The Business Of Amazon Shipping Boxes

Summary

The rise of e-commerce, particularly Amazon's shipping dominance, has significantly boosted the cardboard box industry, despite challenges from plastic packaging. Amazon's innovative packaging strategies, including Frustration-Free Packaging and computational engineering, aim to reduce environmental impact and shipping costs. As online sales surge, the cardboard box market faces both growth opportunities and the need to adapt to sustainable practices and consumer preferences.

Takeaways

• 📦 The growth of e-commerce, especially Amazon's expansion of one-day delivery, has significantly increased the use of delivery boxes in the U.S.
• 🛍️ Corrugated boxes, accounting for 95% of U.S. shipments, are favored for their durability, recyclability, and low risk of damage during transit.
• 💰 Amazon's shipping costs surged to $27 billion in 2018, more than double the amount spent in 2015, highlighting the financial impact of e-commerce on packaging industries.
• 🌳 The e-commerce boom has been a boon for the paper and packaging industry, offsetting declines in demand for traditional paper products like newsprint.
• 📉 Despite Amazon's influence, the cardboard box market faced challenges from the early 2000s due to economic downturns and digitalization.
• 🔄 Amazon's push for sustainability includes efforts to reduce packaging waste and promote the use of recyclable materials, impacting the containerboard industry.
• 🛒 The rise of plastic packaging poses a challenge to traditional cardboard boxes, with Amazon experimenting with lighter and cheaper alternatives.
• 📈 U.S. e-commerce sales have been a significant market driver for the containerboard industry, with Amazon capturing a large portion of these sales.
• 🏢 Major box manufacturers like International Paper and WestRock have seen their stocks underperform despite the e-commerce boost, indicating a complex market landscape.
• 📊 Amazon's initiatives to reduce box size and optimize packaging have led to a decrease in corrugate waste, reflecting a shift towards more efficient packaging solutions.
• 🌐 The future of cardboard boxes in e-commerce may be uncertain, with the rise of plastic mailers and changing consumer preferences, but demand remains high for now.

Q & A

What has been the impact of e-commerce growth on the use of delivery boxes in the U.S.?

The growth in the retail e-commerce market, driven by faster delivery, easier return policies, and free shipping, has led to a significant increase in the use of delivery boxes, with Amazon alone shipping over 5 billion packages through Prime in 2017.

Why are corrugated boxes considered ideal for shipping products?

Corrugated boxes are durable, sturdy, and offer less risk of damage in the supply chain, making them an excellent medium for transporting goods.

What percentage of products in the U.S. are shipped using corrugated boxes?

Approximately 95 percent of all products in the U.S. are shipped using corrugated boxes.

How much did shipping cost Amazon in 2018, and how does it compare to their spending in 2015?

Shipping cost Amazon $27 billion in 2018, which is more than double the amount spent in 2015.

What effect has the rise of e-commerce had on the paper and packaging industry?

The rise of e-commerce has been a positive development for the paper and packaging industry, providing a ray of growth amidst declines in other segments such as copy paper and newsprint production.

What is the significance of Amazon's shift to plastic packaging for the cardboard box market?

The shift to lighter and cheaper plastic packaging poses a new challenge for the cardboard box market, which has traditionally thrived in the age of e-commerce.

How has Amazon addressed the issue of excessive packaging and large boxes for small products?

Amazon introduced the Frustration Free Packaging program in 2008 to reduce extra packaging and incentivize vendors to modify their packaging for easy recycling and opening.

What incentives and penalties did Amazon implement regarding packaging?

Amazon offered vendors a $1 per shipment incentive to modify their packaging and, starting August 1st, 2019, implemented a $1.99 penalty for products shipped that need to be reboxed.

How has Amazon's approach to packaging impacted the corrugated industry?

Amazon's changes have led the corrugated industry to rethink its business practices, focusing on improving efficiencies through right-sized packaging.

What are the environmental considerations of using plastic mailers compared to corrugated boxes?

While plastic mailers use less energy and produce less CO2 during manufacturing, they are often not accepted in municipal recycling programs and can cause issues in recycling machinery, leading to mixed views on their environmental impact.

