Tag: packaging costs

Thinking Outside the (Cardboard) Box to Reduce E-Commerce Packaging Waste & Excess Costs

Aiza Chaudry
Insights

Did you know? About 165 billion packages are shipped in the US every year, according to data from USPS, FedEx, and UPS. (LimeLoop)

The packaging required for that package volume is roughly the equivalent of 1 billion trees!

At a micro-level, the typical household throws away up to 13,000 pieces of cardboard in a single year. Additional packaging materials, such as plastic, tape, and bubble wrap, each contribute a fair amount of landfill waste, as they often cannot be or simply are not recycled. 

Shipping packaging is directly to blame for a wide range of environmental issues, such as overcrowded landfills, increasing greenhouse gas emissions, and litter pollution (both on land and in the ocean). 

As a result of this multi-pronged challenge of packaging waste, the battle to ship goods more sustainably is escalating. Nowhere is this more pronounced than in e-commerce shipping.

Let’s examine why and how online retailers can achieve greater profitability while transitioning toward a circular economy.

How does shipping packaging impact your business?

While the overall cost of packaging varies greatly by product and application, it typically accounts for 10%–30% of COGS. And if your packaging usage is excessive, you could be throwing away hundreds of thousands or even millions of dollars every year. Yet, because shipping packaging is assumed to be essential, it’s often not seen as a facet that can be optimized to achieve both greater profitability and sustainability.

Factors ranging from weight and materials to size can impact your packaging needs and costs, but fulfillment and shipping methods are also key. Here are a few examples of things that will affect your packaging needs/costs:

  • Rising packaging material costs –  One of the main reasons you may have experienced an increase in packaging costs is an increase in demand for the raw materials used to produce corrugated cardboard (and hence for the finished material itself).
  • Oversized packaging – If the dimensions of the cardboard box don’t closely match the product dimensions, your packaging is likely to be excessive. For instance, a t-shirt doesn’t need to be in a 15” x 15” box. Some e-retailers make the mistake of ordering oversized boxes under the pretext of getting a discount for bulk packaging purchases and having something that can fit most/all of their products. This can become unnecessarily expensive if your delivery carrier applies dimensional weight pricing, and it is also wasteful in terms of the excess material used.
  • Ineffective packaging materials – when your packaging is not sufficient to protect your product, you end up paying for it with higher return rates (due to damage) and customer churn. This can obviously increase your overall costs and even kill your business. Do NOT attempt to save money by reducing your protective packaging unless you are (a), confident your product can hold up in transit, or (b) using micro-fulfillment (i.e. Ohi’s instant delivery platform) to greatly reduce the last mile delivery distance.
  • Order fulfillment – If your e-commerce orders typically ship via standard ground delivery to the end customer from one or just a few traditional warehouses (whether in-house fulfillment or 3PL), your protective packaging needs are likely to be high, given that orders are traveling hundreds/thousands of miles in the back of a truck before they arrive to your customer. If on the other hand, you have your inventory forward-positioned into micro-fulfillment centers, your orders can be hand-delivered by a gig driver/rider and only need to travel a few miles to reach your customer. Many merchants on Ohi’s platform have completely eliminated the need for any cardboard or plastic protective exterior packaging, which is good for the environment and for their bottom line.

How can your e-commerce business cut down on wasteful packaging and costs?

The majority of packaging used today is still linear, meaning that the packaging for a product is created from raw materials, the product is used, and the packaging is discarded.

Renowned brands like Gucci, Nike, Puma, and Zara are starting to recognize the environmental impact of their packaging and are working to incorporate sustainability initiatives to achieve the triple bottom line by creating packaging for a circular economy. 

Consider the following strategies to optimize packaging and reduce shipping costs and waste:

1. Think outside the traditional cardboard box.

Cardboard boxes, as discussed earlier in the article, contribute to millions of tons of waste each year, and even in proposed reuse scenarios, they are often quickly discarded and dumped into landfills.

Using packaging alternatives that facilitate composting and biodegradable processes will help your brand amplify its sustainability efforts.

For instance, Puma, a leader in sportswear and shoes, launched ‘Clever Little Bag’ to replace the traditional shoebox, using 65% less cardboard. 

Source: Fuseproject

The bag and box system has no printing or tissue, assembles easily, takes up less space, weighs less in shipping (saving money and fuel on the delivery), replaces the plastic retail bag, and is completely recyclable.

There are many options available to choose from as compared to a few years ago when there were limited options and they were more expensive.

  • Easily biodegradable/compostable packaging like molded pulp packaging. 
  • Reusable packaging like eco-friendly tote bags is ideal if you use a micro-fulfillment, as you no longer need a heavy layer of protection with a greatly reduced travel distance.

2. Make your deliveries faster, more sustainable, and more cost-effective with Ohi.

Ohi deliveries were shown to be 22x more eco-friendly than next-day air and 5x more eco-friendly than 3-5 day ground.

Here’s how Ohi’s instant delivery platform is eco-friendly as well as business-friendly:

  • Ohi’s e-commerce fulfillment platform generates the least carbon emissions because products are shipped from micro-fulfillment centers that are located very close (often just a few city blocks) to your end customers. 
  • We use foot couriers and bike, e-bike, and scooter couriers in densely populated urban areas (instead of vans/trucks), which results in faster deliveries (due to the ability to avoid traffic) and less overall fuel consumption.
  • Ohi promotes the use of eco-friendly reusable totes for 2-hour and same-day deliveries whenever possible, as opposed to expensive/wasteful conventional packaging. Excess packaging is not needed for Ohi deliveries, because the risk of damage in transit has been virtually eliminated.
  • While Ohi’s model is sustainable, there is still a residual carbon footprint that remains from areas of the business that still require fuel or carbon consumption (e.g. middle mile line hauls).. So, we’ve partnered with EcoCart to calculate and offset the remaining carbon footprint, allowing us to offer our customers carbon-neutral e-commerce fulfillment. 

Ohi helped a leading kombucha brand, Health-Ade, increase its customer lifetime value (CLV) by 49% while greatly reducing their packaging waste and shipping damages.

Adopting a more sustainable approach to your e-commerce business doesn’t have to mean a loss of profits. By implementing sustainable solutions and strategies at each step of your post-purchase experience, you can provide a better customer experience, contribute to a circular economy, and even reduce your overall shipping costs. 

About Ohi

At Ohi, we’ve flipped the script for e-commerce fulfillment, transforming it from what is traditionally seen as a cost center into a growth engine. Brands join the Ohi platform to deliver powerfully fast, brand-focused, and memorable post-purchase experiences that enable them to grow. Want to learn more about how Ohi enables instant commerce? Get in touch today.