Think Small to Combat Higher Shipping Rates and Drive Profits
When was the last time you ordered something that didn’t come with free or expedited shipping (or both)? The rise of consumer expectations for expediency and immediate gratification isn't slowing down anytime soon, and the strain those expectations put onto supply chain and fulfillment operations is immense.
Something has to give, and it’s probably not going to be consumers suddenly deciding they’re fine to pay more or wait longer to get what they ordered. The answer? Size.
The space available in the cargo bay of an aircraft or in a freight container isn’t getting bigger. That means that the individual shipments within them need to get smaller. Inch by inch, they need to make room for other packages so that everyone gets what they want, when they want it.
The shipping rate increases going into effect in 2016 for FedEx, UPS and the U.S. Postal Service shouldn’t come as a surprise, and nor should they be viewed as a punishment. They’re a statement: it’s not just about the weight of a package anymore. Size matters in a big way.
The announced rate increases are the second chapter in a story that began in late 2014, when many of the same shipping and logistics providers announced new standards for dimensional weight pricing. In other words, they declared intent to start evaluating more items based on their total dimensional size, not just their weight. This was a long overdue death knell for oversized boxes carrying small items and a mound of wasteful void-filling materials (a pet peeve of nearly a third of consumers — 32 percent — according to Sealed Air's 2014 study of e-commerce packaging conducted with Harris Poll), but it was also a golden opportunity.
By introducing efficient, right-sized packaging into fulfillment operations, retailers won’t just avoid getting hit by dimensional weight pricing increases, they can also reduce overall freight cost, the amount of packaging material they use and pay for, and even product damage. Right-sized packaging isn’t just about using smaller boxes; it’s about creating the optimal balance between protection and packaging material.
The imminent increases in shipping rates are an incentive to do just that: be smarter about how you pack. That’s no easy task, with consumers increasing the variety of their online purchases to include flat-screen TVs, sink basins for DIY home renovations, and sensitive pharmaceuticals. If retailers work with the right partners to select smart packaging solutions, they won’t just mitigate the impact of shipping costs on their operation, they’ll enhance their overall brand reputation with customers.
How? While customers do care about getting their orders fast and free, they also care about the experience they have with the item when it arrives. How easy is the package to open and dispose of? How reusable it is for returns? In fact, some two-thirds of all Americans (66 percent) believe the packaging of their shipment shows them how much the retailer cares about them and their order. That’s a wide open door for brands looking to differentiate themselves from competitors and create loyal fans for their products, yet a great many still haven’t stepped across the threshold.
Thoughtful, right-sized packaging solutions are even more important for retailers that have entered into the logistically challenging world of ship-from-store fulfillment. Bringing the packing operation in-house to retail stores has been a game changer for customers who can now select items online and receive them the very next day (or in some cases the same day), and it’s also helped retailers control shipping costs by limiting the distance that items travel.
Distance isn’t the only factor to control when it comes to limiting shipping costs, however. It starts with the packaging. The labor force executing ship-from-store operations is often not trained to employ multiple different packaging strategies for different SKUs. That can result in underprotected or overpacked orders shopped in whatever box size was available, regardless of dimensional weight.
In order to ensure consistency across all stores and limit the costly impact of shipping poorly packed items, retailers should seek out solutions or automated pack station technology that are proven to reduce damage, easy to use, space efficient, flexible enough to be used for multiple types of items, and can automatically dispense or control the amount of material being used to limit overpacking.
Shipping rate hikes don’t have to hurt profit margins. If retailers act swiftly and smartly to invest in right-sized packaging across their fulfillment operation, the returns for “thinking small” can be enormous.
Ken Chrisman is president of the product care division and corporate vice president at Sealed Air Corporation, a global manufacturer of protective and specialty packaging for food and consumer goods.