How is Amazon working to optimize the cardboard box for e-commerce shipping?

Amazon is using computational engineering to test stress, strains, and vibration effects on packages, optimizing the weight of the corrugate box and reducing its size to better fit products and reduce waste.

What is the projected growth rate for e-commerce packaging, including cardboard and plastic options, from 2017 to 2022?

The e-commerce packaging market, which includes both corrugated and flexible packaging, is expected to grow at about 14 percent annually, reaching nearly $55 billion by 2022.

Outlines

00:00

📦 E-commerce Growth and the Cardboard Box Industry

The rapid expansion of e-commerce, particularly Amazon's shipping services, has significantly increased the demand for cardboard boxes. Amazon shipped over 5 billion packages through Prime in 2017 and expanded one-day delivery to more products. The corrugated box, being durable and recyclable, is the primary choice for shipping, accounting for 95% of all products shipped in the U.S. Despite the growth in e-commerce, the industry faces challenges from lighter plastic packaging and Amazon's efforts to reduce its carbon footprint. The U.S., being rich in trees, is a major producer of cardboard boxes, but the industry had faced a decline before e-commerce sales, particularly from Amazon, provided a new growth avenue.

05:03

🔄 The Evolution of E-commerce Packaging and Its Environmental Impact

The e-commerce industry's packaging practices have evolved to address customer dissatisfaction with excessive packaging and to improve sustainability. Amazon introduced the Frustration Free Packaging program in 2008 to reduce unnecessary packaging and encourage the use of recyclable materials. The company has also implemented incentives and penalties to motivate vendors to adopt this program. Amazon's shift to using fewer cardboard boxes and more plastic mailers for smaller items reflects a broader industry trend towards more efficient and cost-effective packaging solutions. However, the environmental benefits of plastic mailers are disputed, with concerns about their recyclability and impact on recycling machinery.

10:06

🛍️ The Future of Cardboard Boxes Amidst Plastic Packaging and E-commerce Trends

While plastic mailers offer certain environmental and logistical advantages, such as reduced energy use and more efficient shipping, they are not universally accepted in recycling programs. The cardboard box industry is adapting to these challenges by focusing on right-sized packaging and improving efficiencies. Amazon's continued demand for cardboard boxes, despite the rise of plastic mailers for certain products, indicates that the corrugated box remains a vital component of e-commerce shipping. Innovations in cardboard box design, such as weight reduction and better fit for contents, are helping to maintain the relevance of cardboard in a competitive packaging market.

15:10

💰 Projected Growth in E-commerce Packaging and Its Implications for the Industry

The e-commerce packaging market, including both corrugated and flexible packaging, is expected to grow at a rate of 14% annually, reaching nearly $55 billion by 2022. This growth is driven by the projected doubling of U.S. online retail sales to over a trillion dollars by 2025. Despite Amazon's efforts to reduce its shipping footprint, the demand for cardboard boxes and plastic mailers is likely to increase. The cardboard box industry, having faced economic challenges in the past, is poised to benefit from this growth, as e-commerce continues to drive demand for packaging solutions.

Keywords

💡E-commerce

E-commerce refers to the buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the internet. In the video's context, e-commerce is the driving force behind the growth of delivery boxes and the shipping industry, with Amazon's Prime service and one-day delivery expansion being highlighted examples.

💡Corrugated Box

A corrugated box is a type of container made of corrugated fiberboard, known for its durability and sturdiness, making it ideal for shipping goods. The script emphasizes the corrugated box's role in the U.S. e-commerce market, noting that it is used for shipping approximately 95 percent of all products.

💡Sustainability

Sustainability in the video pertains to the efforts made by companies like Amazon to reduce their environmental impact. Amazon's move towards using fewer boxes and exploring alternative packaging materials reflects a broader concern for sustainability in e-commerce packaging.

💡Recyclable

Recyclable materials are those that can be processed and reused, reducing waste and environmental impact. The script mentions the recyclability of corrugated boxes as a key advantage, contrasting with the challenges of recycling plastic packaging.

