The Business Of Amazon Shipping Boxes

The Business Of Amazon Shipping Boxes


For the past few years delivery boxes
have been piling up on people’s doorsteps and in apartment
buildings across the U.S. Faster delivery, easier return policies
and free shipping have fueled growth in the
retail e-commerce market. Amazon alone shipped over 5 billion
packages through Prime in 2017 and in 2019 announced they are
expanding their one-day delivery service to over 10 million products. The corrugated box is a great
medium for transporting things because it’s durable and sturdy and from
a damage standpoint you’re going to have less risk of that getting
damaged in the supply chain. A corrugated box is the brown paper
box that is used to ship roughly 95 percent of all
products in the U.S. The corrugated boxes is probably the
single best mousetrap to get goods from point A to point
B, its recyclable and returnable reusable. Shipping cost Amazon $27 billion
in 2018 which is more than double the amount it spent in 2015. That growth has been great news
for the paper and packaging industry after the move to digital devices caused
a drop in production of copy paper and newsprint. There’s no question that it’s, I don’t
want to call it a salvation but it’s been a ray of sunshine
a point of visible growth within companies where other segments of
their business were clearly in decline. Amazon has been blamed for everything
from the death of brick and mortar retail to the financial
woes of the post office. But the rise of e-commerce shipping boxes
has provided a boost to the stagnant cardboard box market. The box business now faces a
new challenge from lighter and cheaper plastic packaging that has proliferated in
recent years due to a transformation in the way
packages are shipped. And as Amazon tries to cut
down its carbon footprint the containerboard industry is bracing
for the fallout. Which begs the question with multiple
headwinds on the horizon will paper based cardboard boxes that have
been used for generations and thrived in the age of e-commerce
continue to flourish or could the cardboard box be facing
a new challenger? Cardboard boxes are a really
big deal in the U.S. The United States is the
Saudi Arabia of trees. Someone’s gonna make the first box
and that’s almost inevitably a mill generally in the
Southeast United States. China certainly doesn’t have trees and
India the extent they do have trees they’re not necessarily the right
types of trees and shouldn’t be dedicated towards making
boxes for us. The box business grew rapidly up
through 1999 when the U.S. coordinated box market had
its peak shipment. Starting in the early 2000s the U.S. corrugated box market faced
multiple economic obstacles. The great recession dragged on box demand
and even after the recession demand continued to slow for consumer
goods like soda and for the boxes that transport them. The move to digital devices also coincided with
a drop in demand for copy paper and newsprint. But box makers found a saving
grace in e-commerce sales and Amazon sale specifically which were growing at
mostly double digit rates in the recession and
post-recession years. Those e-commerce sales have become
a significant market for the containerboard industry. In 2018 told a U.S. e-commerce sales were estimated to be
$512 billion almost 50 percent higher than in 2015. Amazon captured 48 percent
of those sales. Most estimates are that e-commerce accounts
for about 10 percent of the U.S. box market. Amazon accounts for close to
5 percent of U.S. box demand. By our estimates they are clearly the
single largest box user in the US. International Paper with a third
of the market I think does closer to 50 percent of all the
amazon boxes evidently they got a bit more share than perhaps some
of the smaller players. Amazon said they deal with most of
the big box makers across the U.S. according to analysts. Those manufacturers include International
Paper, WestRock, Packaging Corporation of America
and Georgia-Pacific. Some investors were turning to these companies
as a way to invest in the e-commerce giant without having
to purchase Amazon’s pricey stock. People didn’t really start talking
about buying International Paper or WestRock as a secondary investment in
Amazon till about the last five years. Despite the boost from e-commerce sales
the box business still isn’t growing all that much. And since 2018 their stocks
have mostly underperformed the S&P 500. In 2018, 69 percent of
International Papers total revenue came from the box business and that sales
volume has been mostly flat for the past five years. Although the big producers sold less
boxes in 2018 than in 2000, industry consolidation has
dramatically narrowed the fields. The handful of big players remaining
are based in Memphis, Tennessee, Atlanta, Georgia and
Lake Forest, Illinois. Analysts have told CNBC that
substantial industry mergers have made it easier to collectively hike prices
and those price increases have helped drive revenue. There are portions of the business
