In 2022, global e-commerce sales stood at $5.63 trillion which represents nearly 19 percent of retail sales worldwide. Forecasts indicate that over the next five years, the online segment will make up close to a quarter of total global retail sales. This provides a fillip to the e-commerce packaging market which has enjoyed a CAGR of 20% since 2017 and expects to grow further. The growth will be led by packaging manufacturers who continue to innovate as per the needs of the market. We have already seen innovations such as lightweight packaging, efficient raw material usage, recyclable and reusable packs, elimination of void space, material substitution, and more which are having a critical business impact in the e-commerce industry.
The Traditional E-commerce Packaging Challenge
For years, the e-commerce world has been synonymous with cardboard boxes. While these boxes are functional and reliable, they are far from perfect. Often oversized, they lead to excess material waste, drive up shipping costs, and contribute to environmental concerns.
The environmental toll of traditional ecommerce packaging cannot be ignored. Cardboard boxes, along with the plastic materials frequently used for cushioning and protection, contribute to a significant amount of waste. In an era where sustainability is a paramount concern, this traditional approach is increasingly untenable.
Furthermore, the conventional packaging approach is marked by inefficiencies. Overly large boxes are used to accommodate various product sizes, resulting in underutilized space and increased shipping costs. This inefficiency also translates to a larger carbon footprint, as more transportation resources are required to move goods.
Addressing such challenges requires continuous innovation from the packaging industry.
Embracing Sustainability
One of the most promising avenues of innovation in ecommerce packaging is the adoption of sustainable materials. Businesses are increasingly turning to biodegradable plastics, recycled materials, and packaging that is recyclable. These materials not only reduce the environmental impact but also resonate with eco-conscious consumers. This is best illustrated by IKEA. The Swedish conglomerate has committed to investing in biodegradable packaging made from the mycelium fungus, or what we commonly call mushrooms. The radical change will eliminate the use of styrofoam which is the most common resource used to secure products in cardboard packaging today. As a result, IKEA’s carbon emissions are expected to be reduced by up to 90%.
Lean and minimalist packaging approaches are also gaining traction, shifting the focus from excess packaging to essentials. This approach reduces waste, lowers shipping costs, and simplifies the unboxing experience. The mantra here is simple: less is more. London-based startup Raylo followed this mantra to optimise its packaging by using less material. That resulted in an 11% decrease in packaging costs and a 25% reduction in the weight of the packaging.
In a bid towards optimum sustainability, companies are increasingly embracing the circular economy approach by introducing reusable packaging systems. Under such a system, customers receive products in durable containers that can be returned and refilled. This not only reduces packaging waste but also lowers the overall carbon footprint of e-commerce.
New-Age Packaging Solutions
In today’s digital age, technology is a key driving force behind countless innovations, and the world of e-commerce packaging is no exception. The intelligent use of AI tools has begun reshaping the industry.
- The integration of Internet of Things (IoT) helps e-commerce businesses to improve their Inventory Management and Supply Chain Management capabilities. For example, packaging giant Tetra Pak has invested in Microsoft Azure IoT solutions to create ‘smart factories’ that drive sustainability across its whole organisation. By focusing on predictive maintenance and overall equipment effectiveness, these solutions will help Tetra Pak enhance their operational efficiencies at various customer facilities around the world.
- Automation is increasingly prevalent in warehouses and fulfillment centers with robots playing a significant role in packaging, reducing labor costs and minimizing errors. The precision and efficiency of robotic systems translate to a more streamlined and cost-effective e-commerce operation. A prime example of this is Amazon’s AI-powered robot called Sparrow. Currently operating as a trial, the robot is able to accurately handle and sort items as varied as one would expect at Amazon without damaging them.
- AI is also being used in conjunction with data analytics to drive predictive packaging and demand forecasting. By analyzing customer behavior and historical data, AI can reduce overstocking and ensure that products are delivered when and where they are needed. It can also help companies ensure quality in packaging. For example, Packaging Distributors of America (PDA) developed an AI-based system that led to 100% accuracy in package inspection. It helped the company reduce customer complaints to zero.
A Win-Win for All
As packaging providers continue to deliver increased cost efficiency and reduction in waste, e-commerce businesses and end customers alike are reaping the rewards.
Innovations in right-sizing and on-demand packaging are changing the game for businesses. Rather than using one-size-fits-all boxes, companies are implementing technology that customises packaging to the size of the product. The XPAK ROBOX, which is an adaptive robot motion software, is facilitating custom-sized secondary packaging. The machine outputs a box with the specified dimensions once the operator inputs the box’s length, breadth, and height.
A boon for both businesses and customers is the advent of innovative return-friendly packaging. Global supply chain leader DHL is paving the way in the field by creating a system based on the principles of circular economy. Under this model, orders are shipped to the customer in a reusable package and then returned via mail or via a drop-off location. The package is then prepared for the next order following cleansing and quality checks.
To enhance the customer experience further, AR features and scannable elements are being used to transform the way customers interact with packaging. QR codes and scannable graphics can provide access to additional content, product information, or even immersive experiences. Interactive packaging bridges the gap between the digital and physical worlds, enhancing the overall e-commerce journey. For instance, Jack Daniels provided a virtual tour of its distillery via an app which was enabled through the packaging. The tour allowed users to witness the whiskey-making process at the iconic brand and learn more about the company from Mr. Jack Daniel himself.
Such innovations are elevating the user experience and providing brands with increased possibilities for personalisation and customer engagement.
Further Progress Needed
While the e-commerce packaging landscape is rapidly evolving, it faces regulatory challenges. Regulations around sustainable materials, recycling, and waste management vary across regions. Businesses need to navigate this complex regulatory landscape to ensure compliance while still innovating.
Companies must also strive to find the right balance between environmentally friendly materials and affordability. However, as technology advances and economies of scale come into play, sustainable solutions are becoming more cost-effective.
This must go hand-in-hand with consumer education. Brands must communicate the benefits of sustainable packaging to consumers and encourage responsible disposal practices. Informed customers are more likely to support eco-friendly packaging initiatives and drive further innovation.
Thinking Beyond the Box
Packaging, often overlooked as a mere necessity, is being increasingly recognised as playing a pivotal role in the e-commerce experience. It is the bridge between the virtual realm of online shopping and the tangible world of physical products. E-commerce packaging serves not only as a protective shell for products but as a messenger of brand identity, a canvas for creativity, and a means to enhance customer satisfaction.
As business leaders, it is our responsibility to embrace these innovations and drive positive change in our industry. The impact of these innovations extends far beyond the box; it touches every aspect of the ecommerce journey, from the initial click to the final unboxing. By prioritizing sustainability, efficiency, and customer satisfaction, we can not only meet the demands of the modern e-commerce era but also shape its future.
Authored By – Partha Dash, Managing Director- New Business and Growth, Moglix
Partha S. Dash joined Moglix in 2015 and has been a part of the seed to scale journey for the MRO and Packaging verticals. Going forward, he will focus on growing the new business verticals and geographies. Partha is an NIT Rourkela and XIM alumnus, he has worked in leadership positions at manufacturing giants such as ITC, Tata Steel and Olam International across 15 countries globally. Before joining Moglix, Partha was heading the distribution business for Olam in the entire South Africa.