The retail industry is in the middle of a digital transformation. With the growth of e-commerce, smart devices, digital wallets and an increasingly tech-savvy customer base, the retail experience is undergoing what seems like a permanent change. How does the shift from store shelves to online shopping change the way brands package their products? How does consumer packaging trends demand change?
From 2016 to 2020, the global e-commerce market is expected to grow at a CAGR of 19.42 percent, according to Research and Markets. As part of this rise, brands must (re)consider a critical element to their sales model: customer experience as a function of the buying channel. The in-store experience is quite different from the on-screen experience.
Optimizing the customer experience is different for physical stores versus e-commerce sites. The in-store setting requires the creation of an on-shelf experience that will delight and persuade the customer to buy. But that experience is completely different in an e-commerce setting. The customer makes the selection in a 2D world and doesn’t have the ability to touch or feel the product before making the purchasing decision. Add to that the considerable wear and tear a product endures before it ever arrives and the experience is turned upside down.
Last month, Jabil sponsored a packaging trends survey focusing on the inevitable shift from traditional retail to e-commerce channels and explored how brands can support a successful transition to stay ahead of the curve. Conducted by Dimensional Research, a third-party research firm, the survey was designed to reveal the evolving packaging considerations of brands as the new retail reality extends from store shelves to an online setting.
Representing management and executive-level decision-makers in such sectors as consumer packaged goods, food and beverage, industrial, consumer health products and electronics, more than 200 manufacturing professionals responsible for packaging decisions participated in the survey, primarily from mid-size to large companies in the U.S.
While 27 percent of respondents exclusively sell online, 54 percent support a mix of online and physical channels. For those who utilize e-commerce as a channel, 91 percent view e-commerce sales as important to their revenue models and another 88 percent expect it to grow in the next two years.
Ninety-five percent of the respondents say that packaging impacts online purchase experience. Although the actual purchasing process is important for e-commerce, the customer experience doesn't end there. In fact, the physical experience begins when the consumer receives the shipment containing the product.
When thinking about the packaging factors that affect the customer's experience after an online purchase, a majority of the respondents believe that the package condition upon arrival had the largest impact. But other factors, such as the ease of opening the package, extensive secondary packaging content, cost-effective shipping and ensuring instructions are not lost within the packaging also affect the customer experience. So where does e-commerce ready packaging come into play?
Our respondents agree that BOTH good and bad packaging can have a significant impact on the customer experience. Seventy percent of the professionals believe that good packaging could create a memorable customer experience, while 71 percent agree that poor packaging could ruin the customer experience.
Having said that, two in three of the packaging professionals believe that e-commerce packaging needs are different than store shelves. A closer look reveals that brands who primarily sell through online channels understand the importance of unique packaging for their e-commerce initiatives. A majority of brands see the different demands of e-commerce and they have responded to those demands with different packaging solutions.
Brands see the importance of improving packaging for e-commerce to meet customer expectations. Eighty-six percent of respondents agree that the responsibility for driving improved packaging for e-commerce originates with them more so than the e-tailer.
For issues faced during the shipment process (think damaged packages, leaks etc.), most respondents believe the responsibility falls on the brand, no matter what level they were at within the organization. Some respondents also assign blame to the shippers or e-tailers and would expect them to correct the issue. Surprisingly, two percent of the respondents thought the responsibility fell on the customer, as they chose to buy online.
Perhaps one of the most interesting revelations from the packaging industry has to do with "worst-case-scenarios." When we asked our respondents whether they thought about these scenarios when choosing packaging, 96 percent say they think about e-commerce packaging problems, but only 54 percent indicated that they actually test for them. For brands looking to deliver a positive customer experience, this definitely represents an opportunity.
We have already been witnessing technology transform businesses and industries all over the world. Our respondents see opportunities for modern technologies to drive innovation in e-commerce packaging solutions.
Nearly half of the respondents believe Radio Frequency Identification (RFID) systems will drive the most innovation in the near future. However, respondents also believe sustainable packaging options, the Internet of Things (IoT) and devicification will make a significant impact on e-commerce packaging.
As expected, brands believe their e-commerce buyers are younger and more tech-savvy, whom strongly prioritize convenience as a driving influence of purchasing online instead of in-store. Research shows that "60% of adult Americans are happy to know they won't have to shop in a crowded mall or store" when they shop online. Thirty-four percent of respondents say their e-commerce buyers prefer auto-replenishment or subscription purchase models that drive the convenience they've come to love.
When buyer demographics change, so do the behaviors. Over the last decade or two, the purchasing experience has completely changed not just in the way technology has enabled new capabilities, but also in how customers interact with companies. With the rise of social channels, customers have a more prominent (and more public) voice when they have poor customer experiences. Nearly half of our respondents say their e-commerce buyers share online purchases experiences via social media, including pictures and comments related to the packaging.
E-commerce is increasingly becoming the preferred channel for consumer purchases and big brands are scrambling to position themselves ahead of the competitive curve. As brand experience is redefined for e-commerce, new models and packaging expertise will be required – including design and manufacturing optimization and smart and consumer device package solutions that support sustainability and leverage digital technology platforms.
What’s the upshot? Clearly, it’s time for brands to stand up and take notice of the changing consumer landscape. And, further still, the moment is now to make packaging model changes expressly designed to support the shifting customer mindset to better meet their needs where and how they buy. While the dramatic shift is only just beginning, it’s the brands that prepare for the inevitable realities that are going to emerge victorious. And success will mean they considered all aspects of the shifting model – from sustainability to functionality and durability.
Success will also mean they moved fast to the Smart Packaging applications and consumer device solutions that will position them well and support even greater convenience for the consumer over time. After all... we might be moving from retail to online today, but the convenience of tomorrow will have consumers skipping the selection and order process all together. If you drive customer experience and loyalty now, you’ll keep the customer forever.