Amazon Pushes Brands to Be Less Boxy

Date: Friday, August 2, 2019
Source: The Wall Street Journal

Companies face an Amazon-imposed Aug. 1 deadline to make boxes smaller and easier to open

Amazon.com Inc. AMZN -0.61% is pressuring brands to make their packaging more efficient, which has prompted vendors to make costly changes to their businesses or face fines.

Since last fall, Amazon has told companies they must make packaging for thousands of larger products more compact and easier to open by Thursday. Eventually, Amazon wants every product it ships to meet similar standards, according to the company and its suppliers. In a letter to vendors, Amazon said the requirements will make packages more environmentally friendly. Amazon declined to comment on its packaging policies.

The new packaging requirements are the latest example of Amazon’s power to get vendors to change the way they do business. The company has also been pushing brands to sell products in quantities and at prices that best fit its storage and delivery systems; brands that don’t comply are being cut from Amazon’s site. In addition, the e-commerce company is asking makers of consumer products to develop brands for Amazon to sell exclusivelyrather than creating its own private-label products from scratch.

Consumer-product companies say they have little choice but to meet Amazon’s requirements. Manufacturers of items from soup to garden rakes say they have to sell through Amazon to reach more customers.

Philips Norelco OneBlade, owned by Koninklijke Philips NV, said it cut the components in its razor packaging to nine from 13 and reduced the volume of packaging by 80% to meet the new standard. Hill’s Pet Nutrition Inc. said it decreased the packaging volume of its Science Diet premium dog food by 34% and the amount of wasted space, or air shipped, by 82%. Newell Brands Inc., the maker of Rubbermaid FreshWorks, said it cut the components used to ship its containers to two from seven.

“Some brands tell us they plan to negotiate with Amazon, but we don’t see that happening,” said Matt Reddington, a director at packaging-testing consulting firm VeritivCorp. Mr. Reddington said that while some companies could remove their products from the retail giant’s platform, he expects Amazon to keep pushing brands to change packaging and other aspects of their business in ways best suited to its own evolving strategy.

Amazon has been trying to make packaging more efficient for more than a decade. Its expanding e-commerce footprint is consuming more cardboard and plastic packaging. Now, Amazon is trying to address consumer calls to cut back on waste while reducing excess weight and volume to generate savings on shipping as well.

The company said in 2017 that it was persuading more manufacturers to cut excess space and materials to save time and money on shipping.

Companies need a consulting firm to certify that their packaging meets Amazon’s new standards. One consulting firm said about 15% of the packages it has tested needed to be redesigned.

Amazon offered a $1 credit to producers for each item sold in packaging that met the new standard ahead of deadline. Companies that haven’t complied by Aug. 1 will face a $1.99 surcharge on each item sold in packaging that runs afoul of the new standard.

Brands that adopt more efficient packaging stand to benefit from lower shipping costs and Amazon does as well, said Mike Kuebler, technical director and packaging specialist at Smithers Pira.

“It does cause some pain, but I think the benefit is there,” he said.

 

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