that are in indisputable secular decline but if you’re in the brown
part of the business, making these boxes, that’s been some
very welcome growth. But those extra boxes piling up on
people’s doorsteps have led to a backlash from disgruntled customers who
are sick of receiving golf ball sized products
in supersized boxes. It used to be that you’d order a
toothbrush and it would come in three giant boxes and you’d say
to yourself, what is this? Well, Amazon is trying to rectify that
by using fewer boxes and using other types of
packaging where appropriate. With e-commerce packaging underfire Amazon
decided to change the way they do shipping. In 2008, Amazon introduced the
Frustration Free Packaging program. It aims to reduce the extra
packaging created when retail packaged products are placed inside Amazon
boxes to be shipped. Instead, products certified in the program
that are roughly the size of a blender or larger need to be
packaged in their own ready to ship boxes. And those boxes also need to
be made of 100 percent recyclable materials. For customers that means that
the packaging is easy to recycle and the box is easy to
open without all the excess packaging materials. For a year. Amazon offered vendors an incentive of
a dollar per shipment to modify their packaging. And starting August 1st 2019 Amazon
is charging a $1.99 penalty for each product shipped that
needs to be reboxed. And basically the point of this deadline is
for Amazon to get out of the business of packaging. They want their vendors to send them
boxes that Amazon doesn’t have to touch or rebox. Amazon says that in the 10 years
since its rolled out the program in 2008, it saved them from shipping
out 500 million shipping boxes and reduced their packaging
materials by 244,000 tons. Even corrugate waste that can
be properly recycled is still a burden placed on the customer to
tear down and properly recycle so this is just a recognition that
we want e-commerce to be the most sustainable easiest choice
for our customers. In those shift by Amazon have
made the corrugated industry rethink the way it does business. International Paper said in an email to
CNBC, “At the start of the Ecomm boom it was really
difficult to forecast demand. There is a big focus on
improving efficiencies through right sized packaging.” But, with Amazon using fewer and
smaller cardboard boxes in the future that could prove to be bad
news for the box makers. Before Amazon launched Prime in 2005
free two-day shipping wasn’t a thing. Today it’s the norm. In an effort to reduce costs and
ship out an ever increasing number of products faster Amazon moved to plastic
mailers and plastic bags for many of its smaller products. If your shipping clothes that don’t need to be
in boxes they can go in a flexible plastic mailer. As a result of which you’ve seen
more and more products go into flexible plastic mailers. Over the past year or so it’s
just part of Amazon’s overall effort to reduce its costs. Over the last few years we’ve recognized
that there is a great role to play for flexible packaging of all
types and we’ve reduced our overall corrugate and shifted many of
our smaller items to being shipped out bound
in flexible packaging. It’s made a pretty profound
difference we’ve reduced substantially our use of corrugate
box. Sealed Air a packaging company that invented bubble
wrap in 1957 started working with Amazon in 1996 developing inflatable
pillows for the company to ship books. The evolution of packaging for e-commerce
it really started off quite basic. Whatever item you received you
received it in packaging that was probably designed to ship on a
pallet and go to a retail store. What e-commerce companies did was they
take those items and they put it into another box. What’s evolved is you now see
a lot more flexible packaging. There is a lot of competition
in the mailer market in generally mailers are a low margin product. As of 2019 Sealed Air a
leader in the protective packaging market makes food packaging, air pillows
and automated packaging systems for e-commerce. Sealed Air had a
revenue of $4.7 billion dollars in 2018 up modestly
from a revenue $4.5 billion dollars in 2010. When you think about the
challenges that e-commerce fulfillment companies face it’s really in shipping
expense because if you give away shipping I mean someone’s paying
for that and it typically is the e-commerce fulfillment company. There is a lot of desire to
decrease the amount of labor, when you are able to get it, it’s
hard to retain it and it’s expensive, automation has really been where
we have spent a great deal of our time investing. Around 2010, Amazon started using
Jiffy padded envelopes with Kraft paper on the outside in
plastic bubbles on the inside. Over the last two years we
have invented two different kinds of flexible mailers. One is the blue and
white all plastic mailer. We’ve recently launched in the last
six, eight months a paper padded mailer that’s actually fully recyclable
with the paper stream. Amazon said they made about 10