💡Containerboard Industry

The containerboard industry is involved in the production of paper materials used for making boxes and other shipping containers. The video discusses how this industry has been positively impacted by the growth of e-commerce, but also faces challenges due to Amazon's shift towards more sustainable packaging options.

💡Frustration-Free Packaging

Frustration-Free Packaging is a program introduced by Amazon aimed at reducing unnecessary packaging and making it easier for customers to open their packages. The script describes this initiative as part of Amazon's efforts to streamline and reduce its packaging waste.

💡Plastic Packaging

Plastic packaging refers to the use of plastic materials for wrapping and protecting products during shipping. The video script discusses the rise of plastic packaging as an alternative to cardboard boxes, noting its lighter weight and cost-effectiveness, but also its environmental concerns.

💡International Paper

International Paper is one of the leading companies in the paper and packaging industry. The script identifies it as a major supplier for Amazon's box needs, indicating the significance of e-commerce in driving demand for their products.

💡E-commerce Fulfillment

E-commerce fulfillment encompasses the entire process of receiving, storing, packing, and delivering goods for online retail. The video touches on the challenges and innovations in this area, such as Amazon's shift from cardboard to plastic mailers and the impact on the packaging industry.

💡Packaging Efficiency

Packaging efficiency refers to the optimization of packaging materials and processes to reduce costs and environmental impact. The script discusses how Amazon and the containerboard industry are focusing on right-sized packaging to improve efficiency.

💡Consumer Backlash

Consumer backlash in the context of the video refers to the negative customer reactions to excessive or inappropriate packaging, such as receiving small products in large boxes. The script notes that Amazon is addressing this issue by optimizing box sizes and materials.

Highlights

Delivery boxes have been increasingly common in the U.S., driven by faster delivery, easier returns, and free shipping in the retail e-commerce market.

Amazon shipped over 5 billion packages through Prime in 2017 and expanded one-day delivery service to over 10 million products in 2019.

Corrugated boxes, accounting for 95% of U.S. product shipments, are durable and less likely to be damaged in the supply chain.

Shipping costs reached $27 billion for Amazon in 2018, more than double the amount spent in 2015.

The growth in e-commerce has revitalized the paper and packaging industry after a decline in demand for copy paper and newsprint.

Amazon's impact on the cardboard box market has been significant, despite criticism for contributing to the death of brick and mortar retail.

Plastic packaging is emerging as a new challenge to the cardboard box market due to its lightness and cost-effectiveness.

Amazon's efforts to reduce its carbon footprint may impact the containerboard industry.

The U.S. is a major producer of trees, making it a key region for cardboard box production.

The U.S. corrugated box market faced economic challenges in the early 2000s, including the Great Recession.

E-commerce sales, particularly from Amazon, have been a significant market for the containerboard industry.

Amazon's demand for boxes is substantial, accounting for close to 5% of U.S. box demand.

Major box manufacturers like International Paper and WestRock have seen their stocks underperform the S&P 500 since 2018.

Amazon's Frustration Free Packaging program aims to reduce extra packaging and promote recyclable materials.

Amazon's shift to plastic mailers and bags for smaller products is part of an effort to reduce shipping costs and environmental impact.

Flexible packaging, including plastic mailers, is becoming more prevalent in e-commerce shipping.

Plastic mailers have environmental benefits, such as lower energy use and CO2 production compared to corrugated boxes.

Despite the rise of plastic mailers, corrugated boxes are still preferred for their recyclability and customer convenience.

Amazon's potential shift from cardboard to plastic mailers could signal an industry-wide change.

The cardboard box industry is expected to grow with the increase in U.S. online retail sales, reaching over a trillion dollars by 2025.

Transcripts

For the past few years delivery boxes have been piling up on people's

doorsteps and in apartment buildings across the U.S.

Faster delivery, easier return policies and free shipping have fueled

growth in the retail e-commerce market.

Amazon alone shipped over 5 billion packages through Prime in 2017 and

in 2019 announced they are expanding their one-day delivery service

to over 10 million products.

