Some CPG brands have been summoned by Amazon in recent months to overhaul their product packaging to be greener, sturdier and cheaper to ship. From August 1st, manufacturers with products identified for the packaging improvement program will be charged an additional surcharge on non-compliant items, to the tune of $1.99 per item shipped. Brands that upgrade their packaging to meet the requirements ahead of the deadline will be rewarded with a credit of $1.00 for each item shipped.
“The idea is to reimburse brands for the cost of fixing their packaging,” says the Founder of packaging consulting company Fuseneo, Brent Lindberg. “Brands that upgrade their packaging might even make substantial money from the effort before the August deadline, beyond just offsetting the cost of fixing their packaging.”
The Wall Street Journal first reported on this initiative in December, citing channel profitability as a driver of some broader changes rolled out to the company’s suppliers. But Lindberg says that Amazon’s motives appear to be focused just as much on right-sizing packaging and reducing waste than it is about reducing shipping costs. “To get all the processes in place, and set up a system to effectively penalize and reward the vendors is hard work,” says Lindberg.
The battle that Amazon was facing, whether from an operations, sustainability, or profitability standpoint, is that brands often supply Amazon with the same inventory that they would put on a retailer shelf. Designing packaging that will stand up in a fast-moving warehouse environment is completely different to designing packaging that is primarily designed to catch a shopper’s eye while displayed on a shelf.
While Tide and Seventh Generation recently made headlines about their new Amazon-friendly packaging, Lindberg asserts that such significant changes to product formulations and packaging were not only about working into Amazon’s repackaging timeline. “Liquids are hard – they are heavy, leakable, and often have low margins. Tide probably has known this for a while and had a reformulation in the works for two or more years.”
Packaging upgrades are not only being prioritized by large CPG brands though. Fuseneo has started working with a lot of smaller brands who are looking to upgrade their packaging for the tougher demands of ecommerce. Many smaller marketplace sellers manufacture and import from China and other far-flung countries. By packaging products better, savings are realized by being able to fit more inventory into shipping containers, and reducing waste from breakage.
“Amazon’s initiative has shed a light on packaging from smaller sellers to larger CPGs,” says Lindberg. “Brands of all sizes are thinking about more than just how the packaging looks. They’re also considering the right size, the right materials, and hardiness.