Web-to-Pack pricing: our analysis and our first tips
A few weeks ago, in our article " Packhelp's record-breaking fundraising, or why you should learn from printers! "about the 40 million euros raised by one of the world's leading Web-to-Pack specialists, Packhelp of Poland.
As a reminder, the company announced dizzying figures - in just 6 years of existence - in a Web-to-Pack sector that was still in its infancy (how many of you now sell your packaging online?):
- 250+ employees (and dozens more under recruitment)
- + more than 50,000 customers in some 30 countries (an average of nearly 10,000 new customers a year)
- At the time, we estimated their monthly sales at around 1 million euros , with probably 3-figure growth .
In view of the success of this article and your numerous feedbacks, we decided to delve deeper into the subject over the last few weeks to bring you some valuable market data on the real price of a Web-to-Pack orderWith some real surprises (but also some confirmations), we've distilled our initial advice to help you respond to the inevitable rise of Web-to-Pack.
We have carried out our price study on two classic packaging materials with which you are familiar:
- A corrugated cardboard blank - FEFCO 427 (ear box) standard size, printed
- An American case - FEFCO 201 tailor-made, neutral
We consolidated our information by requesting prices from various market players, in order to obtain a panel as representative as possible of the industry's economic reality:
- Packhelp - Web-to-Pack solution - Poland
- Pack.ly - Web-to-Pack solution - Italy
- Aquitaine Packaging* - Traditional industrial - France
- Occitanie Packaging* - Traditional industrial - France
- Lusitanie Packaging*- Traditional industrial - Portugal
- Warsaw Packaging* - Traditional industrial - Poland
- Iberico Packaging* - Trader - Spain
*Company names have been changed.
With 7 manufacturers, 2 common packaging types and requests for 3 different quantities each, we've gained some valuable insights, with key information for your future strategy. We also give you the average lead times of these platforms and suppliers, as well as their tooling costs (if applicable).
Application n°1 - FEFCO 427 (Ear box) print
Our first test request was as follows:
- A FEFCO 427 (Ear box)
- 210 x 180 x 90
- E 30 brown kraft flute, brown test
- 1-color printing, black on front, coverage 25%.
- For 2,500, 5,000 and 10,000 units
- Shortest possible delivery times in the 64
Our transparent FEFCO 427 price table...
The table shows it very clearly: if the customer is not in a hurry, Packhelp is, to our great surprise, unbeatable on price.
Between 2,500 and 10,000 pieces, Packhelp is able to reduce its piece price by almost 30%, even though it was already the best placed on the smallest order.
It's even more impressive when you compare the pure player (whose business is 100% online) with its Polish counterpart, with whom we do business directly. Packhelp is simply 28% cheaper on the 2,500-piece series, and up to 36% cheaper on the 10,000-piece series. Bearing in mind that delivery times are comparable and that service quality alone cannot justify such a price differential (in this case, we'd choose a local player), you can bet that Packhelp will start by eliminating all its traditional national competitors (or making them subcontractors) over the next few years.
Packhelp's aggressive pricing is made all the more obvious by the fact that we include delivery costs for all the manufacturers tested. There are therefore no additional costs to be expected on the prices we are announcing.
Pack.ly seems to be off the market, with stratospheric prices that are nonetheless justified by a very high level of service. With the Pack.ly Special rate, a customer is delivered in 8 days (production + delivery time!). Do they still win orders with these prices? Except in extreme cases (and even then, you have to know the service), nothing is less certain.
The message of hope for this type of packaging is that French manufacturers are positioning themselves very well and delivering almost twice as fast.
With the associated high level of service, price competitiveness, transparency (I know who makes my packaging and where)... the manufacturer who manages to position himself well online has every chance of winning most orders on the French market.
Application no. 2 - FEFCO 201 (American Fund) neutral
Our second test request was as follows:
- FEFCO 201 (American Fund)
- 625 x 290 x 475
- EB 30 brown kraft flute, brown test
- No printing
- For 1,500, 3,000 and 5,000 pieces
- Shortest possible delivery times in the 64
Our transparent FEFCO 201 price list...
Firstly, 3 suppliers are not positioned on this product.
Pack.ly and the Portuguese manufacturer do not produce this product. The Polish manufacturer declares itself uncompetitive with local manufacturers (in this case, French) on this type of product. Looking further afield, foreign players (beyond neighboring countries) are not responding to this kind of demand. The FEFCO 201 thus configured is a low value-added product, with no tooling, and their economic relevance on this type of project does not allow them to position themselves.
Packhelp is poorly positioned here. What's more, it plays on a lack of clarity about its flutes. The website states "Safe transport and handling thanks to robust corrugated board (E to EB flute)", but the difference between the price and quality of E and EB flutes makes the comparison irrelevant. When it's specified that we want EB 30, prices soar. To make matters worse, Packhelp is totally out of date with the other three manufacturers.
French manufacturers fare best, followed by the Spanish trader. Watch out, then, because it's the Spanish manufacturer who - with a tight direct price, transparency and good service quality - could win the day with an E-Commerce site on the French market.
French manufacturers don't have to wait to launch their Web-to-Pack offer, as they are relevant not only in France, but also in neighboring countries. It's a safe bet that today's frontrunners will be tomorrow's winners - if they execute well.
To sum up
The difference in positioning for Packhelp is enormous, depending on the cut (no doubt due to the fact that Packhelp works with manufacturers who use laser cutting for their flagship products).
Our biggest surprise comes from the gap between the Web-to-Pack leader and its Polish counterpart. How can a neighboring reference supplier, contacted directly, offer higher prices (up to more than 50%)? It's even more striking when you consider that Packhelp is undoubtedly working with a direct competitor of this Polish supplier: what margin does this manufacturer have left? Is Packhelp losing money on these orders?
This raises the question of the strategy used to crush the European Web-to-Pack market and - more generally - the packaging market. It seems obvious that Packhelp, in order to win customers, is losing or at least not making any money on these orders. Rereading the tables, adding logistics costs, the substantial advertising budgets invested online (which the rest of you have little or none of), the margin left to partners, the numerous recruitments, ... the quasi-annual and increasingly large fund-raising campaigns (as a reminder, 40 million for the last one) become obvious. Investors pay the margin and finance the losses in exchange for double or even triple-digit growth.
The European packaging industry is undergoing a veritable "uberization" process, with new entrants entering the market, undercutting prices, drying up the market and eventually consolidating it.
Customers are viewed here in terms of "lifetime value" (LTV), and the models are based on the sum of the gains they will generate throughout their "commercial life" with Packhelp. The only thing that counts here is sustained growth, with more new customers being recruited every year and cumulatively (50,000 customers in 5 years).
So how do you deal with it?
We hope we've provided you with some important and relevant information, and while we await our leads and advice in the next article, please don't hesitate to contact us to discuss your strategic vision on this subject.