The surge in e-commerce demand across the last year has disrupted many aspects of company supply chains, including the boxes they ship products in. The price of cardboard hit a record high in February according to the Producer Price Index, pointing to the sudden rise in demand for everything from food to pet supplies to clothing appearing at consumers’ front doors. But beyond cardboard’s newfound cost is another important box consideration: the appeal of packaging.
As more customers are shopping online than ever before, how might the presentation of a company’s packaging be affecting customer behavior? In their newly published paper, JBL authors Carl Marcus Wallenburg, Lukas Einmahl, Kang-Bok Lee, and Shashank Rao examine the impact of packaging presentation on the likelihood of returns in “On packaging and product returns in online retail – Mailing boxes or sending signals?”
The returns process is widely regarded as incredibly costly for businesses in both time and money. An average return incident costs over $15 in shipping and handling expenses alone, which is compounded by both the fact that up to 50% of products sold online get returned and most returned products cannot be sold at full price. Due to the expensive nature, businesses naturally try to avoid returns as much as possible through two approaches: avoidance and gatekeeping. While gatekeeping seeks to prevent customers from making returns by imposing barriers, avoidance reduces the likelihood by attempting to mitigate reasons customers may have to return an item. In other words, companies take steps before the returns process to ensure a lower chance of a customer returning a product at all.
Packaging can be divided into two categories: primary and secondary packaging. Secondary or transport packaging is what’s intended to protect the products inside the primary packaging – it’s the cardboard box that you find on your doorstep or front porch. Primary packaging is inside, protecting the actual product. Previous research looking at presentation has demonstrated its influence on customer expectations, usually at the time of sale. But with everyone ordering things online, packaging’s importance has moved up, as a package’s arrival on a customer’s doorstep is the first time they will see the product in person.
It turns out that packaging presentation does influence the likelihood of a customer returning a product. Items shipped using some degree of visually enhanced packaging were 25.5% likely to be returned, compared to the 32.1% likely for their counterparts shipped in ordinary cardboard boxes – a 6.6% difference. And the effects of packaging on return reduction are substantially stronger for packaging that is uniformly premium. In other words, if a company continues shipping products in normal cardboard boxes for secondary packaging, but upgrades their primary, inside packaging to a premium standard like gift wrapping or tissue paper, their products will be 2.8% less likely to be returned than their plain counterparts. But those items sent in both premium primary and secondary packaging will still fare better.
For managers handling returns processes and order fulfillment, all of this means a more holistic approach to packaging. As opposed to focusing solely on functionality, packaging should be made to be consistently more aesthetically appealing. And the costs of returns pale in comparison to the costs of upgrading packaging: premium packaging costs retailers less than 10¢ per shipment. Investing in premium packaging reduces the likelihood of having customers return products ordered online, which means a chance to avoid costly returns processes, making it one of the better value-for-money last-mile improvements for online retailers.