E-Commerce Packaging: Economic and Environmental Performance
29th June 2018 | Henrik Pålsson
E-commerce sales have increased dramatically by around 15% per year in the EU over the recent years (E-commerce Europe). In the most frequent e-commerce countries in the EU (e.g. the UK, Germany and Denmark), more than 80% of internet users shopped online last year (European Commission).
E-commerce changes many parts of a supply chain, from production to consumption. This includes the number of warehouses, their geographic locations, their size, as well as the mode of transport, fill rates in vehicles, packaging solutions and more. E-commerce also means that companies need to communicate and distribute products to consumers in new ways, as the stores are eliminated. These and other changes affect the economic and environmental performances of e-commerce compared to conventional commerce.
It is a complex matter to analyse the effects, as the total economic and environmental performances depend on six factors:
- Freight transport
- Passenger transport
- Packaging solutions
- Energy consumption in buildings
- Share of product returns
- Unsold or damaged products
Each factor needs to be understood in order to determine the total economic and environmental performances of e-commerce or conventional trade.
The Impacts of Packaging
Packaging has an impact on the majority of these factors. Excluding the direct impact of the packaging factor, which refers to the costs and the environmental impact of packaging manufacturing, indirect impacts of packaging are also important.
The weight and volume efficiency of packaging and its stackability determine the number of products that can be:
- Loaded into a vehicle (freight transport factor)
- Handed simultaneously and efficiently stored in warehouses (buildings factor)
Packaging also has an impact on the efficiency of product returns. Usually, returned products must be repacked. The extent to which the packaging solution supports time and cost-efficient repacking with minimal waste, affect the total economic and environmental performances of e-commerce.
Another indirect impact of packaging is its capability to protect. The aggregated economic and environmental impacts of damaged products include those from product manufacturing, packaging, transport etc. In addition, the cost and environmental impacts of a product are usually by far higher than that of packaging. Thus, sufficient packaging protection is essential. According to E-commerce Europe, one of the most common complaints in e-commerce are damaged goods. Statistics from Eurostat showed that 9% of the consumers had received mistaken or damaged goods during the last year.
Developing Packaging Solutions
However, research has shown that e-commerce can become economic and environmentally efficient (e.g. Palsson et al., 2017), but it requires that companies develop their processes and distribution systems so they have a lower impact of the six factors mentioned above.
Since packaging influences these processes and systems, companies should develop packaging solutions, which are adjusted to the characteristics and requirements of e-commerce. Currently, many packaging solutions have been developed for conventional trade, and have been used in e-commerce as it grows. It's common practice to pack the same primary package used in stores for transport (i.e. corrugated boxes), but this is rarely the most cost/environmentally-efficient option.
Dedicated packaging solutions for e-commerce should avoid unnecessarily large packages in order to minimise the transport of air and the use of too much packaging material. The generation of unnecessary waste should also be avoided. For instance, primary packaging for toys sold in stores is often designed to be difficult to open and to show the product through transparent plastics. These features are redundant in e-commerce. On the contrary, if such a package has been opened and then returned, the repacking is time consuming with a considerable amount of waste.
Companies should also aim to avoid damaged products by having sufficient packaging protection, as this has considerable impacts on economic and environmental performances. However, it is often a dilemma between economic and environmental performance; cheap but energy-intensive e-commerce products may not be protected enough to avoid high packaging costs, as the relative cost of damaged products may be low. However, the environmental impact of the damaged products are high. In selecting packaging solution, these trade-offs must be considered and managed.
The possibility to use efficient packaging solutions depend to some extent on logistics practices and strategies. Companies can offer differentiated delivery times. A longer delivery time means that the lead time for order fulfilment increases. By enabling for and encouraging consumers to select a longer delivery time, research shows that the opportunities to consolidate orders and thereby increase the vehicles’ fill rates.
Another opportunity is to co-pack orders from the same consumer in the same transport package. For instance, if a consumer orders three books at the same time instead of one book at three different occasions, the transport packaging is reduced by almost 2/3 per book, the freight transport becomes more efficient, and if the book is collected by car from a pick-up point the last mile becomes significantly more efficient. Both the consolidation and the co-packing opportunities in e-commerce require that the packaging solutions are flexible and suitable for co-packing.
These are some of many perspectives on packaging and e-commerce that companies and consumers should relate to for e-commerce to develop in an economic and environmentally efficient direction.
As e-commerce matures and grows, many new and innovative solutions are being developed. To consider how packaging is affected by, and effects, the total economic and environmental impacts of those solutions, the six factors need to be considered.