10/01/12

Can’t miss it

Custom packaging packs a marketing wallop that hits home as the shopper opens the box.

Amy Dusto , Associate Editor

Consumers can buy practically anything online, including items that hardly seem like they'd ship well in a box—an expensive bicycle wheel, for example. It's the merchant's responsibility to get the product to the customer intact. Some online retailers design their own packaging to maximize the protection of their products, and while they're at it spend a little more to make the package itself so enticing that it will make customers want to buy again.

For example, e-retailer Karbon Speed, which sells carbon fiber bike wheels for racers and triathletes, needed to find a way to safely ship the expensive wheels, which cost $1,500 per set. Wheels can withstand a fairly hard bang on the rim vertically, but lay them flat and that bang can cause damage, says co-founder and CEO Justin Li. He wanted a box that would prevent damage, and, given the product's price point, he also wanted opening the box to be a commensurate, white-glove experience.

Li solved both problems working with packaging manufacturer Unisource. The vendor came up with a dual-layered package design: a glossy, black and neon green box branded with Karbon Speed's logo contained within a plain shipping carton. Both cartons are cardboard; the outer one protects the wheels from impact damage while the inner one, stuffed with paper inserts, protects the product from vibrational damage incurred while bouncing around the back of a delivery truck, Li says. Unisource lab tests show the inner box and inserts alone can successfully protect wheels in air travel too, and Li says he's used the box to transport wheels himself on numerous flights without damage. The tests were lab-based estimates for a five-hour cross-country trip by air from Karbon Speed's Dallas headquarters, Li says. "If we put this much thought into our packaging, imagine how much thought we put into our wheels," says a caption beneath a photo of an open Karbon Speed box that the retailer posted on Pinterest.

Karbon Speed pays a premium for its dual packaging, about $12-$15 per unit. Li says Karbon Speed paid Unisource $30,000 in research and development costs to arrive at the packaging design, and that price included enough boxes to cover a few months of wheel sales. It began using the boxes this summer.

While online retailers accustomed to paying between $1 and $2 for a typical brown shipping box might balk at paying much more, some retailers are finding that the benefits of specialized packaging outweigh the added cost. And some are finding ways to generate new revenue by selling excess packaging materials to recylers. Meanwhile, logistics companies are modifying their facilities and equipment to cater to web retailers that are moving away from the plain brown box.

Building a brand

As a marketing tool, custom packaging has one big advantage over other advertising options—the customer can hardly miss it, says Jonathan Asher, executive vice president at shopper and packaging research firm Perception Research Services. "There are a million channels and all sorts of reasons advertising will be missed," he says. "But people have to come in contact with the package."

Party supplies e-retailer Big Dot of Happiness founder and president Sherri Yukel says the cost of manufacturing all its own bright blue branded boxes, mailers, cellophane bags and ribbons pays off in customer acquisitions and retention. The biggest box the retailer buys costs $2.35, about $1 more than a plain brown box, Yukel says. The company also needs to order boxes two to three weeks in advance and in batches of about 20,000, whereas standard boxes can arrive in one day.

But the end result generates returns for the e-retailer. When Big Dot of Happiness packages arrive, the blue shipping boxes stand out and the package contents are decked out to look like presents. "They are expensive to manufacture, but so is getting a customer," she says. "We literally want them to remember us for any event."

Yukel says many new customers tell the e-retailer they came to the web site because they saw a blue box delivered to someone else and were intrigued about its contents. "We are all about making sure they remember who Big Dot of Happiness is and, on the flip side, the box is so cool that people don't throw them away," she says. A recent poll the e-retailer ran on its Facebook page revealed that many Big Dot customers use the boxes in their homes for storage. Branding firm DBD International Ltd. designed the boxes.

Big Dot also switched from filling boxes with Styrofoam packing peanuts, which are notorious for sticking to anything they touch, to using airbags from vendor Storopack. Yukel says packing peanuts work fine to protect goods from damage in transit, but they didn't make it pleasant for the customer opening the box. She says the airbags are more eco-friendly, easier for customers to dispose of, and they protect products effectively.

More mailers

Enough e-retailers like Karbon Speed and Big Dot are shipping in customized packages that companies that fulfill orders on behalf of web merchants are making changes to accommodate this trend.

Last year Innotrac, a fulfillment service provider, packed and shipped more than 13 million packages for e-retailer clients that include Ann Inc., VF Corp. and Beachbody LLC, helping give it a bird's-eye view on packaging's evolution. Chief operations officer Robert Toner says e-retailers are increasingly emblazoning their brands on the shipping containers they use, such as on boxes, flexible mailer bags and packing tape. Innotrac adds a slight cost for branded materials, he says, typically 2% to 3% per color, which varies by the colors and complexity the brand requires. This is because those materials cost a bit more and because Innotrac must create separate packing and storage areas within the warehouse for them. But that hasn't been a deterrent to retailers, he says.

