The original article was published in CGT Magazine. The following is the first in a three-part series from Edge by Ascential on e-commerce packaging optimization and the challenges and opportunities of translating packaging strategies to the digital shelf.
Don't get me wrong, my wife and I love our Instant Pot. One thing we didn't love, however, was when it arrived at our door. It was double boxed: one glossy, attractive branded box inside another box, which was brown cardboard with simple black lettering (also branded).
In light of the emphasis Amazon has placed on frustration-free packaging since 2007, it's surprising that one of the retailer's most successful products fails to meet two of its key tenets: to be easy to open and to contain minimal packaging. But Amazon has been consistent, if slow-moving, in its ultimate goal toward this optimized end state and has taken a more direct step to progress the transition with tighter rules that will come into effect on Aug. 1.
That said, manufacturers shouldn't be waiting for Amazon to force them into implementing e-commerce-optimized packaging. Reducing waste is crucial for protecting the environment and, knowing this, consumers are choosing to support brands that make sustainability a priority (as well as leaving them with less trash to deal with). Brands that don't just meet but exceed Amazon's requirements will also see their positive impact on the world reflected on their bottom line.
The Frustration-Free Packaging certification (FFP) introduced by Amazon in 2007 was designed to incentivize suppliers to rethink packaging for the digital shelf. Even today, many brands design their products to look good on a brick-and-mortar shelf, and then over-box them for shipping. Twelve years ago, Amazon was at the forefront of the movement to improve e-commerce packaging to lower costs, reduce waste and optimize the customer experience. To do so, the e-tailer introduced three general tiers:
- Tier 3: Prep-Free Packaging: Packaging that still requires an overbox for shipment to the customer but reduces the prep required by Amazon at the fulfillment center.
- Tier 2: “Ships in Own Container” Packaging (SIOC): Packaging designed to ship to the customer in the same container in which it arrives at the fulfillment center (so no overbox).
- Tier 1: Frustration-Free Packaging (FFP): Packaging that meets Tier 2 requirements but is also designed as easy to open with minimal packaging and curbside recyclable materials.
Last September, Amazon notified its North American suppliers of an update to FFP designed to incentivize them to take the lead on reducing waste and damage and increasing sustainability. As of Aug. 1, all items larger than 18" x 14" x 8" and/or 20 pounds or more — which includes essentially all products that ship through non-sortable facilities — must be designed and certified as ready-to-ship (Tier 1 or Tier 2).
While Amazon has not yet introduced a similar directive for smaller items (products selling through sortable facilities), many suppliers have taken the initiative to implement their own version of e-commerce-optimized packaging.
For example, a coalition of major consumable brands recently announced Loop, a new zero-waste platform. Loop gets its name from “closed loop packaging,” an emerging model that focuses on creating a closed loop distribution system in which packaging materials are returned to the manufacturer and reused. This is a big, international initiative that goes above and beyond the various requirements put forth by most retailers and even lawmakers.
The push for packaging efficiency and sustainability is affecting all retailers, so why should brands focus on Amazon? For key omnichannel players like Walmart, Kroger and Target, the priority is to accelerate the penetration, basket size and frequency of their click-and-collect and ship-from-store businesses, which still involve the physical shelf. Amazon, on the other hand, takes the physical shelf out of the equation. As a result, the need for e-commerce-optimized packaging is more urgent and gives brands more opportunity to reduce costs, innovate and prepare for a more sustainable future.
Pursuing Tier 1: FFP or Tier 2: SIOC certification also comes with several beneficial side effects, including:
- Improved profit margins, by lowering packing material costs and Amazon's shipping costs;
- More product availability, by increasing efficiency at the fulfillment center;
- Better customer experiences, by eliminating difficult or messy unboxing; and
- Improved brand reputation, by reducing waste and increasing sustainability.
According to Amazon, the FFP program has eliminated more than 244,000 tons of packaging materials, saving the equivalent of 305 million shipping boxes in 2017 alone. Our data shows that by meeting Amazon's guidelines, brands can save on average $1 per unit for smaller sortable items and $10 per unit for larger, non-sortable items. This is enough of a cost savings to be the difference between a high-ranking ASIN and a Can’t-Realize-a-Profit (CRaP) delisting at Amazon.
In the face of rising consumer demand for sustainable business practices and ongoing criticism of the wastefulness associated with e-commerce fulfillment, it's simply good business to invest in better packaging. Manufacturers should use this as an opportunity to integrate brand engagement into their approach to FFP. In e-commerce, the package is a critical touchpoint between brand and consumer — the only real physical point of interaction — and so it's a brand's last opportunity to leave an impression (aside from letting the product speak for itself).
By tightening the reins on frustration-free packaging, Amazon is responding to market realities and consumer demands. Meeting these requirements is literally the least a supplier can do to stay in the game; smart brands are doing much more, investing in green packaging and programs such as closed loop distribution. Tomorrow's winners are not just responding to today's rule changes, they're innovating to stay well ahead of the curve.
Chris Perry is Vice President of Global Executive Education at Edge by Ascential. Over his career to-date as a CPG practitioner, he has led the e-commerce strategy, organization, capabilities and activation across Reckitt Benckiser, WellPet, and most recently Kellogg, generating collectively $350 million in profitable revenue growth, thousands of basis points in online share leadership, and collaborative joint partnerships with more than 25 top e-commerce retailers.