Let’s face it: the e-commerce revolution has not only changed the rules for consumer packaged goods companies, it has created a whole new game in which the new coronavirus has only cemented the need for brands to adapt.
Not long ago, brand owners were able to maintain or grow market share by focusing their attention on shelf-impact strategies while making modest product innovations. Today, e-commerce has changed the entire way CPG’s do business, requiring completely new strategies to adapt, survive and thrive. These changes start with the product design and include the choice of packaging, as well as new systems for order fulfillment and shipping to avoid obstacles as online orders continue to become the new normal. Prior to the global pandemic, online sales in the United States were growing at 15% a year, and 62% of consumers purchased a product online and picked it up in the store in 2019, according to PMMI’s report Omnichannel Retail: Operating Harmoniously in an Integrated, Digitally Enabled Supply Chain. A Forbes article reported that in the first few months of stay-at-home orders, online revenue growth was up 68% from last year for U.S. retailers.
Though many people around the world are eager to escape quarantine life and may be gradually returning to brick-and-mortar shops, emergency scenarios like a pandemic reveal what dependence on e-commerce can look like and what companies were and were not prepared for. Brands that aim to come out successful on the other side of COVID-19 should consider some key tenets can help brand owners and their partners stay ahead of the curve.
Take a flexible approach
To suggest that brand owners must be flexible in the age of e-commerce is an understatement. The lifetime of a product today is shorter, with tightened production cycles and an increasing number of SKUs. Product manufacturers are subject to the whims of online reviewers who can catapult a product to instant success—or failure. In contrast to a retail environment, packaging strategies for e-commerce must be more agile, especially in secondary packaging. Quick adjustments to meet consumer demand are necessary. In brick and mortar retail, a product might be sold as a single unit or as a six-pack, but brands gain the favor of online shoppers by customizing quantities whenever possible.
These changes complicate packaging decisions, motivating brands to simplify wherever they can. In fact, according to PMMI’s report, E-Commerce: Think Inside the Box, 25% of CPGs report they are designing e-commerce-specific packaging, and many are eliminating secondary packaging altogether to save on material costs. This approach requires primary packaging to withstand the rigors of shipping via multiple channels to consumer doorsteps. Packaging must also be strong enough to be reused for shipping back to the manufacturer, as e-commerce purchases have much higher return rates compared to traditional retail. Companies can right-size their packaging to reduce material use, while at the same time invest in stronger substrates and leak-proof protection to ensure that products arrive undamaged. However, amid all of these adjustments, brands must ensure the new packaging also meets consumer expectations for a fulfilling unboxing experience.
The pressures associated with e-commerce have made supply chains more complex. PMMI’s report states that, on average, a brick-and-mortar retail product is touched just six times along its journey to the store shelf. But for e-commerce purchases, packages are touched up to 20 or 30 times before they reach consumers.
This means not only must packaging be more durable, but brand owners need to collaborate with a larger number of players throughout the multiple channels of distribution.
Manufacturers increasingly rely on partners to help fulfill e-commerce demand. The same report acknowledges that nearly 40% of brand manufacturers use third-party logistics (3PL) channels to fulfill online orders; nearly two out of three use e-tailers, and more than half sell products through Amazon. Manufacturers are barely able to keep up with consumer expectations for next-day delivery, let alone meet pressures for same-day or even next-hour delivery. These demands require supply chains to be connected more closely than ever before, from order processing and inventory management to tracking and delivery.
Product traceability is key for a collaborative e-commerce supply chain, and it is intrinsically linked to brand reputation and management. Both brand owners and consumers rely on product traceability to locate products within distribution, whether it is being shipped to the consumer or returned back to the manufacturer. QR codes are increasingly common not only for tracing, but also to deepen relationships with consumers by soliciting feedback and testimonials on products as well as communicating updates back to consumers.
Handling small custom orders is putting enormous pressure on businesses to adopt automation technologies. Robotics, including collaborative robots (cobots), increasingly help manufacturers solve e-commerce challenges by offering speed and reliability, and by compensating for chronic labor shortages.
Automated technologies need to handle shorter runs, new and diverse packaging shapes and sizes, and manage the diverse pack counts that are hallmarks of e-commerce. Automation is particularly important for fulfillment in warehouses. Some of the automated systems that brand owners are relying on include automated conveyors, integrated wearables, automated guided vehicles, voice-actuated picking and automated storage and retrieval systems. These technologies are helping to streamline fulfillment.
Find the right solution
E-commerce is here to stay. In fact, in 2018, nearly two of five brand manufacturers were considering changes to their primary packaging, and three of four brand manufacturers were making changes to their secondary carton, as reported in the PMMI e-commerce report. COVID-19 has forced everyone in the supply chain not only to adjust their way of doing business, but to implement completely new strategies to remain competitive. As the world becomes more interconnected, brand owners will succeed by staying ahead of these changes, implementing new tools and remaining nimble.
As manufacturers and end-users navigate the challenges posed by COVID-19 and its impact on e-commerce, the new live, web-based PACK EXPO Connects 2020 (Nov. 9-13), produced by PMMI Media Group, will provide insights the industry has relied on through the PACK EXPO trade shows for more than 60 years. The event will include live chats, product and equipment demos, and educational sessions. More information is available at packexpoconnects.com.
PMMI, The Association for Packaging and Processing Technologies, represents more than 900 North American manufacturers and suppliers of equipment, components and materials as well as providers of related equipment and services to the packaging and processing industry.