Tim Tam Logistics

As an Australian living in the US, I feel it’s my duty to introduce the treats of my childhood to my co-workers: red frogs, Fantales, and Milo have all made appearances. However, far and away the mostly highly voted treat has been Tim Tams. Unfortunately, as an imported product, Tim Tams are pretty expensive in the US - over US$8 a packet on Amazon. It’s not immediately clear where this cost comes from, so I decided to figure out if I could sell them for less.

Original Tim Tams, picture from Arnott's site

Tim Tams are manufactured in a number of countries across the Asia Pacific region, including not just Australia and New Zealand, but also Indonesia, Japan, and Singapore. They are, however, customized slightly for each of these markets, so let’s assume for the sake of argument that we wish to purchase Australian Tim Tams.

The first thing we need to do is find out the wholesale price for a packet. This information is a little difficult to come by, so instead we’ll extrapolate from retail prices, since we’re only trying to get a ballpark figure anyway. There are two large supermarket chains in Australia, Woolworths and Coles, but both sell a full-priced packet of 11 biscuits for the same amount: AU$3.50, (currently US$2.63). However, Tim Tams are so popular that one of the two chains typically has them on special at any point in time, usually for AU$2.50 (currently US$1.88). Given the frequency of these sales, I think it’s reasonable to say that the supermarkets aren’t making a loss on them at that price, so we’ll use a generous wholesale price of US$1.88.

Now that we’ve figured out how much it costs to buy an individual packet of Tim Tams, we need to decide how many packets we’re going to buy. Assuming that we have sufficient initial capital (say from an IndieGoGo campaign, or similar), our main constraint is going to be shipping.

The cheapest way to get a lot of things from Australia to the US is on a ship, so we need to determine what size shipping container we want. It turns out that shipping containers are always 8 x 8ft wide and tall, and can be 20ft, 40ft, or 45ft long. Let’s say that we don’t want to have too high an initial cost, so we’ll use the smallest available shipping container size. That means we’ll have an 8 x 8 x 20ft, or 2438 x 2438 x 6096mm, box at our disposal. We’ll give ourselves some wiggle room and call that 2200 x 2200 x 5800mm.

Tim Tam packets themselves are 35 x 75 x 220mm, and come in boxes of 24 packets, layered 6 across and 4 tall. That gives us dimensions of 140 x 450 x 220mm for each box, which we’ll round up to 150 x 500 x 250, for air and packaging. Stacking boxes, we can say we’ll fit 14 boxes high, 5 boxes across, and 23 boxes deep. That’s a total of 1,610 boxes, or 38,640 packets of Tim Tams (containing over 425,000 individual biscuits!).

With a handle on our volume, we can start to talk costs. We said that we’d assume a wholesale price of US$1.88 for each packet, so buying enough stock for our container is going to cost US$73,000 (to the nearest $1000).

Once we’ve bought that stock, we need to get it to a port, where we can load it into a shipping container. Let’s say we choose to rent a truck for that - a moving truck will be a little small, so we’ll use two. Each will cost around AU$500, so we’ll budget AU$1000 for the vehicles themselves. We’ll also need drivers for the trucks, but since they’re just moving trucks, they can be driven by anyone. Let’s say we use AirTasker (an Australian TaskRabbit-alike), and offer AU$30/hr, well over the Australian minimum wage. For two people for an eight hour day, that will cost us just under AU$500. So we’re looking at AU$1500, or US$1200 for transportation from the point of sale to the port.

Ideally, we’d like a port in one of the larger Australian cities, to give us more choice of supermarket to source our Tim Tams from. Since we’re shipping to the US, we’ll presumably want a port on the Eastern side of the country. Playing with the rates on worldfreightrates.com, it doesn’t seem to make a difference which ports we ship to and from on the Australian east coast / US west coast, so we’ll use Sydney and Oakland, since they’re the ports I’m most familiar with. To keep our Tim Tams in the best possible shape, we’ll pay for a refrigerated container, and since it’s a large investment, also insurance. We get a quote of US$1950, which we’ll round to US$2000.

So, our biscuits have made it to the US! Well, not quite - we still need to pay import taxes. We’ll use dutycalculator.com to figure out how much we need to pay to import our “Biscuits | coated with chocolate” to California. Helpfully, the US and Australia have a bilateral free trade agreement, so we only end up needing to pay US$250 for duty!

So far, we’re at a total cost of US$76,450, or US$1.97 per packet of Tim Tams. Things are looking pretty promising for us being able to beat the market rate of US$8 per packet!

However, we said that we’d fund this with some kind of crowdfunding campaign. That means we’ll now need to distribute our Tim Tams to our backers, which will mean shipping to an assortment of addresses within the United States. We’d rather not expend too much effort on this, and we’d like a way to continue offering shipping on an ongoing basis, so we’ll use Fulfillment by Amazon.

We’ll need to watch out for a number of requirements Amazon specify here. We’ll have to add a shipping label to each of the boxes of Tim Tams, so that they can be correctly received, in addition to labelling each box with a sticker that notes the expiration dates on the boxes are in DD-MM-YYYY format. Let’s assume that we’ll get our two AirTaskers to deal with that labelling back in Sydney, and that that costs us nothing.

We then need to get our shipment over to Amazon. Like most things Amazon, the location of their fulfillment centers isn’t widely published, but if this blog is to be believed, there’s a center in Alameda County, just down the road from Oakland’s port. Trucking costs in Sydney and Oakland are similar, so we’ll budget another US$1200 for transporting the goods to Amazon.

The last thing for us to figure out is how much Amazon will charge us for the privilege of shipping our biscuits. We can find Fulfillment by Amazon fees here. Assuming that we ship every packet as an individual unit, and that we use standard shipping, we get a cost of $4.75 for order handling, $0.75 for pick and pack, and $0.45 for weight, giving us a total cost of $5.95 for shipping each packet around the US.

That means each of our Tim Tam packets is going to cost $7.92, surprisingly close to the $8 price we originally saw! That surprised me, because I assumed that the Amazon sellers would be making a larger profit than that, and certainly would have more foreign exchange buffer built into their prices.

However, looking more closely, I noticed that that listing is actually a 2 pack of Tim Tams. Making the same optimization ourselves gives us a total cost of $5.95 + $1.97*2 = $9.89, or a 60% markup - much better. There are definitely price optimizations to be made in these calculations, but the ballpark seems right.

So there you have it - the cost of Tim Tams on Amazon in the US has nothing to do with getting them across the Pacific. In fact, the cost of moving Tim Tams 12,000km across the Pacific was just 12c per packet! A quarter of the remaining cost was the wholesale price of the biscuits, and the remaining 75% was getting the biscuits to individual houses in the US. Who knew domestic shipping was so expensive!