Starting a Packaging Distribution Business, Cost, Profit

Introduction to starting a packaging distribution business

The packaging industry has become a growing industry in today’s market. Everyone needs to carry their products. Due to online shopping, the use of packaging becomes more important. These opportunities created a wider market for the packaging industry. Many business owners who deal with products should spend a lot of time packing and shipping orders. The demand for packing creates many to start their own distribution business. Entering into the packaging world results in rewarding huge profits due to market expansion. However, a bit of patience is required to create a market base for the business. Now, let us get into starting a packaging distribution business in India.

A guide on how to start a packaging distribution business

Who are packaging distributors?

Every product we purchase comes with packing. Even when we purchase chocolate it is packed well and sealed. Few may also be connected only with packing which creates interest to buy the product. This is one industry that never goes out of business. The demand for this made many entrepreneurs start a packaging business. The supply chain is like Manufacturers-Distributors-End users. The packing manufacturer has a machine to produce. They will either make packaging for the order or packaging to sell to distributors. The employees working in manufacturing companies are well experienced and aware of the company’s type of packaging.

Packaging distributors run the business to fulfill the needs of companies who often supply the products. The companies are fed up with the packaging which takes more time. So they choose the distributors who can pack their products and fulfill the requirements. Packaging distributors come up with their unique ideas and increase their sales.

Role of Distributors

When a product is manufactured in one place, but customers are over a wide area, it is difficult for the producer to distribute it all over the country. This shortage is fulfilled by distributors.

They are the connecting link between manufacturers and retailers or consumers. One of the key responsibilities of a distributor is of moving the products. The right distributor enhances a company’s exposure in the product market and can give an edge in terms of speed and efficiency.

Step by step procedure to start a packaging distribution business

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Procedure of Packaging Distribution. — The procedure of Packaging Distribution.

Create a business plan

The business plan helps an entrepreneur to be successful. One can know the information and procedures to start this business. It is easy to frame the cost of buying material, purchasing machinery, hiring employees, advertisement, etc.

Research on how to target the market can be known by contacting a few people who are experienced in this industry.

Make a detailed analysis of the business plan. Include day-to-day activities in detail. Details should include workflow, packing and distribution outlay, location, etc.

Legal formalities

Registration

The business must be registered legally to prevent legal issues. The business includes a form of business structure. Based on the budget and investment one can choose to start any form of business organization. Few businesses are operated from home, so they require a small amount of investment. These are considered Sole proprietorships. The business is managed and operated individually in Sole proprietorship or Person Company. No registration is required to start a sole proprietorship business, but a business license should be obtained.

One can opt to form a business organization like a Company or Partnership firm or Limited Liability Corporation (LLC). LLC can be opted to prevent from being personally liable. The registration process is different for different forms of business organizations. If the scale of operation is a large Company form of business organization is suitable. The Company can be registered as per provisions of the Companies Act, 2013. To register it as a Company few documents must be filed like the Application form with required details, a Declaration form, a Memorandum of Association and Articles of Association, and any other required documents if mentioned.

License

The licensing requirements for distribution businesses will vary depending on the state and type of product. A business license is required to start a new business of any kind. It is an easy process to apply for a license. An application form with details of business contact information, nature, and type of business can be mentioned. But to obtain a wholesale distribution license much more effort is needed.

Insurance coverage

The property and liability must be insured to claim the damage and loss. An insurance agent will advise about the options and one can choose the best plan.

Other approvals

NOC No objection Certificate from the local body is required along with the license.
GST registration is to do based on the turnover of the business. To perform legal operations this registration is a must. The returns have to be filed monthly, quarterly, annually based on the registration requirement.
Small scale industry registration is required to be done by Micro, Small, and Medium Enterprises (MSME).
Trademark registration if required.

Location

The location of the packaging unit is to be registered by providing residence proof. It is required to be cautious about the location because many products which they deal with maybe perishable in nature. The location should ensure that the product received without deteriorating its quality. Most of the distributors rent the warehouse space for storage. They find it is economical than purchasing the space.

Marketing tips

Offer discount coupons
Advertise in local newspapers in vernacular language
Make commercial powerful messages which run on TV
Usage of social media Face book, Twitter, Instagram, etc.,

Budget or cost to start a packaging distribution business

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The total capital to start a packaging distribution business amounts to Rs. 30,00,000 to Rs. 45,00,000

Office space- Rs. 2,00,000 to Rs. 3,00,000 per month
Storage room – Rs. 4,00,000 to Rs. 4,50,000 per month
License cost – Rs. 1,00,000 to Rs. 2,50,000
Machinery – Rs. 10,00,000 to 15,00,000
Insurance – Rs. 1,00,000 to 2,00,000
Marketing – Rs. 5,50,000 to Rs. 6,00,000
Miscellaneous expenses – Rs. 2,00,000 to Rs. 3,00,00

Skills to be possessed by the distributor

Negotiating skills
Marketing skills
Professional ethics and behavior
Understanding the customer and acting accordingly
Estimating the product needs effectively
Creating memorable packages
Attracting end-users with huge discounts
A good relationship with local providers

How much profit does the packaging business make?

