space and more vehicles than necessary for transportation. Automated cartonization determines box sizes at the order-routing stage, before items reach the warehouse, removing guesswork and ensuring the use of the smallest possible box for every order.
See how to optimize cartonization with Shipium.
10. Consolidate orders to reduce total packaging cost
Retailers often ship multiple customer orders or multi-item purchases separately, resulting in multiple boxes, labels, and carrier fees per delivery. Consolidated shipments combine split orders into single deliveries at intermediate points, such as between fulfillment centers during regular inter-warehouse transfers. With this approach, you maximize cargo space and reduce handling costs.
11. Integrate packaging with route optimization
Packaging efficiency improves when you optimize routing. Shipping from closer fulfillment centers reduces the need for protective packaging, allowing lighter materials and less void fill. Route optimization solutions, such as zone skipping, reduce costs by leveraging bulk LTL rates to regional sort centers, bypassing high-cost zones and avoiding long-haul parcel surcharges.
12. Negotiate carrier DIM rates based on data
Reducing average package dimensions improves your shipping profile and provides data to support carrier negotiations. Providers reward consistent optimization through cubic pricing tiers, density discounts, and accessorial waivers. Combined with other factors like volume and service mix, improved parcel packaging efficiency strengthens your position to negotiate better carrier rates and incentives.
13. Audit carrier invoices for DIM weight errors
Carrier invoices can contain errors rooted in incorrect DIM calculations, which occur when a package’s physical dimensions are mismeasured or misreported. Audit invoices to ensure your optimized packaging footprints are being billed correctly, so you’re not hit with misapplied surcharges or “dead air” penalties. Billing management tools can automate this process and flag dimensional discrepancies that might be inflating your shipping spend.
Optimize your packaging costs with Shipium
Shipium is an end-to-end shipping platform that integrates easily with your supply chain ecosystem. We help to optimize packaging by leveraging automated cartonization logic to ensure the right-sized box is selected for every order.
- Our cartonization software calculates the smallest possible footprint for an order, helping you “stop shipping air” and avoid expensive carrier surcharges.
- By determining the exact package size and weight early in the process, you can provide more accurate delivery promises and shipping rates at checkout.
- Selecting the correct box size ensures items are secure, reducing the risk of product damage and the high cost of returns.
Book a demo and discover how to reduce packaging costs with Shipium.
Frequently asked questions
What are the benefits of reducing packaging costs?
Reducing packaging costs improves profitability by lowering the total cost per shipment. Beyond material savings, packaging optimization increases warehouse throughput: you can pack orders faster, reducing the labor hours required to meet daily volumes.
How to reduce packaging material cost?
To reduce packaging material costs, retailers should leverage automated cartonization to ensure every order uses the smallest container possible, minimizing both corrugated waste and expensive void fill. By conducting a data-driven audit, you can also identify “over-engineered” boxes and switch to lower-grade boards or poly mailers that maintain product safety at a lower unit price. This strategy effectively reduces procurement spend while lowering carriers’ billable dimensional (DIM) weight charges.