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Live at FlexForum: Disconnects in 'Say' vs. 'Do' in E-comm Sustainability

Consumers and brand owners alike report that sustainability is king in e-comm packaging. And flexible packaging claims CO2-based bona fides. But do consumers know what that means? Do brands act on this demand? Research reveals a 'schizophrenic' landscape.

General trends to watch for brand owners with designs on packaging shifts in e-comm or D2C channels.
General trends to watch for brand owners with designs on packaging shifts in e-comm or D2C channels.

As the e-commerce landscape rapidly evolves, so do the demands on the packaging that delivers products through the channel. Daniel Arnold, managing partner of Trifecta Research, was at PLASTICS Industry Association's FlexForum today to drill down on consumer preferences in e-commerce packaging, revealing what drives consumer satisfaction and loyalty in the digital shopping era.*

“We’ve been at this for a while. We’ve seen e-commerce successfully scale over the last 15 to 20 years, and the U.S. closed last year with just over $1.1 trillion in retail e-comm sales. As we look through 2027, the forecast is for an additional $600 billion in the U.S., so $1.7 trillion with an 10 to 11% CAGR each year for the next for years until 2027,” Arnold said. 

What does that mean for packaging? It means that $1 in $5 U.S. retail sales dollars will be conducted online by 2027. And the valuation for e-comm-specific packaging will more than double by then, from $9 billion to nearly $20 billion.

Packaging reinforces decision-making for more “intentional” shoppers

In an era of perceived economic uncertainty, consumers have tightened their belts. Stock markets are at all-time highs, but pandemic-related inflation has been sticker than many hoped, especially in highly visible segments like food. Consumers are now more intentional with their purchasing habits as a result, Arnold said. 

 In the CPG product market, this translates to eroding brand loyalty and more willingness to stray to other options, based on worry about the economy and inflation.

·     5% of consumers say they've changed their shopping habits, citing inflation as the reason

·      58% Say that inflationary concerns have made them less loyal to brands

·      28% of consumers have postponed major purchases

·      37% have switched to cheaper products, especially in highly commoditized categories like food and clothing

“In addition to tightening their belts, to being more selective, to narrowing their minimum and maximum restrictions with their dollars, consumers are also seeking to find the alignment between the brands they shop and the products they purchase online, and their own values. That sort of alignment is creating this, this shopping intentionality…,”: Arnold said. “That means product content, packaging content, packaging materials, and packaging type, all of which are designed to showcase the look and feel the quality of products, all can bring tangible value to the consumer.” 

Among the large, emerging younger generations, sustainability is chief among those values.

“The truth is sustainability is absolutely here to stay, with 82% of shoppers wanting brands to embrace sustainable practices,” Arnold said. “Gen Z is driving this this this migration, with 55% of shoppers having recently purchased a sustainable product, and 32% saying they paid significantly more for their sustainable purchase. And they are willing to wait longer for it to arrive.”

In an environment where people want to shop brands that match their values, but don’t know how to size up vague sentiments like "sustainability,"  consumers seek guidance. That’s why third-party validation is important through “social proof:" reviews, star ratings, press coverage, certifications, and awards. Such validation reinforces the intentionality with which consumers come to the market, and gives them a socially acceptable reason to make a choice to buy. User-generated content such as “unboxing” videos rely on packaging to help inform and reinforce purchasing decisions. Through its look, feel, and gestalt, packaging sends the signal that consumers and third-party validators receive and translate. 

·      38% of all US shoppers make monthly purchases through social media, where others can view and comment on the shopping behavior

·      50% of younger consumers 24 and under (Gen Z) look to social platforms like Facebook, Instagram, and TikTok for their purchases

·      40% of Americans ages 18 to 24 use TikTok and Instagram as their search engines of choice

·      International brands gain prominence as international social media formats unlock nearly equal footing via these  democratizing channels. As long as delivery, quality, and cost are near parity or better to traditional domestic brands, internationals represent new challengers.