million shipments using the paper padded mailer and depending on the
month the plastic mailer is used about 20 to 30 percent of the time. So really when we come down to deciding
if the product is of the size it can go on a mailer, it’s not
likely to be damaged by going in the mailer, the mailer is always the
better fitting option and frankly is easier for the customer to choose
to recycle than breaking down a corrugate box. We’re driving in that direction
for many different reasons. But those plastic mailers generally are
not accepted in municipal recycling programs and you’ll need to
bring them to a store that accepts plastic bags. Many cities have film recycling
and take back programs through stores then that plastic
mailer makes sense but we’ve basically moved away from a
non-recyclable to two recyclable options. Plastic mailers have some
benefits for the environment. A corrugated box uses 23 times more
energy and produces six times more CO2 than a bubble
mailer to manufacture. Plastic mailers take up less space in
containers and trucks making shipping more efficient. But in the paper versus
plastic debate not everyone agrees. Environmentalists argue in practice the
plastic mailers aren’t better for the environment. They say these products need to
be recycled separately from other plastics and they aren’t
recyclable in curbside bins. Two huge barriers to recycling. The latest stats from the EPA show
that corrugated boxes were recycled at a rate of 92 percent in 2015
while plastic bags, sacks and wraps were recycled at a rate of
13 percent in 2015. When you think about what is the
greatest pain point for the consumer after having it get there safely
arrive on time people are concerned about receiving something that is plastic
or made a poly because of the environmental concerns. Some waste management companies say
plastic packaging also causes problems for the recycling systems. Plastic mailers get caught in
the recycling machinery slowing down the process and raising the
costs for recyclers and sometimes contaminating entire bundles. Until Scotty on the Enterprise can
beam the products from the warehouse to your living room I think
Amazon’s gonna be good for the corrugated business. I think there’s going to be
noise I think you’re gonna have challenges from time to time where people
say, “Should we try and the plastic pouch?”, in the long run plastic is gonna
be on the wrong side of history. Because Amazon is a
market leader in the U.S. e-commerce sector any move away
from cardboard to plastic mailers could signal a shift
for the entire industry. The corrugated box could be about
to undergo a major facelift. We’re seeing some major trends
among consumers and what they’re expecting from e-commerce and the first
one is actually this desire for increased engagement
with the package. In 2015, Amazon partnered with
Universal Pictures and Illumination Entertainment to ship orders in
bright yellow delivery boxes featuring cartoon characters from
the movie Minions. The boxes promoting the movie
and a special Amazon U.R.L. dedicated to shopping for
merchandise from the film. If a millennial is going to look at
it and it’s gonna be an Instagram moment then we need to be thinking
about what can we do with the package to help foster that. At Amazon an engineering team is
working on redesigning the cardboard box. In 2018, using computational engineering
they began to test the stress and strains and vibration effects
of packages as the moving trucks across the country. We’ve optimized the weight of the
corrugate box and reduced the overall weight of our boxes
by about 9 percent. And we’ve reduced the size of our box
meaning making them fit better and our customers are seeing in some cases
much of an 18 to 20 percent reduction in the weight
of the recycled corrugate waste that they would have
seen coming into their home. While items like clothing and diapers
can ship in a plastic flexible mailer, electronics and easily damaged
goods will still need the protection offered by
a corrugated box. Despite headwinds in the economy
and inroads from plastic mailers demand for cardboard boxes from
Amazon continues to remain high. Even though Amazon is using some
smaller boxes, the four companies that I mentioned have not been
talking about less demand from Amazon they’re talking about more
demand from Amazon. And if it’s smarter demand from Amazon
I still think they’re to get paid for that. With U.S. online retail sales expected to
surpass a trillion dollars by 2025, double the amount it reached
in 2018, the market for e-commerce packaging could increase rapidly in
the coming years despite Amazon’s effort to cut down
its shipping footprint. E-commerce packaging which includes corrugated packaging
as well as flexible packaging will grow at about 14
percent every year from 2017 through 2022 reaching almost $55
billion in 2022. That growth could deliver sizable
returns for the cardboard box makers and we’re likely to see
even more boxes and plastic mailers piled outside of people’s
homes in the future.

