Big Ideas for 2019: Surge in Direct-to-Consumer Shipping Impacts Protective Packaging
In 2018, a simple question - "What's in the box?" - became more of a mystery for online shoppers coming home to a package on their doorstep. With consumers ordering a wider variety of products online than ever before, that package could contain just about anything, making the unboxing experience feel like a mystery grab bag.
Not surprisingly, clothing, shoes, electronics and books remained among the top eCommerce product categories in 2018, but nipping at their heels were groceries and consumer packaged goods (CPGs) such as cosmetics, toiletries and cleaning products.
Data from Nielsen Holdings and Rakuten Intelligence show that online sales of CPGs climbed 29 percent year over year, compared with a modest 2.6 percent gain in overall CPG sales. Consumers are also beginning to spend more money on CPGs online: The average amount spent per customer on CPGs had risen only 0.1 percent, but the online figure climbed to 16.6 percent.
Much of this can be attributed to millennials, who don’t want to spend their time shopping for goods that are reliable and predictable, such as their favorite brand of laundry detergent. Millennials are also more loyal to brands – in fact, according to research from Accenture, 67 percent will spend more with the brands they love.
In an article by MediaPost, this sentiment was echoed:
“…Brands need to create a deep, authentic and appropriately personal experience that makes their products seem tailor-made – or at least more relevant to – individual consumers. The more that consumers experience this sort of intimacy with brands, the more they will grow to expect it across other brand interactions."
In response to growing demand online, some grocery and CPG manufacturers are beginning to ship goods directly to consumers instead of using third-party fulfillment. These shippers are restructuring their supply chains, so in addition to sending palletized products via truckloads to distribution centers and grocery stores, now they're creating channels for products to be shipped via direct parcel delivery.
This new approach creates a challenge and an opportunity for manufacturers in 2019:
- The challenge: Most companies have designed their product packaging for cost-efficient shipping on pallets in trucks, but they now must consider protective packing materials for parcel shipping and how they can create unique experiences that foster loyal buyers.
- The opportunity: Companies can use protective packaging to increase brand loyalty and connect with customers by having their logo, color scheme and marketing messaging incorporated into the design. In doing so, they can take control of their unboxing experience and impact consumers directly, instead of leaving it up to distributors.
“Moving ahead, leading brands will capture the attention of buyers – many of which are millennials – by harnessing a personalized approach and raising the bar for the unboxing experiences."
The huge driver of protective packaging redesign in 2019, no doubt, will be Amazon’s Frustration-Free Packaging Program, which the company introduced a decade ago to reduce waste, lower shipping costs and please customers with easy-to-open, 100-percent recyclable packaging. As part of the program, Amazon has mandated that by Aug. 1, 2019, all items larger than 18 inches by 14 inches by 8 inches, or heavier than 20 pounds, must be designed and certified as “ready to ship.”
New Requirements from Amazon
That means that they do not require any additional boxes or packing supplies from Amazon for delivery. The company is encouraging vendors to meet these standards early by giving them a $1 credit per ready-to-ship package sent to an Amazon fulfillment center through July 31. After that, the carrot becomes a stick, with Amazon charging vendors an additional $1.99 per package that does not meet its ready-to-ship guidelines.
The threat of that additional cost will lead many manufacturers to consider direct-to-consumer shipping or a redesign of their packaging in 2019. For many vendors, the new year means a new approach to shipping - and new opportunities to reach consumers directly to increase brand loyalty and create one-of-a-kind in-home experiences.
To learn more about the unboxing experience and its effect on consumer emotions, read, “How Packaging influences online Sales.”