If retailers sell soft goods that can be shipped in mailer bags without risking damage, they may be able to mitigate the price difference, as bags are less expensive per unit than corrugated boxes, Toner says. There's been enough demand from retailers that want to incorporate mailer bags into their shipping that Innotrac built a belt sorter at its newest center in Groveport, Ohio, that can handle both bags and small boxes. Previously, bags couldn't flow through a belt conveyer. Now they are processed on a belt conveyer just like boxes, including in-line weighing and scanning that automatically sends them to their proper shipping lanes.

The rise of mailers in the warehouse has also led Innotrac to add automated machines that print and insert packing slips, invoices or shipping labels for mailers on demand, Toner says. The machines help save on labor costs, he says—staffers can finish 12-15 packages per minute with the auto-printing machine.

Efficiency experts

Big fulfillment providers like Innotrac may have efficiency down to a technological finesse, but retailers who manage their own warehouses also have tricks to save time, space and money, while still making sure products arrive intact.

With more than one million boxes shipped out of a Rochester, N.Y., warehouse each year, QCI Direct needs to do all it can both to save on packing materials and make sure no space is wasted. To that end, the retailer, which sells home, health and outdoor products online and via mail order, recycles, says vice president of operations Donna Ciccarelli. QCI uses cardboard boxes made with 65% recycled materials, which are cheaper than new ones because they aren't imported, she says, and fills the space around items with excess newsprint and magazine paper bought from printing houses. Employees do all the packing by hand.

About 25% of the 3,000 to 4,000 items QCI ships in a typical day go out in poly-bubble, non-bubble or Kraft paper bags, which take up less space in the warehouse than boxes do, Ciccarelli says. "My mind works in length, width, depth per square inch," she says. "It's constant and it's always changing."

QCI also buys boxes and bags as locally as possible and recycles all excess packaging including paper, peanuts and cardboard, all of which leads to savings of more than $20,000 annually, she says. Wooden pallets that materials and goods arrive on are either resold or sold to local garden centers for mulch, she says. What she can't recycle or reuse, Ciccarelli sells back into the packaging marketplace. "Why not sell it?" she says. "All of these things are a commodity."

She gets $80 to $90 per ton for resold cardbard, three to four times what she was able to sell it for 14 years ago when she joined QCI; she attributes the higher price to there being fewer paper mills in the United States today. Between 1997 and 2008, at least 10 U.S. mills closed each year in all but two years, according to the American Forest & Paper Association.

QCI Direct and Big Dot of Happiness have already seen their efforts pay off in customer feedback and savings. Karbon Speed will have to wait to see if the six months spent making the perfect container was worth it. In the meantime, Li knows his wheels will arrive intact and make the right impression. He's betting that in the race for loyalty among competitive cyclists, his specialized packaging will give him an edge.

amy@verticalwebmedia.com

Packaging inserts pay off for an e-retailer For Internet and mail order retailer

For Internet and mail order retailer QCI Direct, tossing a little something extra into shipping boxes is helping it win over customers, while also generating new revenue.

QCI Direct puts free samples of small items from various brands, such as a small box of Honey Nut Cheerios, a Schick razor or a 5-Hour Energy drink, in the boxes it sends to consumers. Middleman marketing firm IDR Online connects QCI with brands whose target demographics match the retailer's clientele. QCI pays nothing for the samples and gets paid based on the size or weight of the samples and the number it ships; IDR also gets a cut.

In the more than three years since it began including samples, QCI has found it can offset most of its annual packaging budget—between $300,000 and $500,000—with the funds it gets by adding the samples, says vice president of operations Donna Ciccarelli. Not only is the merchant making significant incremental income, she says, but customers love it. "People call up and say 'we didn't order this.' The operator says 'it's a gift sample' and customers are thrilled," she says. "They think they're getting a present."

To date, QCI's most successful insert campaign has been with Honey Nut Cheerios, Ciccarelli says. Cheerios, like many brands that offer inserts, includes coupons on its samples to track campaign results.

Topics:

American Forest & Paper Association, Ann Inc., Beachbody LLC, Big Dot of Happiness, boxes, branded packaging, cellophane bags, custom packaging, DBD International Ltd, Donna Ciccarelli, e-commerce technology, Facebook, IDR Online, Innotrac, Jonathan Asher, Justin Li, Karbon Speed, Kraft paper bags, mailers, October 2012 Magazine, Packaging, packaging for shipment, Perception Research Services, Pinterest, QCI Direct, Recyclable materials, Robert Toner, Sherri Yukel, specialized packaging, Storopack, Styrofoam peanuts, Unisource, VF corp., warehouse technology

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