Here's How Online Retailers Can Increase Profits By Reducing Their Packaging

For consumers, the convenience of shopping online from your couch just might be the new American dream. But for retailers, excessive packaging can end up undermining a company's best efforts to stay sustainable.

Research from Carnegie Mellon shows that online retail is much greener than brick-and-mortar shopping. Consumers drive less. Retailers can cut electricity use and reduce how much they're shipping products between warehouses and stores. It's quantifiably more eco-friendly to send products directly to customers.

But there is still room for improvement. As of 2011, packaging accounts for 22% of an online order's carbon footprint, says Carnegie Mellon. A 2010 study from the Institution of Engineering and Technology (IET) concluded that in order to make up for that, consumers need to have 25 orders delivered at the same time, save a shopping trip of more than 31 miles, or replace 3.5 brick and mortar shopping trips.

"Shopping online does not offer net environmental benefits unless these criteria are met," reports The Telegraph in an analysis of the IET study.

Multi-Step Solutions

Shipping sustainably is far from a self-contained process; organizations need to get stakeholders on board. But be prepared for manufacturers and distribution partners to respond to initial requests with a "no."

"Larger companies often specify that every single product must be encased in a polyethylene bag," says Jenner Feller, co-founder of Refleece, an eco-design company that makes upcycled accessories from scrap, and used clothing from brands like Patagonia. "For our first multi-thousand-piece order, we called the [manufacturer] and basically just kept talking to people, asking if we could ship without the bags, until someone finally said OK."

Scott Walker, CEO of Underwater Audio, an online retailer that sells waterproof Apple iPods and headphones, went through a similar process with his company's manufacturer. The exercise of finding the right solution was a true collaborative effort.

"Initially, our manufacturer objected to the packaging change," explains Walker. "We had to convince them of the importance this change had for our business. It took several iterations and lots of patience to produce the packaging that we have today."

But the change was worth it to the company's bottom line. Underwater Audio was able to reduce packaging costs by an average of $6.50 per shipped unit after implementing a sustainable packaging program. "These savings will continue to accumulate and ultimately increase our profit margin as a business by a significant margin," says Walker. "We have overspent on shipping costs for a long time because we did not make this change."

Giving Customers What They Want

A key concern is that customers will respond negatively to reduced packaging. As Internet Retailer points out, the look and feel of packaging is linked to customer satisfaction.

"Our old packaging looked very appealing," says Walker. "We evaluated whether or not to keep the old packaging even after we had developed the lighter, cheaper, more sustainable packaging because we worried about how our customers would react."

The solution, according to Walker, is to prioritize what customers want most: simplicity and efficiency.

"We decided that we could make our customers happier with the new packaging by making it more accessible," explains Walker. "Have you ever tried opening something you bought from Costco and cut yourself with the biggest knife in your house? We took our new packaging to the opposite extreme and made it easy to remove. Since most of our sales are online, we don't have the same theft concerns that [bricks-and-mortar] retailers have."

Don't Expect The Process To Be Perfect

Reducing your packaging can help save your company money, but at the expense of other luxuries that come with cardboard.

"I am still facing the challenge of adequate marketing with less packaging," says Cindy Slansky of GreenPaxx, a line of reusable plastic straws. "My company mission is to really get as many people as possible using reusable straws instead of disposables, and in order to do that I need to have effective marketing. With a small product and a small box, I have the dilemma of getting my message across adequately."

Business owners will need to get creative. Until you find the perfect solution, the key is to make the most of what you have.

"I reuse all the boxes I get from my overseas shipments," Slansky says. "I also reuse each and every piece of fill I get from any package we receive. So, you may get a box from us that has plastic fill but is never anything we've purchased. It is always secondhand. Saves money and saves waste."

- Written by Ritika Puri

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