Ahead of his presentation at this September's E-PACK Europe conference in Vienna we spoke to Tom Hallam, renowned packaging guru and expert and Project Director, Packaging Consultancy at Smithers.
He provided us how the industry is adaption to the changing retail landscape, the impact of sustainability on e-commerce packaging and the main threats and opportunities faced by this industry.
How is the industry adapting to the changing retail landscape?
It has been well documented that the e-commerce market sky rocketed during the pandemic. It was the perfect storm of consumers being stranded in their homes, with accelerated rates of m-commerce (mobile-commerce), higher adoption of e-commerce by the older generation, and 'retail therapy' for consumers juggling full time jobs and other demands from the lockdown orders.
However, the e-commerce landscape has changed quickly post-pandemic, and there have been two key dribers that have meant that the stellar growth in e-commerce growth has abated.
Firstly, consumers have returned to in-store shopping, which has slowed e-commerce rates down over the last 18 months from the middle of 2021.
Secondly, Europe has been gripped by dramatic economic changes during this period, with spiralling inflation and rising unemployment levels in the largest e-commerce markets, specifically, the UK, Germany, France & Italy. In response to these major challenges, the industry has focused on fixing the most prominent consumer pain points – slow fulfilment/delivery and unsustainable/poorly designed packaging.
What is the impact of sustainability on e-commerce packaging?
In terms of sustainability, there have been a couple of quantum leaps in the e-commerce packaging market over the last five years.
The first is the development and mass commercialisation of the paper mailing bags, which has been championed by the likes of H&M, Amazon, and Zalando. Brand owners have quickly realised that consumers want packaging solutions that can offer functionality and sustainability throughout their lifecycle. This ranges from responsible sourcing of the wood fibres, through to low carbon manufacturing (particularly in the Nordic countries), and well-developed collection and recycling infrastructures at the end of life.
Secondly, automation can be found in the most modern fulfilment centres. Automation doesn’t just mean robots that pick products, it extends all the way through to the AI software that scans the goods through to the ‘right sized’ automated box, and bag packing machines that many brand owners and retailers have onsite. In the future there is the potential that this can facilitate packages that use less raw material and contain less void space, meaning more packages per vehicle, less vehicles on the road, and less emissions. In terms of improvements, the e-commerce industry will have to work with the waste management industry to find better ways for plastic-based packaging to be mechanically, or chemically recycled.
What opportunities await the e-commerce industry over the next five years?
Although the growth rate in e-commerce has reduced post pandemic, the e-commerce market still offers great opportunities for those selling goods, and for those supplying packaging materials. The recent revisions that have been proposed to the Packaging and Packaging Waste Directive (PPWD) should be seen as an opportunity for the key stakeholders to adapt their current business models. Those who defer their action on reusable packaging will find themselves in trouble when 2030 comes around and regulations change to fit sustainability goals. Reusable packaging is not an easy fix in e-commerce and, like in other packaging sectors, those that move first will reap the benefits in the long run. The continued development of AI, smart packaging, and automation will also hold a big opportunity for brand owners and retailers to get closer to their customers and to fine tune the customer experience.
What are the main threats the industry needs to be wary of going forward?
Like many industries, the main threats to those selling in the e-commerce sector are margin dilution and the erosion of consumers' disposable income, and we are seeing some clear actions from sellers in response to this. A good example is the withdrawal of ‘free returns’ by many retailers, as this is widely considered uneconomical in the current environment. Brands and retailers will need to find other ways of differentiating themselves in what is a highly saturated market, (if we use the clothing market as an example). The return of in-store shopping is also a threat, as many consumers still prefer a more personal experience. Retailers and brand owners with a multi-channel approach to market, will be best placed to withstand this pressure.
Tom Hallam has 23 years of professional experience, initially working in the consumer products sector with Reckitt and for the last 15 years in forest products. Originally he was focused on market and consumer insight but he has been firmly working on sustainability and innovation ever since. He has worked for four multi-national companies and has since been delivering freelance projects via Brand Ethics consulting before joining Smithers as Project Director, Packaging Consultancy.