The profit margin for this industry is high. It is one of the growing trends of the business. Approximately 30% to 40% margin can be gained by this business.

What happens during a typical day at the packaging distribution business?

The packaging distribution business drives employees to work through a variety of design lessons. They always must check the clarity and simplicity of the designs. It also reflects product features, marketing trends, administrative management, finance, etc.

Types of packaging companies

There are two common types of packaging companies:

Manufacturers

Packaging Manufacturer
Prototype Company

Brokers

Packaging Distributor
Packaging Broker
Packaging Co packer Company
Packaging Designer firm

The packaging manufacturer is the one who has machinery and produces products. The manufacturer acts accordingly based on customer needs.

Prototype companies are a type of packaging company that produces a small volume of packaging which is mainly used for sampling and presentation purposes.

A packaging broker is a type of packaging company who buys custom packaging from a packaging company and resells it to the customer.

The packaging distributor is the one between manufacturer and retailer. The distributor typically buys from the manufacturer and provides it to the end-user.

Packaging designs are provided by companies that give a lot of creative services. These services are often used by larger companies with deep pockets.

Co packer company is nothing but puts the product into the package and makes them retail-ready. It involves putting products into jars, bottles, tubes, etc.

What are stock packaging and custom packaging?

There are mainly two types of packaging. One is stock packaging and the other is custom packaging. Stock packaging is a readymade one. It is produced inexpensively. Generally, it is made in standardized styles and sizes. Beverage bottles, vitamin jars, protein powders are made in-stock packaging.

Whereas custom packaging is specifically tailor-made to fit a product perfectly. Printing plates and cutting dies are examples of custom packaging. This type of packaging is expensive than stock packaging because it requires designing and planning. It gives a more refined and professional appearance to the product. Many clients order custom packaging because of its uniqueness.

Equipment required starting a packaging distribution business

Mailers
Boxes
Plastic wrap
Scissors
Cutters
Tapes
Labels
Dollies
Permanent markers

Types of packaging

Packaging plays a large role in the value of a product as a whole. There are many options to choose from packaging and boxes based on today’s market. Below are the lists of options one can choose for packing their products:

Plastic boxes

Traditional materials such as wood, glass, ceramic have already been replacing by plastic.

Plastic boxes have many advantages. Generally, these are more durable than paper boxes. It preserves the quality of food and prevents any contamination of diseases. These are cost-effective.

Document enclosed wallets

For parcels or pallets, these enclosed walls are used. In-office and industries the usage of document-enclosed walls is more. Important files and documents can be protected by this type of packaging.

Foam edge guards

These are mainly used to protect mirrors, frames, glasses, etc. these foam edge guards are simple and cost-effective protection for pallet and product edges.

Kraft paper rolls

When products are shipped kraft paper rolls act as additional protection. Mainly used during the period of shipping.

Removal kits

These are used when there is a shifting of the house, flat, or office. Simply for moving and storing the goods removal kits are used.

Jiffy foam rolls

These rolls are used to protect the items that need special care and attention. These are versatile and suitable for a multitude of applications.

Board back envelopes

These are used to send documents and items without getting creased in the post. These keep the contents of the letters flat, crease-free, and with perfect corners.

Common types of boxes used for packaging

Folded cartons

These types of boxes are mostly used in retail stores. Cereal box, pizza parcels are done on folded cartons.

Rigid boxes

These boxes are sturdier. They do not get folded or collapse as folded cartons. These are often used for high-end products. An iPhone box is an example of a rigid form of a box.

Corrugated boxes

These commonly refer to as brown cardboard boxes. These boxes typically have three layers. The fluted layer is where the strength of the product lies. These boxes are often referred to as shipper boxes or master packs.

Tips to reduce the cost of packaging

A recycled paper board is less expensive than a regular whiteboard. Use standard recycled paper board.
The normal and most common coating is water coating. This can be done for the product.
Be conservative and decorate only the most essential parts of the box with foil stamping and embossing.
Include die-cutting shapes.
The ink used to print the graphics can be reduced in cost by halftones.
The thickness of the box based on the product can be reduced.

How much does packaging costs

Custom packaging is discussed regarding the cost. The cost of packaging includes materials, labor, design work, set up fees, tooling, prototypes, storage, etc.

Conclusion of starting a packaging distribution business

However, starting a packaging distribution business is profitable and requires huge investment.

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