The retail landscape within the UK both from a generalist and specific corrugate perspective is changing both dramatically and at an accelerated pace for a variety of reasons but mainly due to socio-economic and technological based drivers, thus opening potentially rather significant opportunities for the corrugate supply industry, writes guest blogger Robert Herridge, Managing Director, Packology Limited.
The traditional retailers (supermarkets) find their once rock solid market dominance crumbling. This is to a certain extent due to over confidence on their part, emergence of low cost retail providers from mainland Europe such as Aldi and Lidl, combined with a relentless growth in online retail outlets with is projected to grow from £38bn sales in 2013 to over £52bn in 2016.
The growth in smartphone technologies to allow online retailing and associated transaction payments has further fuelled this growth and gives the consumer a multitude of touch points in their buying process, thus creating omni-channel marketing opportunities for the brand – whether it be in-store purchase, online purchase, television and printed media advertising or direct email campaigns.
But what does all this mean for the corrugate supply chain? Clearly the large retailers seeking to divest themselves of existing and planned megastores and reduce excess stock within distribution centres, may embark on a destocking process, causing the upstream supply chain to falter and manufacturing (and associated packaging related sales) growth to fall. However, this in turn will be offset by the greater demand for individual sales unit shipper boxes for single items purchased via the internet (Amazon UK increased its sales from £3.3bn in 2012 to £6.1bn in 2015).
It should be considered however that the potential growth of online retailing may in turn also change the way corrugate items are developed. For example, most UK retailers (with perhaps the exception of Waitrose) demand shelf ready packaging. These packs are quick and easy to open and generally speaking fully decorated in brand livery. It may well turn out to be the case though that online retailers, may require product delivered in bulk in plain brown packaging simply identified with one colour black print outlining brand name, product name and barcode. Packaging that is never seen by the consumer may well never need to be branded.
The opportunity for the corrugate market exists in its ability to move away from being a somewhat subservient packaging provider, simply delivering what the brand owner or customer requires, to a sector that can identify technologies to lead the way for its branded customers and drive those customers to adopt new technologies such as Augmented Reality, whereby a logo on a corrugate box for say, flat pack furniture, can be scanned via the consumers smartphone, to display a set of online assembly instructions. Or perhaps better utilisation of digital print technologies such as identifying the supply chain needs that can best be served by such technologies. For example, might it be possible for online retailers to process their packaging and orders in such a way that the corrugate provider is able to deliver the packaging already printed with the individual consumer’s address on it ready for packing and shipping and negating the need for labels and label application?
As the traditional retailers such as Sainsbury’s and perhaps more noticeably, Tesco, flounder in the current retail environment, so the low cost German retailers continue to flourish.
Their stocked brands are often highly decorated with a premium look and feel and there are undoubtedly key market opportunities for the corrugate industry here, however packaging manufacturers are somewhat led by their customers i.e. those brands who seek to have themselves listed within the low cost multiples. While corrugated pack manufacturers have this reliance they are unable to directly control and influence their own destiny within the retail sector without delivering on innovation – an area that the corrugate industry has always excelled.
Technical innovation has created opportunities for retailers and customers as the way goods and services are bought and sold is in constant flux – this in itself is the key opportunity that the corrugate industry must seize upon to be a central part of our constantly evolving retail environment.