We all recognize how e-commerce is changing how we live. What is less obvious to consumers is how this tectonic shift in how we shop is impacting the design, packaging and delivery of the consumer packaged goods (CPGs) they buy.
Online transactions will account for 17 percent of all U.S. retail sales by 2022, according to Business Insider and Statista, up from 12.7 percent in 2017. Those sources project that U.S. e-commerce sales of food and beverage products and personal-care products will grow by 14.4 and 10.5 percent per year, respectively, between 2016 and 2022.
Becky Donner, senior vice president, marketing, design and engineering for TricorBraun, a St. Louis-based designer and supplier of rigid packaging, pointed to some of the key challenges facing brand owners during this retail revolution in a recent presentation. Donner, who was a keynote speaker in Pittsburgh at the Society of Plastics Engineers’ recent Annual Blow Molding Conference, noted that while traditional packaging has been sufficient for the brick-and-mortar segment, it often proves problematic in e-commerce.
“That’s primarily due to the sheer number of touch points in the e-commerce distribution channel,” she said, “resulting in a far greater risk of breakage or leakage. Unfortunately, many CPG companies fail to take a measured approach to determining what kind of packaging would be best suited to the e-commerce channel.”
Remarkably, Donner says, laundry detergent has emerged as the CPG category experiencing the greatest year-over-year growth in the e-commerce space, with an increase of 85 percent, according to a 2016 study by Bemis Co. Inc [PDF]. “That’s great news for makers of laundry detergent, but not so great for the consumer finding a soggy box on their porch because the packaging was not optimized for the unique distribution requirements and multiple touch points of the e-commerce distribution model.”
To understand the e-shopping phenomenon, it’s necessary to understand consumer lifestyle trends. Donner pulled from a variety of sources to report that 37 percent of the global population today are active social media users, and that a whopping 77 percent of U.S. households have an Amazon Prime membership. And generally speaking, according to Marketing Tech News, the younger the consumer, the more time they spend on their devices–– with Generation Z types (age 21 and below) spending an average of 5.9 hours on their mobile, vs. 5.2 hours for Millennials (age 22-37).
These two groups –– which comprise 47 percent of the U.S. population and account for a combined annual spend of $743 billion –– value brand authenticity, peer reviews, seamless technology and new product discovery, Donner said.
It’s understandable that brand owners want a piece of this massive pie, quickly, and with minimal investment, and the fastest way to adapt is to leverage existing packaging and then promote and sell online.
Too many companies simply take their existing packaging, shove wads of paper into the shipping box, slap some tape on trigger sprayers or caps, and encase the products in Bubble Wrap before shipping them off. The results often are not pretty and can be costly –– both in terms of product returns and brand reputation. (Think, for example, of liquid soap or glass cleaner leaking on expensive electronics items that were packed and shipped in the same order.) Such damage costs companies millions of dollars per year.
Additionally, the often-excessive packaging frequently results in environmentally-unfriendly wastefulness that consumers love to ridicule in viral online unboxing videos. The resulting nasty product reviews can put a serious dent in sales.
Translating brick and mortar success to the e-commerce sector, Donner says, “requires companies to rethink their approach to package development. This is especially true for those products at an increased risk of suffering breakage or leakage in transit.”
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Effective packaging, she notes, is not just about independent components that do the job. “It’s a holistic approach that is the combination of four key areas –– package design, robust sealing, packaging performance, and supplier engagement and selection. Then it’s about identifying the options, such as liner options, locking features, packaging components, design technologies and more, that address those key areas.”
A recent, real-life example is the leak-free trigger sprayer that Reike Packaging, part of Bloomfield Hills, Mich.-based TriMas Corp., developed for Amazon. Reike, which makes closures and dispensing systems for the global market, worked closely with the e-commerce giant to develop the Ultimate-E trigger sprayer, which is said to prevent leaks of liquids shipped in the small-parcel environment — to include liquids with minimal product viscosity.
Amazon instructed Reike to:
- eliminate leaks (not just contain or reduce them);
- provide the customer with an experience equal to or better than the brick-and-mortar shopping experience
- redesign the closure’s ratchets to enable consumers to remove the closure (to allow, for example, the bottle to be refilled).
The aim was to provide an omni-channel solution for brands that wanted to expand into the e-commerce arena without having to increase the number of closure options used on their bottles.
Reike ended up developing two versions of the trigger sprayer –– one for industrial products and one for health, beauty and home-care products. Reike worked with bottle molders to adapt the neck finishes to allow this closure to work on both PET and HDPE bottles. Except for a metal spring, all parts in the Ultimate-E are made of polypropylene or polyethylene.
The Ultimate-E has earned certification under the International Safe Transit Association’s “ISTA 6-Amazon.com” test for single-pack and multiple-pack e-commerce packaging. Rieke also reportedly did vigorous internal testing, including a leak test, a drop impact test and full application functional tests.
Amazon says that Reike developed an anti-backoff closure system on the Ultimate-E to address the problem of the closure backing off over time and leaking.
The entire project took about 14 months, from Amazon’s initial request to being ready for commercial launch. The parties went public with the project this summer.
CPG e-commerce packaging adaptations
There are various approaches CPG companies can take to address the challenges presented by e-commerce. The previously cited Bemis study lists the following “four ways CPGs can attack the future –– starting with their packaging”:
1) Fix package formats that fail and drive cost into the system. Noting that rigid or glass packaging formats that work well on store shelves may not fare so well in e-commerce channels, Bemis (a major supplier of the types of film used in pouches ) says that many forward-looking CPGs are exploring alternatives to rigid, such as flexible pouches “that are easier to ship, offer a lower total packaged cost and optimize the product-to-package ratio.”
2) Optimize for consumers, not the retail shelf. In brick-and-mortar stores, bigger equals better, with packages competing for shelf space and offering visual branding opportunities. “E-commerce unshackles you from the constraints of the shelf,” Bemis notes. “Not only can you design for shipping survivability and efficiency, but you can optimize the consumer experience.”
3) Take advantage of e-commerce-optimized quantities and SKUs. CPGs can ignore the sales volume and profit guidelines that traditionally have dictated when one creates new stock-keeping units (SKUs). Instead, firms may wish to invest in new SKUs specifically to target this new channel for the following reasons:
- Optimize package format for durability and consumer functionality
- For goods with a reasonably predictable cadence (e.g., diapers), set quantities to align with a month’s consumption, and enable users to “subscribe” for replenishments
- Re-evaluate your price thresholds to take into account shipping economics
- Consider how e-commerce fits in to your holistic strategy of managing your price curve. “You may benefit by developing sizes and SKUs that are unique to digital.”
4) Focus on flexibility. Bemis stresses the need for CPGs to consider the requirements of serving e-commerce through the fragmented and ever-changing business models that dominate that channel. This could take many forms, ranging from designing e-retailer-specific SKUs and possibly using more robust primary packaging (with a view to reducing secondary packaging), to creating a nimbler supply chain that enables them to ship directly from their own warehouse.
- Business Insider: “E-Commerce will make up 17% of all US retail sales by 2022 – and one company is the main reason”
- Statista: “Retail e-commerce sales in the United States from 2016 to 2022 (in million U.S. dollars)”
- Bemis Co. Inc.: “Packaging for a New Era of E-commerce” (PDF)
- Marketing Tech News: “Gen Y more receptive to mobile marketing than Gen Z: Forrester”
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