Amazon is making a concerted effort to minimize the size and number of the boxes it's sending out to customers, and many holiday shoppers may notice that this season, according to a report from the Wall Street Journal.
The e-commerce giant is using algorithms and machine learning to determine the right amount of packaging, which now includes more bubble envelopes and fewer boxes, according to the report.
At a meeting with vendors in March in Seattle, Amazon reportedly also asked consumer product goods suppliers to re-think packaging and devise supply chain reforms tailored for the age of e-commerce. Amazon responded to Retail Dive's request for comment with a note that it's celebrating 10 years of "frustration-free packaging" policies that include ongoing improvements in density, efficiency and sustainability in packing and transporting orders.
Amazon's third quarter report, like so many before, highlighted burgeoning sales against a backdrop of heavy costs that are tempering profits. Total operating expenses rose 35% to $43.4 billion in the quarter, pulling operating income, (including $21 million from Whole Foods Market), down 40% to $347 million.
Much of Amazon's outlay is in its colossal shipping costs, which increased 39% in the quarter, once again outpacing net sales growth, although that was not as bad as feared, according to GlobalData Retail Managing Director Neil Saunders.
Shipping and last-mile delivery aren't the only high-dollar line items in e-commerce, however— the inefficiencies of packing up boxes add up as well. Amazon's use of robots to drive efficiencies in its fulfillment operations apparently hasn't been able to adequately address that issue. Meanwhile, three years ago shippers like UPS and FedEx announced hiked fees on larger packages, driving e-commerce players to work harder to cut down not only on the number of boxes, but also on unoccupied space. But it's a branding issue, too, and customers can get irritated if their orders arrive in inefficient packaging, according to the Wall Street Journal's report. Amazon says it responds to that.
"Millions of times each year, customers write to tell us they love how their products have been packaged – sending pictures and stories that our packaging and fulfillment center teams love to hear," according to Amazon's statement on sustainability, which an Amazon spokesperson sent in response to Retail Dive's inquiry. "They also tell us when our packaging hasn't worked – when their products were damaged, when the box used was too big, or just too hard to open. This informs our worldwide packaging team and allows Amazon and our vendors to improve packaging design and delivery. If it's serious enough, their feedback can automatically pull what we call 'the Andon cord' to prevent a product from disappointing another customer."
Still, such issues remain. The puzzle of e-commerce fulfillment is an important but often glossed over aspect of the changing retail landscape. E-commerce, which remains a small fraction of overall retail sales (less than 10% by the U.S. Commerce Department's measure), is growing faster than the overall market. But consumers are now inclined to order online only when shipping is free or cheap. If retailers — Amazon included — can't realize savings by wringing efficiencies out of their supply chain, they're either doomed to smaller margins or must turn to their customers to pay their way.
"When shipping costs are fully allocated to the consumer some time in the future, we will see the rate of internet sales growth sharply decline," retail analyst Nick Egelanian, president of retail development consultants SiteWorks International told Retail Dive earlier this year.