The common mistake most private label manufacturers make is thinking that a cheaper price from the factory equals a larger profit. Instead, concentrate on the entire supply chain.
The common mistake most PRIVATE LABEL manufacturers who trade in e-commerce make is to think that a cheaper price from the factory equals a larger profit. So, they choose their supplier based on cost price alone.
Most times, when we choose a factory by price, we get a product whose quality is not equivalent to what we wish to provide to our clients. Instead of concentrating on the product's cost, concentrate on the entire supply chain!
⚠️ Remember!
The manufacturing costs consist of the product's price AND transportation, inspection, terms of sale, taxes, product certificates, storage, shipping, etc. Reducing the product's price by a dollar or a few cents is not necessarily the right strategy for saving expenses or increasing profits.
5 Effective Ways to Reduce Your Manufacturing Costs
Ask your supplier to produce the master carton according to the dimensions you set, and pack products according to the volume you've defined. By properly packing your goods, you can significantly reduce shipping and storage costs. For example, if your supplier's master carton holds 50 units — with the right thinking you can put 80–100 units. That's close to 50% savings on shipping costs (which average 25% of total product cost). Proper packaging can save 15–20% on volume — that's a dollar per kilo!
Most service providers in eCommerce provide a wide range of services. If you purchase more than one service, they may provide a complementary service as a bonus. At GameOn Group, for clients who outsource and manufacture with us, we provide a complete QC inspection service at no additional cost. Inspection normally costs $250 — for 1,000 units at $3 each, that's an 8.3% saving.
FOB, EXW or DDP? The difference between these 3 letters can mean a 15%–40% difference in shipping or product costs. DDP can be a great solution for both saving headaches and money — one dedicated person accompanies you from factory pickup to final destination, saving transportation to port, export costs, import, permits, tax costs, and transportation to fulfillment centers.
Amazon has raised commission prices twice in recent years. Smart product package design affects shipping costs and fees you pay to eCommerce platforms. Consider shrink or vacuum packaging to save volume. Can you give up a printed insert and use a QR code instead? The right packaging shape can save hundreds of dollars on shipping and storage.
Many times we prefer to do things ourselves, believing we'll save money — and most of the time the opposite is true. Using an outsourcing service can solve MOQ problems, since the company has many customers and can order at higher volumes, getting you better prices. A package designer can significantly reduce your dimensions and save you hundreds of dollars on shipping and storage.
💡 Open Your Mind
Ask for quotes, make inquiries and calculations, examine cost versus benefit — and only then decide. You are not committed to anyone, just to the success of your business!
Talk to Our Sourcing Experts