Ben Conwell, managing director and leader, Cushman & Wakefield’s eCommerce
Advisory Group
We’ve all experienced it—receiving a large box delivery only to find out that it contains a single item under a cubic foot of air pillows. Aghast! Or even worse, trying to open that deadly plastic packaging that seems impermeable even with the sharpest tool. You know what I’m talking about—the packaging that surrounds batteries, electronics, and many types of toys that are shipped to your front door.
There’s nothing worse than fighting through a pile of plastic pillows or packing peanuts, and according to a University of Southern Indiana study, 33% of landfills are made up of exactly that—packaging materials. It’s sad to say, but we ship more air than anything else.
For those of us working in the logistics industry, this reality begs a few questions: What must Mother Nature think? What are the environmental and supply chain impacts of package sizes, materials, and methods? And what does packaging have to do with warehouses?
In-store vs. Online Packaging Habits
First, let’s focus on how products are packaged in-store versus online. Is it feasible for Consumer Packaged Goods companies (CPGs) to use the same packaging strategy for both in-store and online purchases?
Hmmm. The answer is no, and here’s why.
Packaging for in-store products serves a different purpose than packaging for products online. Appearance and presentation on store shelves are a significant factor to an in-store consumer’s buying decision. The color, size, and presentation—it all matters. But for online items, packaging is much more utilitarian. Online shoppers usually view photos or videos of the products online and make purchases long before they ever see the products in person. Online purchases are also three times more likely to be returned, which requires a smooth returns process and packaging that is reusable and environmentally responsible.
In addition, according to ANAMA Package and Container Testing Services owner Anton Cotaj, an online package is dropped or experiences “rough movements” an estimated 17 times during its journey. This means the packaging needs to be robust enough to protect the contents inside.
Further, online shipping requires more touches during delivery, which equals more opportunities for damage. Direct-to-consumer shipping is done in “eaches” (the base unit of product packaging), rather than on pallets that go directly to stores. Among the most impactful advances in fulfillment automation is the elimination of as many of these touches as feasible.
Ultimately, online packaging shouldn’t focus on presentation and appearance, but instead on protection from damage and easy, efficient, and sustainable delivery.
Sustainability Improvements and Packaging Efficiencies
Companies are always searching for ways to improve packaging so they can increase sustainability and make the supply chain more efficient. Ideal packaging should be ‘right-sized’ for the total supply chain and harbor as little additional or over-packaging as possible from manufacturer to doorstep.
Improvements
Some retailers are experimenting with Multis, which are a way to incentivize shoppers with coupons or credits when they combine multiple items into a single shipment. This system can be difficult however when items aren’t stored in the same fulfillment center. In fact, bundling shipments from multiple locations is a substantial inventory management issue, and the added expense can be killer.
Many companies are also trying to crack the secret to reusable and sustainable packaging. Some select retailers already utilize packaging that can be reused by customers if they want to return an item. Others are trying to identify a reusable package that won’t end up in the recycle bin—or worse, the trash. Retailers with broad SKU types need a wider variety of packaging, and that can make reusable material much harder to identify as well.
Some innovative alternatives include leaving empties for pick-up at the next delivery (think “milkman”) and partnering with USPS and other carriers for pickups—but even these can be expensive, logistically challenging, and not very user-friendly.
Efficiencies
It’s crucial to optimize your inbound transportation costs. Delivery to the customer gets all the press but managing density in inbound trailers headed to the distribution or fulfillment center is critical too. Inefficient inbound management means you’re paying for costly empty space that could otherwise be filled with products— whether case-packed or palletized. Getting packaging right-sized and right-designed cuts expenses before items even hit a shelf.
Further, it’s not just weight that matters. A package’s dimensions are important too, as shipping rates are increasingly based on both. By removing wasted packaging, the expense per item shipped goes down. A shift towards square and rectangular packaging can aide in density, ease of assembly, and security of pallets versus bottles or other oddly shaped items that don’t fit well on pallets.
Another solution is packaging-on-demand. Advances in automation can create custom packaging that is cut and assembled for unusually shaped items in real time. The technology isn’t cheap, but neither is the cost and impact of wasted space and poorly designed packaging.
Plus, many of the largest ecommerce players are pressuring brands to embrace more of these packaging solutions on their platforms.
Here are four examples of innovative packaging innovations:
- LimeLoop offers retailers a vinyl upcycled reusable package that is lightweight, waterproof, and lasts up to 10 years. Each package comes with a pre-printed return label so customers can ship the package back to the retailer to use on future orders. It is estimated that for every 100 shipments, the use of a LimeLoop package may save 1,300 trees, 1.78 million gallons of water, and 4,000 gallons of oil.
- Nestlé recently announced it will offer Häagen-Dazs in reusable, double-walled steel packaging when purchased through Loop, a new subscription home delivery service. Nestlé plans to implement reusable or recyclable packaging for 100% of its products by 2025.
- IKEA’s commitment for efficiency and environmental responsibility includes single-use cardboard platforms deploying paper pallets throughout its supply chain. “Paper pallets” are strong (enough), lightweight, and quickly biodegradable. Green Label Packaging calculates cardboard pallets at $4-15 vs. $15-60 for wood, which are less sustainable.
- Tide Eco-Box is an ultra-concentrated liquid detergent that uses 30% less water and 60% less plastic than the current 150 oz Tide bottle. It doesn’t require over-boxed online packaging and is lighter and rectangular, so it fits well on pallets, and it ships in its own container (SIOC). Think of it as boxed wine but for laundry detergent.
Ramifications for Real Estate
Improvements in packaging can help drive efficiencies for both online and in-store product replenishment. As packaging becomes more compact and standardized, efficient automation becomes more feasible.
These technological advances in material handling equipment will continue to change real estate requirements for distribution and fulfillment centers. Increased technology will drive greater power requirements and, eventually, will drive meaningful reduction in headcount. Lower headcount needs open up location options for site selection that are not currently feasible because of labor availability.
Continued improvements in packaging can also enable automated material handling equipment to utilize greater clear heights. Advanced automated storage and retrieval systems (ASRS) help smaller footprints support higher throughput which can enable deeper penetration into urban areas. And no, efficient packaging will not lower the demand for warehouse space. Rather, it will contribute to greater throughput per square foot, with demand for space continuing at its current blistering pace.
The Takeaway
It’s clear that when it comes to packaging, what’s good for business is also good for the Earth. Packaging should be a strategic decision for companies when contemplating how to improve supply chain efficiencies for both online and in-store replenishment. Furthermore, the use of environmentally responsible materials and practices can be a powerful part of a company’s value proposition that can build brand loyalty and customer retention over time.
We don’t need to think outside of the box when it comes to successful and sustainable shipping. For a solution that benefits all parties involved, we just need to think more about the box itself.
Cushman & Wakefield is a commercial real estate services firm.
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