Home News Industry News Putting a Dent in Profitability: The Real Impact of Ineffective Packaging and Damaged Products

Putting a Dent in Profitability: The Real Impact of Ineffective Packaging and Damaged Products

If packages could talk, they would tell us frightening tales about life on the road. But since they can't, a simple YouTube search speaks on their behalf about the many ways deliveries can go wrong. For online retailers, videos showcasing disappointed customers unboxing damaged goods don't just hurt to watch, they hurt the bottom line.

The Huffington Post reports that one in 10 eCommerce packages arrives damaged, and according to the Walker Sands Future of Retail 2016 study, 68 percent of respondents cited free returns as an incentive to shop online more. This gives product manufacturers and fulfillment operations a strong incentive to package it right the first time.

Beyond the Costs of Packaging

When evaluating and choosing protective packaging, companies oftentimes have trouble seeing beyond packaging costs alone – not realizing the ripple effect that ineffective packaging can have on their business. If you were to include every function and process in calculating costs for a single return, it could easily reveal hundreds of dollars in added expense.

To shed some light on the not-so-obvious ways that ineffective packaging can impact profitability, we've identified six ways products that are damaged, broken and/or delivered in non-functioning condition incur profit-killing costs:

  1. Freight: Shipping the damaged product back to the warehouse and sending a replacement product.
  2. Product cost: Providing a brand-new product or repairing the damaged item.
  3. Customer-service labor: Processing returns and talking to customers who may want to vent about their experience.
  4. Warehouse labor: Time spent evaluating the damaged good to determine whether it should be fixed or replaced, then repeating the fulfillment process all over again.
  5. Packaging supplies: Paying for the same supplies twice.
  6. Customer lifetime value impact: Consumers who receive damaged goods are much more likely to shop elsewhere next time.

Protecting Brand Image and Profitability

A new generation of high-quality packaging materials makes it easy to reduce the costs associated with damaged products. For example, a foam-in-place (FIP) system is paying big dividends for one Florida-based manufacturer of high-end aluminum wheels.

Before switching from corrugated inserts in a corrugated box (which would frequently collapse with the force of the first impact) to a FIP packaging solution, the company typically had to replace 5 percent to 10 percent of all online orders due to shipping damage – impacting both brand image and profitability.

Not only has the new system significantly reduced the rate of returns, it has stood up to extreme "gorilla" testing, including slamming the parcels onto asphalt driveways, giving the company confidence that every wheel it ships will arrive in pristine condition.

Source: Pregis

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