“All these things are front and center among brand managers at [the big brands] and others as they seek to make their own products more relevant and resonant, even in the context of a social media platform,” Arnold said.

Delivery accuracy and ease of returns are the new unboxing experience

Early on in e-comm's ascendancy, the unboxing experience was an emergent phenomenon. This was big when the subscription business model came online, and it evolved into a core component of the consumer journey. Uniquely, it was post-transactional. Unboxing and experiential packaging now persist as a way for brands to signal their values through decoration, messaging, and accessibility (easy or interesting opening methods).  

“Delivery is now playing the same sort of role,” Arnold adds. “When we survey global shoppers, fast and reliable delivery is the number one factor when shopping online. Transparency with delivery expectations is the number one determinant of whether they continue with that transaction.”

·      86% of consumers make a point of checking your retailer's return policy before making a purchase

·      56% of abandoned shopping carts online or abandoned because of concerns related to delivery

·      76% say that a poor delivery experience affects their decision to order from that company or from that retailer again

“The idea of easy returns in the delivery experience has escalated in primacy in terms of the shopping experience, as has returns,” Arnold said. “Seamless returns, easy returns, and free returns becomes part of the consumer consideration before they transact.”

Packaging plays a starring role in many of these key purchasing and repeat purchasing decision drivers, from signaling values to inspiring unboxing and “porch appeal” theater among third-party influencers. And ease of return and return logistics are areas where flexible packaging can shine. 

Consumers’ sustainable packaging ‘schizophrenia’

Daniel Arnold, managing partner of Trifecta ResearchDaniel Arnold, managing partner of Trifecta ResearchSo called “eco-friendly” or sustainable e-commerce packaging undeniably resonates with younger shoppers, most of whom are more comfortable with e-commerce and D2C than their older peers. But they don’t really seem know what that means.

“Two thirds of consumers self-reportedly claim they have little confidence that they know what packaging is or isn't recyclable. That shouldn't be of surprise. What is surprising, though, is that the stat is trending in the wrong direction. In 2015, 69%, of consumers claimed that they understood recycled content, they understood packaging recyclability. Today, that's down eight points to 61%,” Arnold said. “So despite this hyper-awareness of sustainability, despite their responses to surveys like this that suggest ‘yes, in fact, eco-friendly, sustainable packaging options, and shipping solutions are most important to them,’ they are not fully clear on what in fact, recyclability means or what packaging is coming from recycled content… You end up getting a feeling that there’s a sort of sustainability schizophrenia amongst consumers.”

·      61% said they understand recycled content, and

·      57% claim it’s meaningful, and

·      56% claim that  it reflects a good brand or a good company. But,

·      only 57% understand what it means or believe when a package claims it’s made from PCR

That means there’s a huge opportunity for the packaging industry to deliver on consumer awareness, but “must come with a consumer education and awareness campaign,” Arnold said.

Brands’ own form of schizophrenia

Global CPGs are machines built on scale and volume. They have huge installed bases of equipment and material specs that are optimized down to tight tolerances across expansive and complex supply chains. Conversely, truly innovative alternative packaging has not yet reached that scale and volume.

So, are brand owners willing to spend more on sustainable e-comm packaging?

“We assume that there's a lot of resistance downstream among brand owners to the premium price associated with sustainable packaging. But the truth is brand owners are willing, at least self-reportedly in surveys, to pay more for sustainable solutions,” Arnold said.

According to the Trifecta Research, 69% of brand managers in a published survey spent up to 20% more for sustainability features. They don’t say they regularly, or they prefer, or they always will spend more, but they have spent more for sustainability features in e-commerce packaging. And that spend premium has increased up to 20% on a per unit basis, relative to standard packaging for e-commerce.

