The e-commerce packaging market will reach $55bn in 2022, far outstripping the overall growth rate in packaging.
According to Smithers Pira report, The Future of Corrugated Packaging to 2023, e-commerce packaging is set to rise on a compound annual growth rate of 14.3 per cent through to 2022, drastically outpacing the 2.9 per cent rate predicted across packaging as a whole.
In total, the worldwide demand for corrugated is 143 million tonnes, with a value of $245bn in 2018.
Smithers Pira says that despite the economic slowdown over the past few years e-commerce retail sales have continued to show growth, and present a considerable opportunity for corrugated packaging suppliers.
The research company contends that the nature of e-commerce packaging favours the use of corrugated board as a major medium, and is now estimated that upwards of $20bn worth of corrugated materials are used in the sector. The major sectors making use of e-sales systems include consumer electronics, books and media products, fashion, and toys, hobby, and sports equipment.
According to 2017 data from eMarketer, e-commerce is currently responsible for 10% of all retail sales, and will grow to nearly 15 per cent by 2020.
Addressing this fast-changing market will require corrugated packaging suppliers, and the overall packaging supply chain, to meet new, still developing requirements.
Unlike mass-produced economies of scale, e-commerce tends to have an increasingly complex logistics chain, with packages expected to be handled up to 20 times or more during a standard delivery.
Smithers Pira says added to the scale of the necessary warehousing and delivery systems for e-commerce, there is considerable demand for robust, cost-effective packaging solutions in the sector.
“Additional demands from brand owners are now being felt by the converting industry, as many brands now require the secondary pack to carry their image into the home, not just the retail outlet. This increases the need for converters to produce high-quality graphic designs on the shippers themselves,” says the report author.
The advent of e-commerce especially in the grocery sector is likely to have a slight negative impact on retail-ready packaging (RRP) usage, as e-sales do not require any RRP systems.
Innovation in e-commerce systems such as subscription box services and meal kits that offer direct-to-consumer delivery of specialist food using a weekly or monthly subscription model will have an additional, though slight, impact on the RRP market.
All the sustainability issues facing the corrugated market as a whole come into play even more emphatically in the e-commerce sector, with consumers demanding ease of recycling and returns for their e-commerce purchases.
The report contends that while lightweighting of board has long been affecting the corrugated industry, rightweighting and rightsizing are playing an increasingly important role in this market too. This is not only in response to consumer demand for efficient packaging, but also in response to the logistics chain’s adoption of dimensional weight (DIM) pricing.
Up until 2014, retailers were charged freight costs on the basis of package weight, but since then many carriers have introduced DIM weight pricing based on the dimensions of the package, and including a ‘dimensional factor’ (typically 166 inches cubed per pound in the US market) to determine the DIM weight.
The major carriers, UPS and FedEx, currently use the same calculation, which is the cubic size of a package divided by 166 for domestic shipments, and 139 for international shipments. This DIM weight is then used to determine the cost of shipment.
In some instances this has led to significant cost increases, such as a 32-pack of toilet rolls costing 37% more to ship using DIM weight, and similarly a large box of disposable nappies costing nearly 10% more to ship with DIM weight. Similar examples can be found in many lightweight or low-value products, especially in the growing grocery e-sales market.
With e-commerce becoming an increasingly important element of retail, corrugated packaging stands to benefit substantially. As the supply and distribution chain for packaged goods changes, new requirements will emerge for corrugated packaging products. This makes e-commerce one of the stand-out areas of growth identified in Smithers Pira’s forecast, The Future of Corrugated Packaging to 2023.
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