Web-to-Pack Pricing: Our Analysis and Initial Advice
A few weeks ago, in our article "Packhelp's Record Fundraising: What Can Printers Learn From It?," we discussed the 40 million euros raised by one of the Web-to-Pack specialists: the Polish company Packhelp.
As a reminder, the company announced astonishing figures – in just 6 years of existence – in a Web-to-Pack sector that is still in its infancy (how many of you are selling your packaging online today?):
- Over 250 employees (and dozens of ongoing recruitments)
- Over 50,000 customers in about 30 countries (averaging nearly 10,000 new customers per year)
- We estimated their monthly turnover at around 1 million euros with growth probably in the triple digits.
Given the success of this article and your numerous feedbacks, we decided to delve deeper into the subject in recent weeks to provide you with valuable market data on the actual cost of a Web-to-Pack order, with real surprises (but also confirmations), allowing us to share our initial advice so that you can respond to the inevitable rise of Web-to-Pack.
We conducted our price study on two classic packaging types that you know well:
- A corrugated cardboard die-cut – FEFCO 427 (crash lock box) standard size, printed
- A regular slotted container – FEFCO 201 custom-made, plain
We consolidated our information by requesting quotes from various market players to obtain the most representative panel possible of the industry's economic reality:
- Packhelp – Web-to-Pack Solution – Poland
- Pack.ly – Web-to-Pack Solution – Italy
- Aquitaine Packaging* – Traditional Manufacturer – France
- Occitanie Packaging* – Traditional Manufacturer – France
- Lusitanie Packaging* - Traditional Manufacturer – Portugal
- Varsovie Packaging* – Traditional Manufacturer – Poland
- Iberico Packaging* – Trader – Spain
*The company names have been changed
With 7 manufacturers, 2 common packaging types, and requests for 3 different quantities each time, we have gained some insights, with key information for your future strategy. We also provide the average lead times of these platforms and suppliers, as well as their tooling costs (if applicable).
Request #1 - FEFCO 427 (Crash lock box) printed
Our first test request was as follows:
- A FEFCO 427 (Crash lock box)
- 210 x 180 x 90
- E flute 30 brown kraft, brown test
- 1-color printing, black on the front, 25% coverage
- For 2,500, 5,000 and 10,000 units
- Shortest possible lead time for delivery in the 64 (area code)
Our summary table of FEFCO 427 prices, in complete transparency...
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 manages to lower its unit price by nearly 30%, even though it was already the best priced on the smallest order.
It's even more impressive when comparing the pure player (whose business is 100% online) to its Polish counterpart with whom we deal directly. Packhelp is simply 28% cheaper on the 2,500-piece run and up to 36% cheaper on the 10,000-piece run. Knowing that the delivery times are comparable and that the quality of service alone cannot justify such a price difference (one would choose a local player in this case), we can bet that Packhelp will begin by eliminating all its traditional national competitors (or making them subcontractors) in the coming years.
The aggressiveness of Packhelp's pricing is all the more evident as we include shipping costs for all the manufacturers tested. There are therefore no additional costs to be expected on the prices we announce.
Pack.ly seems out of the market, with stratospheric prices, justified nevertheless by a very high level of service. With its Pack.ly Special rate, a customer is delivered in 8 days (production + delivery time!). Do they nevertheless win orders with these rates? Except in extreme cases (and even then, you have to know about 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 deliver almost twice as fast.
With the high level of service associated, price competitiveness, transparency (I know who manufactures my packaging and where), ... the manufacturer who manages to position themselves wellonline has every chance of winning most of the orders on the French market.
Request #2 - FEFCO 201 (Regular Slotted Container) plain
Our second test request was the following:
- A FEFCO 201 (Regular Slotted Container)
- 625 x 290 x 475
- EB flute 30 brown kraft, brown test
- No printing
- For 1,500, 3,000 and 5,000 pieces
- Shortest possible lead time for delivery in the 64 (area code)
Our summary table of FEFCO 201 prices, in complete transparency...
First observation, 3 suppliers are not positioning themselves on this product.
Pack.ly and the Portuguese manufacturer do not manufacture this product. The Polish manufacturer declares itself uncompetitive against local (in this case, French) manufacturers on this type of product. By pushing the research more globally, foreign players (beyond neighboring countries) do not respond to this kind of request. The FEFCO 201 configured in this way is a product with low added value, without tooling, and their economic relevance on this type of file does not allow them to position themselves.
Packhelp's positioning here is poor. Furthermore, it exploits a lack of clarity regarding its fluting. The website states "Safe transport and handling thanks to robust corrugated cardboard (E to EB flute)", yet the price and quality difference between E and EB flutes makes the comparison irrelevant. When we specify that we want EB 30, prices skyrocket. To make matters worse, Packhelp's lead times are significantly longer than the other three manufacturers.
The French manufacturers are performing the best, closely followed by the Spanish trader. Therefore, caution is advised, as the Spanish manufacturer – with competitive direct pricing, transparency, and good service quality – could win the game with an e-commerce site in the French market.
French manufacturers should not delay launching their Web-to-Pack offerings; they are relevant not only in the national territory but also in neighboring countries. It is highly likely that those who are first today will be – if they execute well – the winners of tomorrow.
In summary
The positioning gap for Packhelp is enormous depending on the die-cut (likely due to Packhelp working with manufacturers equipped with 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 50% more)? It's even more striking when we imagine that Packhelp is likely using a direct competitor of this Polish supplier: what margin remains for this manufacturer? Is Packhelp losing money on these orders?
This leads us to question the strategy used to crush the European Web-to-Pack market and – more broadly – the packaging market. It seems evident that Packhelp, to gain customers, loses or at least does not make money on these orders. Reviewing the tables, adding logistical costs, the significant advertising budgets invested online (which you others do not have, or have little of), the margin left to partners, the numerous recruitments, etc., the almost annual and increasingly large fundraising rounds (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.
Therefore, the European packaging industry is experiencing a true uberization, where newcomers will enter the market, slash prices to seize it, deplete it, and then eventually consolidate it.
Customers are viewed here in terms of "lifetime value" (LTV), and models are based on the sum of the profits they will generate throughout their "commercial life" with Packhelp. Showing sustained growth, with a larger and cumulative recruitment of new customers each year (50,000 customers in 5 years), is the only thing that matters here.
How can we face this?
Hoping to have provided you with important and relevant information, and while awaiting our insights and advice in the next article, do not hesitate to contact us to discuss your strategic vision on this subject.