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About the Author: Oren Garnes

100 Comments

  1. The story of how two brothers… and five other men, parlayed a small business loan into a thriving paper goods concern is a long and interesting one.

    And here it is.

    It all began with the filing of form 637/A – the application for a small business or…

  2. Perhaps we should hope that AI technology can achieve a singularity before we consume ourselves to death. 'Tis sad, and I hate to even say this, but we hairless apes may actually need overseers to either manage us or extinguish us to save this planet.

  3. It’s NOT free 2 day shipping your paying for it with the prime membership smh. Amazon is far from the cheapest online

  4. America is never Saudi Arabia. We just take their oil. The end of Saudi resources come and we drive Teslas to remind them.

  5. Packaging uses more resources than anything. The consumer will not save the environment. Only corporations and governments are capable of that.

  6. I clicked on this because I thought they would explain how Amazon always has the perfectly sized box for everything..

  7. they jest need to make a better paper mailer the job i work at has two big green bin one for trash and one for recycling wich for us a fast food chain is mostly cardboard i also use to work a place that did cardboard recycling and some plastic making balls of cardboard was easy when we did plastic it took a lot more to make one 800ld bail and whoud allwas bind up and melt do to the heat caused from friction when compting it to bale let alone how much work it was jestto sort the plastic

  8. I haul a lot of the giant paper rolls out of some of the Georgia Pacific paper mills, as well as some others on the west coast, and deliver it to several GP and Westrock and PCA box plants down throughout California, as well as hauling recycled cardboard bales to the mills, and delivering to Amazon Fulfillment centers, and I am a Prime member, so this video has a lot of familiar sights in it! Lol

    Most of the boxes that I see being produced in California, and this is not surprising, are for food related products, produce, etc, but at least one of plants I regularly go to (westrock in the bay area) has a dedicated Amazon box line.

  9. We could follow Japan in this moment. Make people take their garbage to community recycling center nearby there they dispose of garbage and recyclables. Of course Japan also has learned to harness human waste as an energy source too so I don't see why we can't do that also

  10. with the technological advances we are in, still can't make trash recycling machine that can sort out plastic and other things from perishables? SMH. wrong side of history

  11. My mom is an executive for one of those "box makers". Given how much she makes I am willing to bet that buisness is amazing.

    People buying stupid useless crap on Amazon is great for me! Keep it up sheep! lulz!

  12. This is fake news.. We all know they ordered there boxes on amazon.com and received it from there drones.
    They didn’t buy them from other companies.

  13. This gives me flashbacks to that one episode when Squidward watches how boxes are made on tv… and it’s on every channel…

  14. There was a study done recently that showed we could eliminate "climate change" if we planted a forest of trees the size of the US. Unfortunately, while you are planting the trees, Amazon will be cutting them down much faster than you can plant them. "Climate change" is said to be a very serious problem, but not enough for it to interfere with us getting those gadgets and gizmos from Amazon. So if it's real, you'll just have to learn to survive it, because Amazon is more important.

  15. Amazon doesn't care about "sustainability" or making things easier for the customer. This is all about costs because brown paper prices have sky rocketed within the year. This is just Amazon looking for a way to cut costs and cutoff the box makers and mills. Amazon will push for plastic as much as possible because it's cheaper.

