by Mike Richardson
February 13, 2018
For much of its existence, the protective packaging industry has toiled in relative obscurity. While flexible, foam, and rigid protective packaging have been used for decades to prevent damage to high value and fragile products like TVs and refrigerators, consumers tend not to care much about such packaging unless it fails (or, of course, it’s Bubble Wrap). Rather, they want the item it protects and discard the rest.
Nevertheless, synergies in adjacent industries – namely e-commerce – are yielding exciting new opportunities for protective packaging, with nearly 5% growth expected per year through 2021.
The year 1995 was a watershed moment for online retail, featuring the launch of e-commerce pioneers Amazon and eBay. E-commerce created a tremendous market opportunity for protective packaging, as so many more products had to be packaged as an individual parcel rather than as one of many products in a larger box on a pallet.
Since then, the immense growth of the e-commerce market (15% annual gains in the US for the last 10 years) has helped drive gains protective packaging, a trend expected to continue. Beyond e-commerce, protective packaging has grown at roughly the same rate as the overall US economy, or about less than 3% annually.
While unrealistic to assume e-commerce’s significantly faster growth will continue into perpetuity, it is likely to keep up for quite a while. Though its growth appears stratospheric, e-commerce remains less than 10% of the overall retail sector, leaving quite a bit of room for growth, especially in corners of the retail world where e-commerce hasn’t fully made its mark yet – most notably, food and other grocery items.
Early in the e-commerce era, Amazon and other ‘e-tailers’ sold a lot of books, CDs, DVDs, software, and personal electronics like iPods and laptop computers. Now, all but one model of iPod has been discontinued (and right about the time I was thinking about replacing mine, of course).
Most Americans spend much of their incomes on mundane items such as:
Food, in particular, represents the third highest expenditure for the average US household. And increasingly, consumers aren’t stopping by brick-and-mortar shops on the way home from work or on weekends to buy these products – not when they can be delivered directly to their doorstep. In a world where busy-ness has become the norm, e-commerce has made it easier to prioritize soccer practice, music lessons, and yoga classes over stops at the grocery store or the Try-N-Save.
Recently, I got to see this more vividly than I would from the vantage point of my own empty nest. Our e-commerce purchases are far more frequent than they once were but rare enough that I still get a little thrill when I see a box on the porch.
But when asked to do my own favorite weekend chore, babysitting my granddaughter, I noticed how e-commerce has grown to be a fixture in people’s everyday lives. In nearly every room of my daughter’s house, there was a stack of boxes that arrived recently from one online retailer or another.
While I’m sure some of the boxes were specialty deliveries or Christmas presents they’d ordered, most were household items that wouldn’t have even occurred to me to buy online, like diapers and paper towels. While these shipments don’t require a large amount of protective packaging, most of those boxes did indeed contain at least one type of protective material.
With Amazon’s recent acquisition of Whole Foods, this is only the beginning of a major shift that will have countless yet-to-be-seen implications. But one trend we can anticipate: as more consumers shop online, more layers of packaging will be needed to protect those purchases during shipping.
For a less personal, but far more comprehensive, view of the US protective packaging market, check out Protective Packaging Markets in the US, a new study from The Freedonia Group. This study includes analysis on historical demand data and forecasts, industry trends, and industry composition and market share.
Mike Richardson is a senior analyst at The Freedonia Group where his work focuses on the US and global packaging markets.
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