A report presents statistics and developments in e-commerce since 2014 and also forecasts the future of e-commerce up to 2023. Accumulated data for the most recent period covered forecasts an increase in global e-commerce sales of 276.9%.
These are remarkable figures and developments. Of course, this sales channel offers a much larger market to reach, generally provides lower costs, enables comparative purchases. However, it is only now that an understanding is being gained that this is a far more complex and cross-linked logistics system than in traditional retail.
However, this alternative distribution channel is thus creating new and paradigm shifting challenges as well as opportunities for packaging. eCommerce is slowly beginning to be seen as a new distribution paradigm and will have a major impact on the future of packaging.
There will be no avoiding optimizing packaging design and materials, because the needs and impact of the entire system, including the product and packaging, must be understood and reflected. Optimizing packaging for the eCommerce sector may well be different from the design for traditional retail.
Leaders in the packaging industry will be those companies that understand these changes and are working to redefine packaging and the broad supply chain to anticipate and address the various challenges that this distribution format requires.
What is the difference between eCommerce and traditional retail when it comes to packaging?
The tradional retail
The traditional retail logistics system is rather linear: the delivered products, often grouped together in large quantities for safe shipping and efficient storage, are sent to a warehouse or back-of-store where they are inventoried until individual units are needed on the shelf for retail displays. The consumer then purchases the products locally and is generally responsible for taking their purchases with them.
In this model, transport and logistics are concentrated primarily in the area between supplier, warehouse and retailer. The movement of the product is mainly in the form of cargo, forklift trucks and pallets. To respond to the needs of this operation, the packaging is developed as a triple system:
In contrast, eCommerce is dramatically disrupting the traditional paradigm with significant consequences for the entire supply chain. The POS is not in the retail sector, but in the digital sphere. The process now follows a much more complex logistics. The goods (mass products) are sent to a fulfillment center. Here the individual orders are itemized for the consumer and made ready for shipment. Transport companies then use sorting centers to consolidate deliveries to regional locations.
This logistics system integrates more service providers and processes, which inevitably leads to considerably more points of contact. In a traditional business environment, products are handled on average 5 times. In eCommerce, products are typically handled up to 20 times or more.
Of course, in such an environment the three-level packaging system is no longer efficient. It is quite possible that in some cases the function of packaging for advertising and display purposes, which is considered and necessary for traditional retail, may become less important. Instead, here and there the functional needs may be in the foreground. And here there is a particular shift. The secondary packaging becomes an advertising space and contributes to product protection and now also has the touch point to the customer. And in many cases the tertiary packaging will become obsolete.
Comparing Logistics Systems
Looking at the comparison and contrast between e-commerce and traditional retailing, the rapid progress towards omnichannel distribution – integrating online and in-store consumer experiences – creates additional complications in the way packaging must respond. In an omnichannel system, the consumer or product provider can use aspects of both systems. The consumer can shop online, but also choose to pick up in-store, or a retailer can use a storefront as a fulfillment center – with warehousing or even direct shipping from the store. New expectations are emerging as e-commerce and omni-commerce channels shift the focus of the logistics system from retailer to consumer. These consumers are looking for ways to maximize convenience, choice and price and create a completely different shopping experience. Processes that create these efficiencies are essential to success. With the right consideration, packaging can create the necessary features and benefits.
But first and foremost, e-commerce will shake up the packaging market. The key influencing factors here are:
Convenience is the main engine for online grocery shopping in all markets, as consumers want a shopping experience that is faster and easier than ever before.
Consumers are increasingly demanding instant fulfillment, and online sellers are stepping up their efforts to respond accordingly. Advances in programs such as same-day or same-day delivery or pickup increase consumers’ expectations of how quickly they should receive an order. This trend is challenging retailers to rethink the traditional shipping process. Where goods have traditionally been shifted from production or port hubs to retail outlets, e-commerce has seen the emergence of multiple hub and spoke systems. In this new model, a variety of goods are stored in fulfillment centers or retail stores located in or near all major urban areas. This increases access to the products, reducing the time it takes to deliver goods over a widely distributed network.
Food and beverage manufacturers can take advantage of this shift by offering convenient packaging, such as packages that are easy to open, robust, lightweight and can be shipped safely without superfluous secondary packaging. By 2025, it is anticipated that space-saving and ” avoid frustration” packaging will become a basic requirement for consumers.
- MAKING THE RETURN OF GOODS EASIER | PACKAGING THAT OFFERS PROTECTION
The increased risk of product damage due to the highly physical distribution structure inherent in e-commerce leads to a much higher response rate than in traditional retail stores. Because the return rate is higher in e-commerce, consumers demand a simple return process: sixty-two percent of e-commerce customers want a return label in the box or an easy-to-print label, and 47 percent want an easy-to-follow process.
