At roughly 12 percent of total 2018 sales in the U.S (emarketer), eCommerce has grown 14 percent annually over the last two years. In five years, eCommerce sales are projected to approach $1 trillion and make up 16 percent of total sales. Large numbers to be sure, but in comparison to traditional brick-and-mortar, it’s still a percentage of total sales. In spite of recent, high profile company bankruptcies and closures, brick-and-mortar is not going anywhere, but we are seeing the effect of companies that are not able to use both forms of commerce together. In 2018, eCommerce consumed $33 billion worth of packaging and by 2023 will exceed $63 billion (The Future of Sustainable E-Commerce Packaging to 2023, Smithers Pira). Companies need to invest in eCommerce packaging in order to be successful in meeting consumer expectations, which influence their perceptions and future purchasing decisions.
The role of packaging is so vital that since the 1950’s there have been schools and degrees focused to training personnel in its four major functions; Containment, Protection, Communications and Utility. These combined functions are intended to maximize sales and profits while reducing loss and waste. They effect the consumer’s decisions, from initial purchase to future return purchases. In traditional brick-and-mortar, the packaging was able to differentiate and influence shelf presence in competitive retail environments. Although retailers confined package sizes, through shape and graphics, the design was something that packaging engineers could control to bring attention to targeted demographics, by either making it easy to spot for return consumers or sway the decisions of new ones. Packaging was influencing this moment in the decision process and consumers had comfort in their purchasing decisions.
Packaging must now be designed for Omni-channel commerce. The packaging needed for each channel is going to be different to find the correct balance of the four packaging functions. In eCommerce, the largest differences between it and brick-and-mortar are the purchasing decisions have shifted and the distribution channels are different. When a damage occurs in brick in mortar, it’s easy for consumers to move the damaged item aside and grab the undamaged one sitting behind it. The loss of product is not necessarily compounded by the lost sales or customer. In eCommerce, the effects of a damaged item are very different. The customer made their purchasing decision at the click of a button several days ago, and after anticipating its arrival, they are now left with a damage to contend with. The old adage that it’s harder to make a new customer than keep an existing one takes on new meaning when 83 percent of consumers are unlikely to purchase from an online retailer again after a poor experience (eMarketer).
There are three impacts that company’s packaging decisions play a role in. The financial impact, the sustainability impact and the emotional impact. All too often the financial impact takes precedent and when companies make packaging cost their sole decision driver, the other two impacts are affected. Making the decision to sell brick-and-mortar products on-line leads to an immediate loss in margin because that primary packaging is not designed for the rigors of the single parcel environment by itself. It was designed with a specific supply chain in mind; palletized with other products just like it. Pallet patterns and shipping orientation can be controlled. Handling is primarily by fork-lift through a majority of the supply chain. In eCommerce, those packaging designs are no longer adequate for the single parcel environment. Liquid products have to be able to support possibly being shipped on their side. Products have to contend with being shipped with other items that they may not be protected for, whether its shock or taking on aromas and flavors from surrounding items. Additional over-packaging is needed and this erodes margins that the products have.
The sustainability impact comes in as these over pack decisions are made. Without proper pre-shipment testing, one of two things can occur. The product can be left under-protected which leads to higher probability of being damaged, which sends everything to the landfill. All the work and expense of manufacturing the product is thrown away. The fuel to move the product, the solid waste, the carbon footprint and emissions are all wasted when a single item is damaged. The other scenario is one where the product is over-packed, which leads to an inefficient solution.
The emotional impact is where the customer comes in. In eCommerce, their perceptions are based on that moment of delivery through the unboxing experience. They are sensitive to under packaged damages, which lead them to find another supplier. They are sensitive to packaging which arrives in poor condition. Perceived damage is almost as important as actual damage because the consumer might believe something is wrong and refuse the shipment even though the product inside might be fine. Companies that over package are opening themselves up to a new kind of scrutiny. Consumers are sensitive to over packaged shipments and use social media to voice their concerns.
Changes in consumer purchasing decisions should drive eCommerce packaging decisions that effect future return sales. Packaging that makes a shelf presence is no longer needed for that purpose. Those packaging resources should be used to affect the purchasing decision that shifted through eCommerce, at the moment of delivery through the unboxing experience. Consumer perception drives their decisions and through social media, can spread to other potential consumers. The effect can trickle down to the brick-and-mortar commerce as the brand itself has been tarnished.
Patrick McDavid, an instructor at the Michigan State University School of Packaging, has 18 years of industry experience in distribution packaging, field analysis, and lab simulation. He has a master’s in supply chain management and an MBA and is currently pursuing his Ph.D. in packaging. McDavid is currently the chair of the International Safe Transit Association’s (ISTA) Technical Division Board.