E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
Custom packaging packs a marketing wallop that hits home as the shopper opens the box.
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.
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.