t started and ended with a sock puppet. In 1999, the Pets.com mascot let pet owners know that they no longer needed to trek to their local store to buy pet supplies. Instead, they could order online and have them delivered to their doorstep for free.
But the e-tailer lost money on almost every sale. It was hard to turn a profit while taking on the high costs of shipping bulky items such as bags of kitty litter and cans of pet food. In November 2000, the Pets.com executive board realized that its business was unsustainable and shut its doors. One of the most valuable assets the company had left was the sock puppet, which sold for $125,000.
Now, 17 years later, the sustainability of e-commerce remains in question. Many e-tailers continue to offer free shipping despite the costs. Meanwhile, carriers such as UPS are adding holiday-shipping surcharges in an effort keep up with the surge of seasonal deliveries.
As e-commerce grows, so do the challenges across the supply chain, all of which threaten every e-tailer's profits. Manufacturers, fulfillment companies and carriers cannot just look at their own operations because their profitability is reliant upon the holistic supply chain. When products are damaged or delayed, it affects the profits and reputation of manufacturers, fulfillment companies and carriers alike.
“Big-picture thinking is essential to the sustainability of e-commerce—from economic, environmental and societal perspectives.”
Big-picture thinking begins with the very definition of what sustainability means for the industry. While many e-tailers have introduced sustainability initiatives focused on reducing their ecological footprint, the impact of e-commerce extends beyond environmental concerns. Environmental and societal impacts throughout the supply chain are intimately connected to the sustainability of e-commerce.
Online shopping and urbanization have increased traffic, congestion and pollution in densely populated areas. For example, in Beijing, the number of vehicles has grown by 303 percent from 1998 to 2013, reaching 5.62 million in 2015. Today, 46 percent of the city’s roads are regularly congested, and people risk illness going outside because of the air quality. How will Beijing’s e-commerce industry continue to grow and deliver products when almost half of the roads are regularly congested?
That transportation problem is challenging for the e-commerce industry in countries such as Brazil, India, Indonesia and Vietnam where road networks are even more inadequate than they are in China, according to data from the Global Resource Management Index.
A more holistic approach to sustainability requires looking across the entire supply chain to find opportunities to improve operations and reduce waste. E-tailers must move beyond only optimizing their internal processes and resource usage and take a system wide approach that includes manufacturers, packaging, carriers and customers.
While packaging plays a large role in the sustainability of e-commerce, focusing on recycled or recyclable packaging material only is not enough. How sustainable is recycled or recyclable packaging if you have to ship the same product twice because it arrived damaged the first time? What if it arrives safely, but the recycled packaging takes up more space, requiring more shipments to deliver the goods? And what about the environmental impact of shipping the packaging materials to retailers?
A systems approach to improve packaging will need unprecedented data collection and distribution within the industry, as well as innovative solutions. Data can tell us the optimal amount of packaging needed to protect a product in the e-commerce channel adequately. That data needs to be collected by and shared with manufacturers, fulfillment companies, carriers and consumers.
Consumer goods manufacturers have traditionally designed packaging for the retail supply chain, emphasizing features designed to catch the eyes of shoppers and to prevent theft. Those features are unnecessary and potentially wasteful in e-commerce channels, which need more protection as they are handled more frequently.
If the packaging was designed with e-commerce distribution in mind from the start, secondary packaging by fulfillment centers could be eliminated completely in some cases. Imagine having multiple units of the same product, each with packaging specifically designed for its destined distribution channels. A percentage of the inventory would be packaged for brick-and-mortar retail stores, and the rest packaged for e-commerce distribution.
Amazon is taking a lead role in this long-overdue transition with its Frustration-Free Packaging initiative. The goal is to help manufacturers understand the packaging requirements to ensure products make it safely through their fulfillment operations and to the customer’s front door. The company evaluates manufacturer’s packaging through a series of drop and vibration tests to ensure it aligns with the industry standards.
At Sealed Air, we’re committed to being part of the solution as well. That’s why we partnered with UPS on the new Packaging Innovation Center in Louisville, Kentucky to help e-tailers understand the challenges packaging carriers face and how to best optimize their packaging. This becomes especially important in the era of dimensional weight pricing and cube optimization, concepts that ultimately seek to reduce the number of vehicles needed for e-commerce deliveries.
Once an e-tailer has determined their optimized packaging though, there’s still the matter of making sure they have enough of it on hand to quickly and efficiently pack and ship their products. And delivering the right materials to warehouses across the country means putting more trucks on the road, increasing costs and emissions.
We’ve looked at our own business and products and come up with innovative new ways to save space—in both warehouses and trucks—and to make packaging more flexible and sustainable. By delivering our packing materials uninflated they take up just one 36th of the normal truck space, and installing systems in warehouses that can quickly create packaging on demand helps businesses in emerging economies and urban areas meet consumer demands.
Big-picture thinking is essential to the sustainability of e-commerce—from economic, environmental and societal perspectives. While it’s easy to get lost in the weeds of quarterly revenues and profits, leaders must take a wider view. As the e-commerce industry continues to grow at a rapid pace, we'll need to continue to leverage big data and big collaborations to ensure our businesses succeed where Pets.com ultimately failed. At the end of the day, no e-tailer should be left with nothing to show for their efforts but a sock puppet.
To learn how getting products in once piece to customer could be a financial windfall, read “Preventing Returned Goods Was Worthy $12M Annually to This Retailer."