Most primary packaging is currently not designed to withstand the harsh and complex shipping and handling conditions of e-commerce, such packaging can face many problems: Closures come loose from the packaging, breakage of the container, the closure, sealing errors and much more.
- EASE OF DISPOSAL AND RECYCLING
Consumers also expect easy disposal of the packaging material. In a 2014 study (Ibid), more than 50 percent of consumers found that their greatest frustration with e-commerce is related to the ease of disposal of packaging.
A third of respondents said they reject and avoid packaging that is difficult to dispose of (e.g., takes up too much space in the garbage can, requires a breakdown), and another quarter are frustrated with packaging material that is difficult to recycle or non-recyclable. In the same study, over 77 percent of consumers said that the packaging a company uses for e-commerce was seen as an expression of its environmental values.
For consumers, recyclable packaging is the best environmental option, but recycling must be made easy for them. As companies continue to develop packaging for e-commerce, finding a balance between easy recycling and packaging efficiency could prove challenging. An increase in the use of corrugated board for extra protection will require more space in the garbage can. Flexible films, often used in the delivery of meal sets, may not be recyclable.
- SPECIFIC STOCK KEEPING UNITS (SKU)
There is no way around developing a separate SKU specifically for the e-commerce channel. Of course, this also means the need for new materials and packaging formats. It is obvious that this is like squaring the circle. Now the CPG industry must simultaneously serve competing channels, each with their own needs. At the same time, brand consistency must be maintained. This is more complicated, complex and costly than serving the traditional channel.
- OPTIMIZATION OF PACKAGING
For some time now, transport costs have been calculated under the aspect of “dimensional pricing”. This is the relation between cubature and weight. This means that the transport of “empty space” will cost something. This leads to dimensional savings and promotes the weight reduction of materials with the result that ever lighter substrates have to be printed, but with a certain robustness for multiple handling.
A closer look at the electronic commerce ( e-commerce ) of individuals in the European Union
More than 7 out of 10 internet users from the 12 months prior to the survey (hereafter referred to as “internet users”) made online purchases in the same period. Overall, the share of e-shoppers among internet users is growing, with the highest proportions found in the age groups 16-24 (78 %) and 25-54(76 %). The proportion of e-shoppers varied considerably across the EU, ranging from 29 % of internet users in Romania to 91 % in the United Kingdom.
Most popular online purchases
The most popular type of goods and services purchased online in the EU were clothes and sports goods (65 % of e-buyers), followed by travel and holiday accommodation (54 %). E-shoppers aged 16-24 were the top age group when it came to clothes and sports goods purchases (73 %), those aged 25-54 in online purchases of travel and holiday (57 %) and the older age group (55-74) in buying books, magazines and newspapers, together with those aged 25-54 (35 % both).
In terms of frequency, the highest proportion of e-shoppers made purchases in the three months prior to the survey three to five times (34 %), while 32 % did so once or twice. In terms of amount spent, the highest proportion of e-buyers (42 %) bought goods or services for a total of between EUR 100 to EUR 499. Furthermore, 35 % of e-buyers made purchases from sellers in other EU countries, compared with 29 % in 2014.
The 16-24 age-group had the highest proportions of e-shoppers purchasing clothes and sport goods (73 %), video games software and other software and upgrades (34 %), films and music (34 %) and e-learning material (13 %). People aged 25-54 made up the highest proportion of e-shoppers buying travel and holiday accommodation (57 %), household goods (52 %), tickets for events (43 %), food or groceries (31 %), electronic equipment (30 %) and telecommunication services (22 %). The older (55-74) age group took the lead in buying medicines (20 %) and shared the lead in buying books, magazines and newspapers with those aged 25-54 (35 %).
About 34 % of e-shoppers had in the three months prior to the survey bought goods or services for private use three to five times and 32 % of e-shoppers had done so once or twice. The proportion of e-shoppers who had made online purchases over 10 times was the lowest, at 16 %. The largest proportion of people buying online once or twice is found among those aged 55-74 (39 %). People aged 25-54 stand out as making more frequent purchases: 18 % of e-shoppers in this age group bought online 6-10 times in the three months prior to the survey and another 18 % did so even more often.
Example: Food & Grocery
- The transition to online retailing in general will continue to have a significant impact on packaging needs and the traditional structure of the value chain.
- E-commerce will also bring new and different possibilities for packaging.
- It will demand even more flexibility and innovation from packaging companies.
- It will require even more supply chain cooperation and even more transparency.
- A convergence of primary and secondary packaging will become inevitable.
- New materials and packaging formats will emerge.
- The number of SKUs will increase and hybrid systems will exist.
- Conversion will be more localized: closer to the brand owner. Faster lead times, high flexibility, fast prototype production. Use of digital technologies/digital printing.
All this will bring a high level of automation.
e-Commerce is not just another channel and the business model is growing out of its infancy and challenging the entire value chain due to its systemic nature.
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