Ok, so I’m willing to make a confession here. I get a little thrill each and every time I come to the front door and see an Amazon box sitting there waiting for me to bring it into the house and open it up. It’s almost like Christmas day all over again! However, the product managers at Amazon have come to a realization that they need to find a way to save money. What they want to do is to find ways to ship things to their customers in fewer and smaller containers. Are they going to be able to do this?
Amazon Loves Boxes
So if you can remember all the way back to the start of this century, back then online sales only represented 1% of retail sales in the U.S. However, things have significantly changed since then. Last year alone, online sales accounted for 17% of retail sales if you ignore the purchase of cars and gas. That kind of increase in sales would look good on anyone’s product manager resume. As you might well image, there is a relationship between the amount of online shopping we all do and the need for paper packaging (boxes).
The need for cardboard boxes has grown as the mail order / e-commerce sector has grown. Last year, roughly half of all domestic retail corrugated-box shipments were used for both e-commerce and mail-order deliveries. It turns out that 80% of the increase in demand for boxes has come from the mail-order and e-commerce sectors. Somewhat surprisingly, it turns out that mail-order and e-commerce sites use roughly seven times as many boxes per dollar spent as traditional bricks and mortar stores do.
All of this would make you think that it must be a great job to be a product manager for one of those companies that makes boxes. The reality turns out to be a bit more complicated. Profits for the box industry have grown very slowly over the past few years. The reason for this slow growth is because the product that box companies make is a generic and easily copied product. This has led to intense competition in the box manufacturing business. In the box industry, the average profit margin increased from 5% of revenue back in 2014 by 5.8% this year. The number of players in the box industry has decreased. In 2001 there were 300 companies in this business. Now there are only 255 companies. This decrease has been attributed to streamlining – the remaining companies are able to produce more boxes.
Can Amazon Use Fewer Boxes?
The Amazon product managers think that the future is going to be different from the present. They believe that the relationship that exists between boxes and e-commerce is going to become weaker. They want to find ways to change their product development definition in order to use fewer boxes. Already alternatives to boxes such as plastic mailers and efforts to try to “right size” packages by doing away with oversize boxes are going to change things. Likewise, the Amazon product managers want to put a halt to what is called “overboxing” which occurs when a product has to be placed in a second box because its original packaging is too flimsy to be able to survive shipping to the customer.
Let’s face it, customers who have to open multiple boxes just to get to the product that they ordered are never happy. There is even a term for how this makes customers feel: wrap rage. The Amazon product managers want to find ways to prevent their customers from ever having to feel this way. If the Amazon product managers were able to find ways to reduce the number of boxes that they used, then they’d be able to reduce their shipping and transportation costs. Last year Amazon spent US$27.2B on shipping and transportation.
The Amazon product managers have come up with new rules for their suppliers. Going forward, products that are larger than 18x14x8 inches or which weigh 20 pounds or more have to be certified as being ready to ship without the need for additional packaging. The challenge that the Amazon product managers are facing is that even as they are trying to reduce the amount of packaging that the company uses, they are at the same time trying to increase their sales. In the end what this is going to mean is that they may end up using even more boxes than they did before!
What All Of This Means For You
Success can be a great thing, but too much success can start to cause problems for product managers. The Amazon product managers have had great success with customers calling them up and ordering products. However, as they ship products to customers they’ve discovered that they are shipping more and more boxes. Those boxes cost money to purchase and to ship. The Amazon product managers need to look at their product manager job description in order to find ways to reduce the cost of all of those boxes.
As we are all well aware, online sales have exploded over the past few years. As more items have been bought online, more boxes have been used to ship products to customers. Mail-order and e-commerce are the ones who are using all of the boxes, not retail stores. In fact, the online firms use seven times as many boxes as retail stores do. Life has not been easy for box product managers. The market for boxes has a great deal of competition and their product is both generic and easily copied. The Amazon product managers want to break the link between rising sales and the increasing use of boxes. They want to use other packaging and to start to use the packaging that products come in to ship them. The Amazon product managers are looking for ways to reduce the number of boxes that they are using. They are starting to require vendors to make their product packaging strong enough to allow their products to be shipped without boxes. However, as Amazon sells more and more products, they will still need more and more boxes.
The Amazon product managers have a real problem on their hands. They need boxes in order to get their products into the hands of their customers. However, as they use more and more boxes, their costs keep going up. What they need to do is to find ways to get products to customers using fewer boxes. The idea of getting vendors to do a better job of packing their products is a great first step. Now Amazon just needs to find ways to package more products together. We’ll have to watch carefully as Amazon tries to keep growing without having to use even more boxes.
Question For You: How could Amazon ship fewer boxes and still deliver products to customers the next day?
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What We’ll Be Talking About Next Time
When you are thirsty, what kind of drink do you reach for? A lot of us will grab a soda, a water, or maybe even a coffee or a tea. However, just a few years ago a new option showed up: favored bubbly water. The leader in this market category was a brand called LaCroix. The LaCroix product managers did very well for a long time. However, the popularity of their product has attracted new competitors and now the LaCroix product managers have to take a look at their product development definition and find ways to defend their market share. What should they do to keep the fizz in their product sales?