How much a damaged pack can really cost your business

More consumers than ever before are now spending their shopping time online rather than going to stores. This is great news for eretailers and brands developing their ecommerce offering.

One critical component to the success of ecommerce brands is their primary product packaging. Specifically, whether that packaging is ecommerce-ready and robust enough to arrive at the consumers’ home in perfect condition every single time – regardless of how it is treated on its journey.

For brands that haven’t yet invested in ecommerce-ready packaging, the wider economic, reputational and environmental cost of damaged goods go far beyond the direct cost of replacing the damaged item – and could be much greater than they realize.

A riskier business

Ecommerce inherently means greater risk of damage to items, which is why ecommerce-ready primary packaging is imperative if brands are to meet high consumer expectations. Products are viewed and purchased online and then delivered directly to consumers through a process that requires many more touchpoints and risk of damage than that of traditional retail. In fact, the average ecommerce pack is dropped 17 times on route.

It may not come as a surprise then to learn that 34% of packaging-related returns are due to product damage. And if a product breaks (a glass jar, for example) it not only needs to be replaced and poses a reputational threat, but it also risks destroying other items through contamination.

This poses a major risk when ecommerce return rates are already between 20% and 30%, which is more than double the 9% traditional retail return rate. Fifty-seven percent of customers expect a full refund if their package arrives damaged.

Putting a number on the cost of product damage

This is extremely costly for brands – and the financial impact goes beyond the direct cost of replacing a damaged item. The broader economic picture includes the logistics costs of new shipments including the potential chargeback received from Amazon ($1.99/unit) for uncertified packaging (keep reading to find out how to avoid this), and any operational costs related to time lost and production line impacts.

Putting this in perspective:

• Amazon lost $7.2 billion due to shipping in 2016.

• Replacing a damaged product can cost an ecommerce business up to 17 times more than the original cost of shipping it.

• For the average retailer, total returns cost 4.4% in lost revenue due to items that can't be resold or must be discounted, according to research firm IHL Group.

Related read: How packaging innovation can overcome ecommerce challenges

Reputational cost

A business’s reputation is inextricably linked with its financial performance. Consumers have high expectations about the delivery of ecommerce products and delays. Damage and lack of reliability are not tolerated.

The statistics for this speak for themselves. Forty-one percent of consumers experience a negative impact with brand image when a shipment is lost, delayed or arrives damaged, and 39% of brands experience reduced customer loyalty under the same circumstances.

Tellingly, 39% of online consumers will not repeat their purchase if they receive defective packaging, and in the US this rises to 79% of consumers if their delivery is damaged. This demonstrates how crucial packaging is to customer satisfaction and ultimately, retention.

Sustainability cost

It’s not all about the money. Responsible businesses also consider the environmental costs connected to damaged packaging. Replacing a damaged package in the first place incurs the biggest sustainability cost, due to duplicated manufacturing processes, discarded damaged products in the water system and added transit miles. Additionally heavier packaging like glass or aluminium incurs a larger carbon footprint than alternatives such as plastic packaging, and therefore more wasted CO2 when the packaging breaks.

Too much packaging used in an attempt to reduce damage causes its own environmental issues, with unnecessary packaging using needless resources. This links back to reputation: 80% of ecommerce shoppers are bothered by oversized packaging, with 38% of this group being 'extremely bothered' by it. Amazon has set up its ‘frustration-free packaging’ to address this.

Related read: The 6 essentials of ISTA ecommerce testing

Prevention is better than cure

The good news is that while the cost of damaged packaging is likely higher than most brands expect, something can easily be done about it. Returns or replacements for any reason are costly to a retailer, but damaged or poor packaging is completely within a retailer’s control – and often requires relatively small adjustments to avoid more substantial costs in the long-run.

Amcor’s Ecommerce Testing Labs offer robust testing against Amazon’s comprehensive ISTA-6A standard, so brands can ensure that their packaging has passed tests simulating the journey from manufacturer to doorstep to ensure products arrive undamaged and intact (and avoid costly chargebacks). And for brands who need to move rapidly, Amcor has a range of ecommerce-ready packaging available.

To find out more about the ways Amcor can help you win with ecommerce, get in touch with one of our ecommerce experts at mailto:ecommerce@amcor.com.