This appeared in the November/December, 2018 issue of PARCEL.
With the explosive growth of online ordering for everything from toilet paper to TVs, consumers and manufacturers alike are eyeballing the next frontier: fast-moving consumer goods, also known as consumer packaged goods (CPGs).
CPGs are typically products with shorter lifespans that are sold on retail shelves in grocery stores and big box outlets. Brand owners have spent decades and millions of dollars on packaging their products to withstand conventional distribution channels. But how will these primary packages fare in an e-commerce world? What design changes or dramatic structural overhauls are needed for damage-free delivery?
The Traditional Retail Experience
Traditionally, CPGs have engineered their primary product packaging to attract attention to the product on the store shelf. Marketers know that they only have a second or two to grab the consumer’s eye with the hope that the product ends up in the shopping cart.
Consumers are drawn to distinctive shapes, colors, powerful label graphics, unique dispensing options, ergonomics, and other attributes that enhance the experience and facilitate the purchase. A positive experience with the product after it makes it to the home will determine whether or not a repeat purchase takes place.
Think of a cereal box. The folding carton and the flexible pouch it contains have been designed to be filled efficiently, loaded into a case, and palletized using the proper pattern in order to maximize the pallet load. From there, the supermarket chain will likely break down truckloads at its distribution center into single or groups of pallets for delivery to individual stores.
However, what works well in a traditional retail environment may not hold up to an e-commerce scenario. If the cereal box is shipped to you by itself via a parcel carrier, it will likely end up being tossed, dropped, and shaken all about as it makes its way through sorting, distribution hubs, and delivery trucks.
The experience upon arrival of that crushed cereal box will likely leave you hungry for the store- bought version. Now imagine that your cereal was shipped with your favorite soda or detergent. You have the recipe for a big mess if not properly packed.
With households and the growing population of millennial moms and dads juggling an increasing number of tasks from work schedules to the kids’ after-school activities, the amount of free time for shopping has been compressed. Today’s household is more likely to order items for e-commerce delivery while watching television at night or commanding a virtual assistant such as Alexa to do so while preparing a meal kit dinner.
With 10,000 Baby Boomers reaching retirement age every day, and more people living into their 90s and beyond, our aging population is another factor that is driving the increase (and convenience) of e-commerce orders.
The environment is another important factor that cannot be overlooked. Consumers are more vocal now about the packaging choices that companies make and willing to share their opinions on social media. CPG companies need to take the packaging lifecycle into consideration, the sustainability of the materials selected, and the ability for consumers to conveniently recycle their packaging components via curbside or store drop-off.
All of these additional considerations need to be factored into both primary and secondary e-commerce packaging.
Attention, Brand Owners
Margins for CPG products are being compressed. Your dilemma now becomes how to add room in the profit margin for additional packaging cost in order for products to survive parcel network distribution and maintain control of the brand. The need for brand control in situations where the product is being fulfilled by a third party is a growing challenge. The loss of distribution control may reduce the likelihood that your product arrives at its destination in the desired condition.
CPG companies must stay a step ahead of the competition. Don’t be left behind when competitors leap frog ahead with an e-commerce-ready packaging solution.
Let’s Talk Options
There are two paths that CPG companies can take — short-term and long-term. As the demand for CPG products via e-commerce delivery grows, companies are likely to consider their existing package to see how “parcel ready” it is. Some might fare well, while others will simply not be suited for this distribution channel.
Companies should consider the addition of different types of protective packaging to bridge the gap between the need for speed and convenience (e-commerce) and the desire to create the same beloved brand experience previously known within the retail store.
However, the long-term path will likely involve a package redesign. Companies have already started going behind-the-scenes development. This approach will likely have significant upfront development costs, but it may save the company money in the long term. An example of this could be a significantly lighter weight bottle for a shampoo or cleaning product that is designed to be a refillable container.
Depending on the product, it is also conceivable that the new e-commerce package might also double as the new retail shelf package. Utopia, anyone?
Creating Customers for Life
The critical thing across all delivery platforms is to protect and capitalize on brand equity while growing lifetime value. This will require a packaging solution that is both low-cost and low-risk. It needs to provide the most protection for the application at the lowest overall cost, which means factoring in damage and returns. (A recent University of Wisconsin study discovered that an eight percent increase in packaging spend yielded a 7,921% increase in perceived product value!)
What is certain is that the e-commerce distribution platform has already significantly impacted our purchasing habits. The door is wide open for CPG companies to come up with creative and differentiating solutions for e-commerce delivery.
It is important to remember that the first time the product is seen may not be when it is received at home. Consumers need to be visually, tangibly, and emotionally rewarded during that first encounter, and the product must arrive in pristine condition to lead to repeat purchases.
Clint Smith is product manager, Pregis. He has a degree in Packaging Science from Clemson University.
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