The rise of e-commerce - detailed analysis of the supply chain, investment decisions, technological developments and growth prospects

2 December 2014

‘Global Executives Survey: The impact and influence of online retail on the packaging industry’ is a new report by Canadean that provides readers with a detailed analysis of the industry’s viewpoint on the significance of e-commerce surrounding the supply chain, investment decisions, technological developments and growth prospects within the packaging industry.

E-commerce is disrupting the packaging industry, leading designers to re-evaluate all aspects of packaging. E-retail is set to become an increasingly important sales channel for groceries and personal care products, driving fundamental changes in packaging design and production processes. The growth of e-commerce means packaging suppliers need to adapt quickly to meet a new set of challenges, or face being left behind as e-commerce plays an increasingly central role in global retail.

Packaging suppliers to the health and beauty, and food industries need to react now to adapt packaging to the needs of e-commerce. These industries will be the most disrupted by the continued growth of e-commerce. Manufacturers in these industries are also updating their supply chain, distribution and delivery processes in order to take advantage of increasing e-retail uptake. Packaging companies, with their experience in product protection and logistics, should take the lead in helping product manufacturers find ways to provide consumers with the right product at the right time.

E-commerce is the primary force driving renewed interest in operational efficiency, and printing and recycling systems. Innovative packaging suppliers have adapted to the growth of e-commerce by pushing the boundaries in operational efficiency, stock control and 'just-in-time' production. The implementation of systems geared towards efficiently managing demand from traditional offline and new online clients will grow in importance. In addition, e-commerce has been the driving force behind the development of new digital printing and recycling systems. Continued e-commerce growth will see even more resources diverted towards meeting the needs of the online channel, which will lead to even more development of new technologies.

Transit packaging needs to be designed with the consumer in mind; this will place greater emphasis on pack aesthetics. The growth of e-commerce will expose consumers to more transit packaging. Previously, this was largely of interest only to distributors and retailers, with functionality therefore at the forefront of design. However, greater exposure to consumers means the importance of attributes such as pack colour, images and logo design will increase. Expect white-top corrugated packaging and microflute packaging to increase in importance.

E-commerce means packaging companies need to be increasingly attuned to the needs of consumers, as opposed to those of the manufacturers they supply. Executives have highlighted consumers as being the most influential in driving e-commerce developments in packaging, with brand manufacturers ranking second and retailers third. Packaging companies therefore need to invest more in consumer insight in order to better target innovation and marketing strategies at the most profitable opportunities. E-commerce also opens up new consumer analytics opportunities, which will allow companies to update their operations, supply chains and key metrics around big data in order to optimise operations.

The impact of e-commerce on packaging supplied for health and beauty
According to survey results, e-commerce is expected to have a strong impact on growth in the health and beauty, food and household care sectors, driven by the rapid expansion in online sales of consumer packaged goods. The large variety in shape and size of health and beauty products limits the use of standardised packaging designs. Moreover, the delicate nature of these products increases the protective packaging requirement to avoid damage in transportation, handling and unloading.

Furthermore, some product instructions require additional packaging material. The growth in packaging of food products as a result of growing e-commerce is attributed to the perishable nature of products and regulatory requirements. Overall, executives expect e-commerce to result in a decline in packaging demand for tobacco and tobacco products despite growth in online sales of consumer packaged goods.

Online shopping's impact on demand for protective packaging for transit
Canadean's survey results reveal that industry players consider that e-commerce has had the largest impact on demand for protective packaging for transit, lighter-weight packs and use of recyclable materials over the past three years. Consumer expectation of unspoilt and undamaged product delivery from online purchases is driving the development of packaging that safeguards the product during transit.

Moreover, efforts to reduce transportation costs, decrease carbon footprint, maximise efficiency and raw material usage, and conform to regulatory guidelines are driving the use of lightweight packaging and recyclable materials. Meanwhile, the packaging developments that respondents most considered to have had no impact were the use of fewer colours, use of more colours and use of greater contrast. However, more than 40% of respondents thought each of these had at least some impact on packaging design, highlighting how the growth of e-commerce is driving a fundamental evaluation of all aspects of packaging.

Operational efficiency in the packaging industry
According to the survey respondents, operational efficiency, just-in-time deliveries and stock holding/inventory are considered to be the areas most influenced by the growth of e-commerce over the past three years. Key factors contributing to this are the increasing focus of companies on reducing bottlenecks in the supply chain, efforts to decrease transportation and raw material costs, and efforts to improve inventory and time management.

For example, in January 2014, Asda, a retailer based in the UK and a wholly owned subsidiary of Walmart, announced plans to implement a cloud-based colour service called PantoneLIVE across its global packaging supply chain. PantoneLIVE will enable Asda to improve operational efficiencies and standardise on a single platform. Additionally, in January 2014, Standard Register selected FLEXcon, a films and adhesives manufacturer based in the US, to provide labelling materials for its online ordering portal. Standard Register's on-demand labelling solution claims to eliminate the bottlenecks and high costs associated with the storage and distribution of labels, thus helping with waste mitigation and improving turn-around time.

Consumers' influence over e-commerce development
Overall, executives consider consumers, brand manufacturers and retailers to have the highest influence in driving e-commerce developments in packaging. With consumers in the final user role, and expecting fast and safe delivery of products from online purchases, companies are forced to improve operational efficiency and implement just-in-time deliveries to boost online sales.

Meanwhile, brand manufacturers are increasing the use of protective packaging, simplifying designs, using more recyclable materials and lightweight packs in order to strengthen the online channel and drive revenues through e-commerce. Additionally, retailers, who act as the point of contact for consumers, are influencing packaging developments through inventory management, and transportation capabilities.

Transit packaging projected to gain prominence
Executives acknowledge that the delivery stage of a product is important for an e-commerce retailer in maintaining brand loyalty. Transit packaging is gaining significance among e-commerce vendors as consumers wish to receive their product in perfect condition without any damage in transit. Historically, transit packaging has been of little interest to consumers, instead focusing on meeting the needs of distributors and retailers. E-commerce is changing this.

For instance, in August 2013, FedEx announced the expansion of its temperature-controlled healthcare packaging portfolio with a new cold-shipping packaging system.

A senior executive from the company said "The demand for global temperature-controlled shipping is growing quickly and our new packaging system is capable of achieving a temperature of 4°C in minutes, and can be maintained for up to 96 hours without any refrigeration."

Retail transit packaging will play an increasingly important role as a product differentiator for consumers. For example, in December 2013, Amazon, the US online retailer, announced its plans to test unmanned drones for delivering goods to customers. While few consumers expect this to become a frequently used service, it further established Amazon's position as a leading online retailer.

The Canadean Intelligence report 'Global Executives Survey: The impact and influence of online retail on the packaging industry' is available via the Industry Report Store at

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