The corrugated box is a great medium for transporting things because

it's durable and sturdy and from a damage standpoint you're going to

have less risk of that getting damaged in the supply chain.

A corrugated box is the brown paper box that is used to ship roughly

95 percent of all products in the U.S.

The corrugated boxes is probably the single best mousetrap to get

goods from point A to point B, its recyclable and returnable

reusable. Shipping cost Amazon $27 billion in 2018 which is more than

double the amount it spent in 2015.

That growth has been great news for the paper and packaging industry

after the move to digital devices caused a drop in production of copy

paper and newsprint.

There's no question that it's, I don't want to call it a salvation but

it's been a ray of sunshine a point of visible growth within

companies where other segments of their business were clearly in

decline.

Amazon has been blamed for everything from the death of brick and

mortar retail to the financial woes of the post office.

But the rise of e-commerce shipping boxes has provided a boost to the

stagnant cardboard box market.

The box business now faces a new challenge from lighter and cheaper

plastic packaging that has proliferated in recent years due to a

transformation in the way packages are shipped.

And as Amazon tries to cut down its carbon footprint the

containerboard industry is bracing for the fallout.

Which begs the question with multiple headwinds on the horizon will

paper based cardboard boxes that have been used for generations and

thrived in the age of e-commerce continue to flourish or could the

cardboard box be facing a new challenger?

Cardboard boxes are a really big deal in the U.S.

The United States is the Saudi Arabia of trees.

Someone's gonna make the first box and that's almost inevitably a

mill generally in the Southeast United States.

China certainly doesn't have trees and India the extent they do have

trees they're not necessarily the right types of trees and shouldn't

be dedicated towards making boxes for us.

The box business grew rapidly up through 1999 when the U.S.

coordinated box market had its peak shipment. Starting

in the early 2000s the U.S.

corrugated box market faced multiple economic obstacles. The

great recession dragged on box demand and even after the recession

demand continued to slow for consumer goods like soda and for the

boxes that transport them. The

move to digital devices also coincided with a drop in demand for copy

paper and newsprint.

But box makers found a saving grace in e-commerce sales and Amazon

sale specifically which were growing at mostly double digit rates in

the recession and post-recession years.

Those e-commerce sales have become a significant market for the

containerboard industry. In

2018 told a U.S.

e-commerce sales were estimated to be $512 billion almost 50 percent

higher than in 2015.

Amazon captured 48 percent of those sales.

Most estimates are that e-commerce accounts for about 10 percent of

the U.S.

box market.

Amazon accounts for close to 5 percent of U.S.

box demand.

By our estimates they are clearly the single largest box user in the

US. International Paper with a third of the market I think does

closer to 50 percent of all the amazon boxes evidently they got a bit

more share than perhaps some of the smaller players.

Amazon said they deal with most of the big box makers across the U.S.

according to analysts.

Those manufacturers include International Paper, WestRock, Packaging

Corporation of America and Georgia-Pacific.

Some investors were turning to these companies as a way to invest in

the e-commerce giant without having to purchase Amazon's pricey

stock.

People didn't really start talking about buying International Paper or

WestRock as a secondary investment in Amazon till about the last five

years.

Despite the boost from e-commerce sales the box business still isn't

growing all that much.

And since 2018 their stocks have mostly underperformed the S&P

500. In 2018, 69 percent of International Papers total revenue came

from the box business and that sales volume has been mostly flat for

the past five years.

Although the big producers sold less boxes in 2018 than in

2000, industry consolidation has dramatically narrowed the fields.

The handful of big players remaining are based in Memphis, Tennessee,

Atlanta, Georgia and Lake Forest, Illinois.

Analysts have told CNBC that substantial industry mergers have made

it easier to collectively hike prices and those price increases have

helped drive revenue.

There are portions of the business that are in indisputable secular

decline but if you're in the brown part of the business, making these

boxes, that's been some very welcome growth.

But those extra boxes piling up on people's doorsteps have led to a

backlash from disgruntled customers who are sick of receiving golf

ball sized products in supersized boxes.

