I’m pleased to introduce NEMA co-founder CEO of eternal before he got in the apparel content game Nima has spent a ton of time in the illusionistic space and is even an advisor to a handful of companies, including Arco. Thanks so much for spending some time with us. Thank you so much for having me. One thing we often talk about is gross margins and how it impacts decisions around logistics whether it’s shipping warehousing or packaging.
How did you think about sourcing your packaging when you decided to move forward shipping your product. Well to make an educated decision I looked for some market data on how much large and small companies alike spend on fulfillment meaning everything from packaging shipping thank you cards pens tape et cetera on the large end Amazon
spends about 15% of sales on fulfillment and they have crazy scale. So I asked several founder friends and looking at internal data from some of the companies I actively advised for most of the rest of us we will likely spend somewhere between 15% to 25% of sales on fulfillment specifically.
OK so what this means is if your average order values $100 you’re not going to be spending more than 15 to 25 bucks on. Exactly right. OK so why don’t you give us a real life example to start. Gross margin is the difference between revenue and cost of goods sold divided by revenue. So if on average it costs you 30%
to make your product then on average your cost of goods sold are $30. Assuming $100 average order value. Now let’s assume you spend 15% on fulfillment meaning $15. So out of your $100 sale 45 goes to a making your product and be fulfilling it.
This leaves you with $55 per product to pay yourself and staff advertise on Google and Facebook and billboards and send smoke signals and buy whiskey and dog food. So to build a profitable business you’ll want to do the math on how many things you need to sell to make payroll and buy dog food.
So how much are you guys spending. In our case, we spend about $21.50 on fulfillment. So that came for us to about 21 and 1/2 percent of sales on fulfillment. And specifically we spend $5 per box $10 for shipping label $5 per pen $1 per thank you card. $0.30 per sticker and about $0.12 per flight and see a bag.
Why did you go with printing just on the inside of the boxes. This decision was actually down to my co-founder. Shouts the big Raj who suggested we ought to print only on the inside to try to avoid getting our boxes stolen or with any flashy designs on the outside and knock on wood. We’ve actually had awesome feedback from our customers telling us what a cool experience has been for them to open a white box
and see the designs on the inside. And we haven’t had any boxes stolen. Red I love this box. It’s perfect for apparel. But why didn’t you choose to go with the bag. As I learned from you to get custom poly bags we would have to commit to a much higher minimum order quantity than we were comfortable with. Which also meant higher upfront costs so we opted for the best solution
being these wonderful commanders. Yeah it’s a nice mailer. It’s an even nicer shirt. Nima thank you, as always, for your guidance. Thank you so much for having me. So if you want to play around with your own numbers we’ve provided the same worksheet name we used. So take a look and apply it to your business. Let’s just quickly read through what a quote looks like and the costs involved.
To summarize you’ll see our setup costs if any like tooling print plates and all that shipping costs which sometimes are calculated after shipment. And of course your per unit costs and the specs that go along with it if you’re printing digitally you don’t need to worry about this. But if it’s flex a little print be prepared for what’s called an overrun and industry standard is
10% So if you order 1000 boxes you’re expected to receive as few as 900 up to 1,100 boxes. Although China can sometimes produce packaging for less it’s really the labor and material that you’re saving on prices for made in the USA can average up to 3x the cost per unit versus China. But wait let’s talk about shipping time and costs
not to mention customers when ordering from China. You could freight your packaging by sea and that can take an average of 30 Days to get to you pay a little extra and you’re looking at a two week trip by air. It sometimes takes only a few weeks when ordering in the US and will be delivered in a truck. Let’s do an example. Let’s say you order 500 medium sized boxes from China
at 45 cents each. Shipping takes 30 days and around $600 not including customs. Now you order 500 in the same box here in the States at let’s say $1 19 each. Shipping takes 12 days at a cost of $110 break that out and you have a total cost of $1.65 per box in China
and only $1.41 per box in the USA. Winner USA.