Retail Packaging Strives to Serve Many MastersPackaging used to be simple. You simply wrapped your product in an attractive container that was easy to display on a retailer’s shelf, and hoped it would grab the customer’s attention.
But now, packaging has become increasingly complex, for at least five reasons:
First, there are so many competing products on shelves that it’s almost impossible for a product to stand out because of its packaging. According to Lateral Marketing: New Techniques for Finding Breakthrough Ideas,1 by Philip Kotler and Fernando Trias de Bes, the number of registered brands in the U.S. grew from less than 31,000 in 1975 to nearly 110,000 in 2000.
Second, because of this intense competition, companies are under greater pressure to cut costs than ever before. As competitors quickly imitate each other’s product attributes, customers are becoming less brand-loyal and more price-sensitive than in the past, so every extra penny spent on packaging increases the chances that the customer will buy a cheaper brand.
Third, consumers are revolting against packaging that is difficult to open. Consumer Reports2 recently criticized manufacturers of packaging that’s hard to open, including video game makers who shrink-wrap the plastic cases, medicine manufacturers who use “blister packs,” and cereal companies that use cellophane bags. For example, its packaging testers found that it took 15 minutes and 10 seconds to un-package an “American Idol” Barbie doll, and that it took 9 minutes and 22 seconds, plus a box cutter and a razor, to open a Uniden Digital Cordless phone set.
Fourth, consumers are increasingly concerned about the environment. That means that if your company is responsible for billions of discarded packages that end up in landfills, you could be vulnerable to a customer boycott or to fines from government agencies.
Fifth, powerful retailers like Wal-Mart are demanding that their suppliers use new types of packaging so they can keep their own prices low. As we discussed in Trends last month, Wal-Mart recently required all of the makers of deodorants to stop using paperboard packaging around the product. As Charles Fishman explained in The Wal-Mart Effect,3 the deodorant already came in a can or a plastic container. The package added 5 cents in cost to each unit; it took up shelf space; and it created waste. By forcing its suppliers to eliminate it, Wal-Mart created cost savings for consumers of $25 million to $30 million per year.
To address these five challenges, the $20 billion packaging industry will need to come up with some innovative solutions. Consider the pre-built product display, pioneered by Sara Lee at Wal-Mart. Sara Lee ? and hundreds of other companies that now do the same ? simply unloads an entire pallet of product, tears off the shrink wrap, slaps on a price sign, and puts it on display at the end of an aisle in a giant store like Wal-Mart.
By showcasing an entire pallet of products, the retailer does not incur any cost for unloading trucks and stocking shelves. The product manufacturer gains the visibility of an entire display of a single product, piled high in the shopper’s path. Costs drop, and sales climb.
A similar concept is being used in the U.K., where leading supermarkets like Tesco are embracing Retail Ready Packaging.4 Instead of unpacking the products from the cases in which they’re moved, the cases are stacked on the retailer’s shelf and become part of the display.Looking ahead, we foresee three developments emerging from this trend:
First, some companies will attempt to differentiate their products by consistently changing their packaging. Consider the patent recently issued to a Russian inventor for a new packaging method.5 The U.S. Patent & Trademark Office describes it as a method for attracting and retaining customer interest by randomly changing the images that appear on the packages that the individual consumer sees. For example, a soft-drink manufacturer could put a different picture, design, or riddle on each of the cans in a six-pack of cola.
Second, companies will need to provide packaging that is easy to open. As the Baby Boom generation ages and encounters maladies like arthritis and weakening vision, the challenge of opening a CD or a cereal box will become an even bigger problem. As the Pittsburgh Post-Gazette6 reported, U.S. Census data shows that twice as many Americans are injured by household packaging and containers each year than are injured in accidents involving skateboards or swimming pools. Similarly, research in the U.K. found that more than 60,000 people have been injured by “wrap rage” ? that is, people hurting themselves or others when they become so frustrated from trying to open a product that they smash it with a hammer, throw it at a wall, step on it, or jab it with a knife. Companies that allow consumers to open the product easily, such as with a pull-tab “zip strip,” will thrive. Similarly, there will be increasing demand for packages that can be re-closed. In Australia, Don Foods pioneered the use of Zip-Pak containers for cold cuts. Any product that isn’t consumed all at once can be packaged in a re-sealable container For example, a consumer rarely uses an entire package of 12 AA batteries when it is first opened; it could be packaged in a resealable bag or a plastic box that can be snapped shut once a few batteries are removed.
Third, expect to see an increase in environmentally-friendly biodegradable packaging based on corn. Until last year, the primary barrier to this technology was the higher cost of biodegradable packaging. But, with oil prices at record highs, food packagers’ costs for conventional plastic materials, made from petroleum, soared by as much as 80 percent in 2005. Now, bioplastics, made of renewable raw materials such as corn, are suddenly affordable. According to Food Products Daily,7 the market is expected to grow by 20 percent annually. Currently, NatureWorks, a division of Cargill, is leading the bioplastics movement in the U.S. by introducing a polylactic acid, or PLA, which is a corn-based polymer that is now being used to package such products as Naturally Iowa’s organic milk.
References List : 1. Lateral Marketing: New Techniques for Finding Breakthrough Ideas by Philip Kotler and Fernando Trias de Bes is published by John Wiley & Sons. ⓒ Copyright 2003 by Philip Kotler and Fernando Trias de Bes. All rights reserved. 2. Consumer Reports, March 2006, “The Oyster Awards.” ⓒ Copyright 2006 by Consumers Union of U.S., Inc. All rights reserved. 3. The Wal-Mart Effect: How the World’s Most Powerful Company Really Works ? and How It’s Transforming the American Economy by Charles Fishman is published by the Penguin Group (USA), Inc. ⓒ Copyright 2006 by Charles Fishman. All rights reserved. 4. Just-Food, April 5, 2006, “Get Ready for Retail Ready Packaging,” by Hugh Westbrook. ⓒ Copyright 2006 by Aroq Limited. All rights reserved. 5. For information about the patent for customizing consumer product packaging, visit the Patent Storm website at: www.patentstorm.us 6. Pittsburgh Post-Gazette, March 5, 2006, “Today’s Packages Can Be Murder to Open,” by Mackenzie Carpenter. ⓒ Copyright 2006 by PG Publishing, Inc. All rights reserved. 7. For information about biodegradable packaging, visit the Food Production Dailywebsite at: www.foodproductiondaily.com