It used to be that you'd order a toothbrush and it would come in three

giant boxes and you'd say to yourself, what is this?

Well, Amazon is trying to rectify that by using fewer boxes and using

other types of packaging where appropriate.

With e-commerce packaging underfire Amazon decided to change the way

they do shipping.

In 2008, Amazon introduced the Frustration Free Packaging program.

It aims to reduce the extra packaging created when retail packaged

products are placed inside Amazon boxes to be shipped.

Instead, products certified in the program that are roughly the size

of a blender or larger need to be packaged in their own ready to ship

boxes. And those boxes also need to be made of 100 percent recyclable

materials. For customers that means that the packaging is easy to

recycle and the box is easy to open without all the excess packaging

materials.

For a year.

Amazon offered vendors an incentive of a dollar per shipment to

modify their packaging.

And starting August 1st 2019 Amazon is charging a $1.99 penalty

for each product shipped that needs to be reboxed. And

basically the point of this deadline is for Amazon to get out of the

business of packaging.

They want their vendors to send them boxes that Amazon doesn't have to

touch or rebox.

Amazon says that in the 10 years since its rolled out the program in

2008, it saved them from shipping out 500 million shipping boxes and

reduced their packaging materials by 244,000

tons. Even corrugate waste that can be properly recycled is still a

burden placed on the customer to tear down and properly recycle

so this is just a recognition that we want e-commerce to be the most

sustainable easiest choice for our customers.

In those shift by Amazon have made the corrugated industry rethink the

way it does business.

International Paper said in an email to CNBC, "At the start of the

Ecomm boom it was really difficult to forecast demand.

There is a big focus on improving efficiencies through right sized

packaging."

But, with Amazon using fewer and smaller cardboard boxes in the future

that could prove to be bad news for the box makers.

Before Amazon launched Prime in 2005 free two-day shipping wasn't a

thing. Today it's the norm.

In an effort to reduce costs and ship out an ever increasing number of

products faster Amazon moved to plastic mailers and plastic bags for

many of its smaller products. If

your shipping clothes that don't need to be in boxes they can go in a

flexible plastic mailer.

As a result of which you've seen more and more products go into

flexible plastic mailers.

Over the past year or so it's just part of Amazon's overall effort to

reduce its costs.

Over the last few years we've recognized that there is a great role to

play for flexible packaging of all types and we've reduced our

overall corrugate and shifted many of our smaller items to being

shipped out bound in flexible packaging.

It's made a pretty profound difference we've reduced substantially

our use of corrugate box. Sealed Air a

packaging company that invented bubble wrap in 1957 started working

with Amazon in 1996 developing inflatable pillows for the company to

ship books.

The evolution of packaging for e-commerce it really started off quite

basic. Whatever item you received you received it in packaging that

was probably designed to ship on a pallet and go to a retail store.

What e-commerce companies did was they take those items and they put

it into another box.

What's evolved is you now see a lot more flexible packaging.

There is a lot of competition in the mailer market in generally

mailers are a low margin product.

As of 2019 Sealed Air a leader in the protective packaging market

makes food packaging, air pillows and automated packaging systems for

e-commerce. Sealed Air had a revenue of $4.7 billion

dollars in 2018 up modestly from a revenue $4.5 billion

dollars in 2010.

When you think about the challenges that e-commerce fulfillment

companies face it's really in shipping expense because if you give

away shipping I mean someone's paying for that and it typically is

the e-commerce fulfillment company.

There is a lot of desire to decrease the amount of labor, when you

are able to get it, it's hard to retain it and it's

expensive, automation has really been where we have spent a great

deal of our time investing.

Around 2010, Amazon started using Jiffy padded envelopes with Kraft

paper on the outside in plastic bubbles on the inside.

Over the last two years we have invented two different kinds of

flexible mailers.

One is the blue and white all plastic mailer.

We've recently launched in the last six, eight months a paper padded

mailer that's actually fully recyclable with the paper stream.

Amazon said they made about 10 million shipments using the paper

padded mailer and depending on the month the plastic mailer is used

about 20 to 30 percent of the time.