The takeaway is that sustainable packaging or e-commerce packaging are no longer two parallel paths, where you can have one that’s durable and robust, or one that’s lightweight, CO2 friendly, and recyclable. Those two once competing objectives are coalescing. And brand owners are spending.

“So you've got consumers who are demanding [sustainable e-comm packaging], you got brand managers self-reporting that they’re willing to pay for it,” Arnold said. “But as we look at actions taken by brand owners last year [2022 reporting] related to SKUs that are sold through their online channels. the top three actions are far more internally focused.”

·      39% of redesigned packaging for automated handling applications

·      33% introduced new formats like multipacks

·      37% updated their labeling

“If we overlay [those top three actions] on what the consumers are telling us as important to them, we don't see a 1::1 relationship. I don't see sustainability, recycled material, eco-friendly material, ethically sourced packaging, etc. among the top three actions that brand managers have done with their e-commerce packaging.”

In the same way that there's a disconnect among consumers between what they say and what they know about sustainability, there appears to be this disconnect among brand managers in terms of their activities relative to consumers. Sustainability is of interest to all parties, it has gotten their attention, and everyone is focused on it. But the say vs. do synchronicity has yet to play out.

A niche, within a niche, within a niche

Trifecta Research’s Arnold identified six trends in sustainable, flexible, e-commerce packaging. Under the broader umbrella of packaging, this represents a niche (sustainable_, within a niche (flexible), within a niche (E-comm/D2C).

Sustainability is the biggest trend in flexible e-comm packaging, with 90% of procurement packaging decision makers agreeing [in one survey] that sustainability is a key consideration in packaging decisions, and 55% of packaging decision makers saying they’ve moved closer to carbon emission goals [by using lighter weight flexible packaging.]

“I think what I want to leave you all with is the connection between sustainability and brand loyalty, and the fact that [sustainability] has a direct impact on [consumers’] willingness to shop with brands.

Returnability and reusability are two words to describe a single concept--durable packaging intended for reuse by the brand. They go hand in hand—what would returnability matter if reusability weren’t the aim? Flexible packaging can still be robust, constructed for many-cycles, while retaining its lightweight advantage over kraft corrugated. Of all returnable packaging available, plastic returnable packaging is expected to grow the fastest with a 63% projected growth from 2022 to 2029. RePack and no-boxx are prime examples of this trend.

Cost reduction strategies were once seen as the enemy of sustainability, and in many cases they still are. But it can be argued that source reduction is both a cost reduction and sustainability strategy—the race to the bottom in lightweighting has happened already in retail packaging—in rigids like bottled water—but is still unfolding in flexible e-commerce packaging.

We're seeing a blending of the two—a lot of focus on innovative cost reduction strategies that also check the box for sustainability,” Arnold said. “It’s this idea of innovation reflecting the intersection both from a process and a materials perspective, for cost reduction objectives as well as sustainability efforts.”

Arnold also cited the visual, aesthetic link between eco-friendly e-commerce packaging and minimalist design. If the pack appears to be reduced in size and impact, consumers read it as more sustainable. Right-sized packaging made on-demand is closely related to minimalist design. This entails bespoke flexible packaging cut from rollstock and customized to fit variable-product orders from sites like Amazon. From a consumer-perception point of view, it eliminates the appearance of over-packaging, such receiving a toothbrush in a 2-ft by 2-foot corrugated case. And quite simply, it is a means of source reduction. Finally, smart and connected packaging that can communicate its own sustainability story via QR codes, RFID, or NFC tags, can broadcast facts about a package's sustainability profile. Smart packaging brings full circle packaging’s potential role in signaling sustainability chops to a more “intentional” shopper. PW

*The range of statistics and surveys that Arnold presented wasn’t original to Trifecta. Rather, it was a broad review of many recognized, published sources on the topic. The analysis of all of this disparate information, though, was certainly original, and it synthesized some noteworthy trends for packagers in what can be said to be a rapidly maturing, yet still growing, e-comm packaging category. 

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