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HOW IS ECOMMERCE AND DIGITALISATION DELIVERING ‘BEYOND-THE-BOX’ PACKAGING OPPORTUNITIES? / 21 May 2018

How is Ecommerce and digitalisation delivering ‘beyond-the-box’ packaging opportunities?

Ecommerce suppliers in America have a brown box addiction, which means big business for box makers and board producers.

The box business is booming in North America. In 2017, containerboard producers and corrugated packaging manufacturers both saw their biggest year-on-year demand increases since 2010. 2018 is off to a strong start, buoyed by positive drivers such as low unemployment, growth in disposable income and healthy manufacturing activity. Other than another economic downturn, can anything stop box and board’s positive trajectory? Who else stands to gain from the increase in boxes? 

See picture from a recent Amazon purchase consisting of five windshield wipers, a pair of gloves and a pair of headphones. Three completely unrelated items were needed, but those needs only required a trip to one website. The order was broken up into three shipments and sent in three corrugated boxes, sealed air protective packaging and a large wad of kraft paper. All three packages arrived the same day….

Consumers look at the picture above and see the everyday shopping experience. Ecommerce’s share of retail reached 9% in 2017, and is forecast to nearly double by 2022. According to One Click Retail, Amazon was responsible for about 44% of all U.S. Ecommerce sales last year, or about 4% of the country's total retail sales. Walmart, America’s traditional brick-and-mortar retail giant, is not going down without a fight and increasing its online sales focus. So are “smaller” (only in comparison to Amazon and Walmart) players such as Target, BestBuy and Macy’s. 

Containerboard producers and box makers look at the picture above and see dollar signs, but there are ample opportunities for others within the paper and packaging industry. Increases in Ecommerce translate into increases in demand for tapes, labels, padded envelopes, kraft paper, and protective packaging made from sealed air, foam, plastic or molded fiber. Innovations in packaging designs, e.g. frustration free packaging, and more environmentally friendly materials, e.g. bioplastics, also create opportunities for material suppliers willing to think ‘beyond-the-box’. The largest Ecommerce giants are on the lookout for sustainable solutions that generate green PR and green ($$$) savings. 

How about environmentalists? Environmentalists look at the same picture above and see excess packaging and a carbon nightmare. It is quite common for online orders to be broken up into multiple shipments. Retailers are fulfilling orders with goods stored in multiple warehouses across the country. Your gloves may be coming from New Jersey, while your wipers are coming from Illinois and your headphones from Kentucky. Supply chains are growing in terms of the number of potential points of distribution and fulfillment. Retail giants Amazon and Walmart are actively building more fulfillment centers close to population centers in order to reach the most people in as little time as possible, but the unpredictability of what consumers might order still means multiple shipments, packages and packaging. 

NEW OPPORTUNITIES FOR SUSTAINABLE SOLUTIONS

Both environmental groups and consumers are quick to point out the excess packaging used in Ecommerce, using photos to shame companies on Twitter and other social media channels. Again, here is the potential opportunity to provide sustainable solutions such as lighter weight packaging and alternative materials. 

WestRock’s acquisition of Plymouth Packaging is a perfect example of a move specifically designed to address Ecommerce. Plymouth offers box-on-demand systems that produce accurately sized corrugated packaging. WestRock gains both increased containerboard integration and an improved service offering, presenting Ecommerce customers with a unique solution that addresses a very current need.

With retailers committed to expanding online sales and Americans becoming more and more reliant / dependent on online shopping, is it nothing but sunshine and rainbows for packaging producers and converters? Do board and box producers need to worry about a genius in Silicon Valley secretly working on a cardboard box disruptor? While it is difficult to guess what some entrepreneurs are toiling away at in a garage in California, it has been reported that Amazon is hard at work on a number of innovations and initiatives. Among them is an effort to increase packaging efficiencies, replacing boxes with padded mailers for smaller orders when appropriate. Another innovation is Amazon’s Key service, which allows couriers to unlock your door, drop off your package and relock your door, provided you have Amazon’s Cloud Cam (of course). Amazon has also been furiously applying for a number of patents related to drone delivery (relating to its envisioned ‘Prime Air’ service), the latest being an airbag that deploys around your package before it drops from the sky.  However, the US government did not include Amazon as part of its Unmanned Aircraft Systems Integration Pilot Program, which saw Apple, Intel, Microsoft and Uber all accepted into the drone testing project (May 2018).

YOU HAVE THE POWER TO SHAPE THE FUTURE

If you are a box and board producer, the first initiative will likely curtail some corrugated demand, but as Amazon’s share of retail grows and Americans order more and more, you may not need to fear significant losses. Producers of kraft paper, tapes, labels, etc. need to ensure they are serving Ecommerce customers. Look for product innovations and evaluate your product portfolio to maximise offerings.  

If you are entirely removed from the packaging sector, are there investments that could be made to enter a new market? Are there assets in North America that could be repurposed to best serve the needs of Ecommerce? Pöyry’s market and technical expertise will assist you with your strategic decision making. Poyry has conducted numerous studies for clients, utilising both engineering and strategic consulting services, to investigate asset repurposing. Poyry can analyse the feasibility from technical, financial and market viewpoints, and provide the framework for success. Poyry’s digitalisation services can also be employed to capture efficiencies, cost savings measures and new business opportunities.

If you are an environmentalist, what kinds of packaging do you want to see? Are bioplastics and nanotechnology part of the answer? Social media makes it very easy to criticise and apply pressure to large corporations and CPG companies, but criticism without a solution does not do much good. Seek out organisations or potential partners to engage with and develop environmentally friendly packaging that still provides adequate protection at a cost effective price. That would be a green idea that generates a lot of green.

Finally, if you are an everyday consumer, expect to witness change as Ecommerce and the packaging surrounding it are constantly evolving. Although it is likely that we are still years away from large-scale drone deliveries and Americans giving Amazon access to their front doors, the avalanche of brown boxes on our doorsteps will begin to look different via reduction in packaging, greener materials and more efficient logistics. 

Are you fed up with the sea of brown clogging up your entryway? Does sealed air packaging make you shudder and think of its potential contribution to the Great Pacific Garbage Patch? Companies seek feedback on consumer experiences and expectations. You have the power to shape the future. 

What do you want to find on your doorstep?

Contact information

Keith Freudenberger
Consultant