So really when we come down to deciding if the product is of the size

it can go on a mailer, it's not likely to be damaged by going in the

mailer, the mailer is always the better fitting option and frankly is

easier for the customer to choose to recycle than breaking down a

corrugate box.

We're driving in that direction for many different reasons. But

those plastic mailers generally are not accepted in municipal

recycling programs and you'll need to bring them to a store that

accepts plastic bags.

Many cities have film recycling and take back programs

through stores then that plastic mailer makes sense but we've

basically moved away from a non-recyclable to two recyclable

options. Plastic mailers have some benefits for the environment. A

corrugated box uses 23 times more energy and produces six times more

CO2 than a bubble mailer to manufacture. Plastic

mailers take up less space in containers and trucks making shipping

more efficient.

But in the paper versus plastic debate not everyone agrees.

Environmentalists argue in practice the plastic mailers aren't better

for the environment.

They say these products need to be recycled separately from other

plastics and they aren't recyclable in curbside bins.

Two huge barriers to recycling. The

latest stats from the EPA show that corrugated boxes were recycled at

a rate of 92 percent in 2015 while plastic bags, sacks and wraps were

recycled at a rate of 13 percent in 2015.

When you think about what is the greatest pain point for the consumer

after having it get there safely arrive on time people are concerned

about receiving something that is plastic or made a poly because of

the environmental concerns.

Some waste management companies say plastic packaging also causes

problems for the recycling systems.

Plastic mailers get caught in the recycling machinery slowing down

the process and raising the costs for recyclers and sometimes

contaminating entire bundles.

Until Scotty on the Enterprise can beam the products from the

warehouse to your living room I think Amazon's gonna be good for the

corrugated business.

I think there's going to be noise I think you're gonna have

challenges from time to time where people say, "Should we try and the

plastic pouch?",

in the long run plastic is gonna be on the wrong side of

history. Because Amazon is a market leader in the U.S.

e-commerce sector any move away from cardboard to plastic mailers

could signal a shift for the entire industry.

The corrugated box could be about to undergo a major facelift.

We're seeing some major trends among consumers and what they're

expecting from e-commerce and the first one is actually this desire

for increased engagement with the package.

In 2015, Amazon partnered with Universal Pictures and Illumination

Entertainment to ship orders in bright yellow delivery boxes

featuring cartoon characters from the movie Minions.

The boxes promoting the movie and a special Amazon U.R.L.

dedicated to shopping for merchandise from the film.

If a millennial is going to look at it and it's gonna be an Instagram

moment then we need to be thinking about what can we do with the

package to help foster that. At

Amazon an engineering team is working on redesigning the cardboard

box. In 2018, using computational engineering they began to test the

stress and strains and vibration effects of packages as the moving

trucks across the country.

We've optimized the weight of the corrugate box and reduced the

overall weight of our boxes by about 9 percent. And

we've reduced the size of our box meaning making them fit better and

our customers are seeing in some cases much of an 18 to 20 percent

reduction in the weight of the recycled

corrugate waste that they would have seen coming into their home.

While items like clothing and diapers can ship in a plastic flexible

mailer, electronics and easily damaged goods will still need the

protection offered by a corrugated box.

Despite headwinds in the economy and inroads from plastic mailers

demand for cardboard boxes from Amazon continues to remain high.

Even though Amazon is using some smaller boxes, the four companies

that I mentioned have not been talking about less demand from Amazon

they're talking about more demand from Amazon.

And if it's smarter demand from Amazon I still think they're to get

paid for that. With

U.S. online retail sales expected to surpass a trillion dollars by

2025, double the amount it reached in 2018, the market for e-commerce

packaging could increase rapidly in the coming years despite Amazon's

effort to cut down its shipping footprint. E-commerce

packaging which includes corrugated packaging as well as flexible

packaging will grow at about 14 percent every year from 2017 through

2022 reaching almost $55 billion in 2022.

That growth could deliver sizable returns for the cardboard box

makers and we're likely to see even more boxes and plastic mailers

piled outside of people's homes in the future.