December 15, 2015
Posted by Alicia Baumann

Why Online Retailers Should Care about the “Packing Problem”

Since packing and packaging is an important part of the eCommerce consumer experience, many online retailers only pay attention to a packages aesthetics and often don’t give much thought to the way items are packed, or to the size of boxes used to pack them, considering box selection only a minute part of the overall eCommerce fulfillment process.

Often parcel shipping is often handled by a third party (e.g., FedEx, UPS, USPS), which means that many online retailers pay even less attention to how items are packaged. After all, once in boxes, a retailer’s merchandise is the responsibility of shipping professionals.

Packaging and box selection can make or break an online retailer’s profit margin on a sale. Smart packaging can reduce shipping costs for consumers, which, in turn, reduces cart abandonment. Here’s why you should care about packaging optimization, how to achieve it, and the impact smart packaging can have on you online business.

The Root of the Packing Problem

Today’s eCommerce retailers face a worrisome phenomenon: countless abandoned shopping carts, to the tune of over $4 trillion a year by some estimates. Five of the top eight reasons that customers abandon carts are related to shipping.

As third-party shipping companies evolve their pricing structures for ground-delivered packages to incorporate not just weight but also size (dimensional weight pricing), badly packed goods can end up costing both retailers and consumers dearly. Furthermore, this packing problem has become even more pertinent since both FedEx and UPS increased their ground rates for 2016 and shifted to a dimensional weight pricing structure in 2015.

In the past, shipping costs for items purchased online would involve the retailer’s “best guess” estimates of what it would cost to ship an item to a given location. Retailers would then have their fulfillment staff determine how to best pack items so they would arrive safely and cheaply.

Here’s How ShipHawk Thinks about the Problem

By leveraging logistics automation platform, retailers can both efficiently and effectively combat the packing problem directly. Here’s a step-by-step guide to how packaging optimization works:

  1. First you input the the dimensions, weight, and type of item (Chair, Desk, Couch, etc.) that is being shipped into the platform.
  2. Then the logistics platform automatically categorizes the items into five packaging categories:boxable, palletizable, crateable, packed, and other.
  3. Depending on which category the software selects, there will be two options.
    • Option 1: Packing boxable items into the fewest number of boxes; packing crateable items into their own crates; and / or packing palletizable items onto the fewest number of pallets.
    • Option 2: Pack boxable items into the fewest amount of boxes; pack boxed, palletizable, and packed items on the fewest number of pallets; and / or pack crateable items into their crates.
  4. After the packaging algorithm decides which option would be best for that shipment, then the platform decides on the most efficient packaging materials and gives the shipping rates for that shipment.
  5. Once shipping rates have been determined, they are filtered. Option 1 tends to be cheaper with small parcel carriers and Option 2 is most often cheaper with LTL and blanket wrap carriers.
  6. Then you are presented with least expensive real-time rates by carrier type and now you have the real-time shipping costs at the point-of-sale or in your backend system!

To remain competitive in today’s eCommerce landscape, online retailers cannot afford to treat packaging as an afterthought. Choosing how to package an item has large implications for the profit margin of each transaction, and for an online retailer’s business overall. Optimized packaging can also result in more efficient pricing—a cost savings that can be passed on to consumers, driving both customer satisfaction and higher conversion rates.

Logistics automation technology presents a scalable solution for eCommerce companies to help optimize their packaging. These platforms can help ensure every item is placed in the most cost-effective packaging and shipped in the most efficient way.

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