  16. Paper is better than plastic. Paper is a renewable resource and the box is recyclabe. Plastic is mainly based on oil and shipping bags are virtually never recycled becaise the adhesives of the surface are contaminants that make this impossible. Instead of plastic bags, higher quality paper bags work fine and are more commn in Eurpope and parts of Asia. USE LESS PLASTIC.

  17. Shipping boxes going from drab to bright yellow, with big, smiling cartoon characters, dropped on your front step where everyone going by on the street sees them. What could possibly go wrong?

    I was livid when Amazon sent me an expensive video card in its own box only, with Prime tape and stickers all over it. It sat on my front porch, advertising itself and the likely equipment inside my home, for hours. This consumer wants the plain outer box for protection, and to keep what I order private.

  18. 11:25 fake staged scene. none of the boxes have markings and the box the guy is handling is not taped on the bottom.
    he's essentially holding an open box upside down…

  19. China is buying a lot of forest trees in Siberia for cheap. They pay about 1 or 2 dollars per tree to russia. They already cut down about 40% of the Siberian Tiaga forest. Most Russians are saying that that is theft and it has to stop!

  20. And this, ladies and gents is why Jeff Bezos makes the money he makes. He built a dream team able to over think every.single.aspect of his brand to enhance his client's experience as well as the public's perception.

    THIS is how you do it!

  21. I am with the environmentalists as in no boxes but it kills the privacy of a person's order. What about that?

  22. There is NO SUCH THING – FREE Shipping! someone somewhere paying for those free shipping. Regular consumers when they are sending packages to their kid in college or grand kids. Retail Shipping went up over 200% because big Shipping companies like UPS, USPS, FedEx bend backward for amazon! Those 2nd day air Prime only cost amazon less than first class postal stamp! soon enough everyone has to work for amazon in return for their foods and housing. the new 21st century of slavery not Amazon 's fault…..it is consumers' fault simply in the name of CHEAP CHEAP CHEAP

  23. At least Amazon is doing something! Local electronics distributor in Latvia usually ships product in it's original packaging non extra. Amazon and bol.com had unnecessary extra boxes

  24. AMAZON counts to the market leaders. The number of shipments is growing and expected to grow, so is the number of boxes and packaging. To change this and reduce the impact on the environment, the shifting of responsibility (from AMAZON to ITEM SUPPLIER) is not the true solution for within the supply chain the same, or even bigger waste volume would be generated. I have heard several times from AMAZON representatives that cardboard is best, durable solution and can be recycled or reused, but I have not seen any single returnable packaging or even reusable or intentionally repurposable packaging in the whole video.

    If AMAZON wants to reduce its impact on the environment, it has to start to prevent waste happen. It can be achieved by the reduced volume of shipments and use returnable or reusable packaging delivering the end users the idea of NOT WASTING.

    If support needed just contact me, for six years I implement the INDUSTRIAL UPCYCLING and INDUSTRY 5.0 in companies, businesses and factories.

  25. They think millennials will instagram their amazon boxes if they put minions on them? It's amazing how out of touch from reality advertisers are.

  26. Soooo how can I invest? Nothing worst than knowing a good opportunity but not knowing how to get a piece of it.

  27. Their plastic packaging is far from frustration free. I would prefer a boxed package for both ease and impact on ecology

  28. I hate when my Amazon order comes in a plastic envelope. I can recycle, reuse, re-purpose the cardboard box, but the plastic goes in the trash. They even use the plastic pillows instead of the paper now. What will I use for Christmas wrap?

  29. chuckles Yesterday I received a DIN-A1 sized Cutting Mat ( https://www.amazon.de/gp/product/B01N24LMWC/ref=ppx_yo_dt_b_asin_title_o05_s00?ie=UTF8&psc=1 ) in an Amazon box large enough to comfortably fit a kid inside.

  30. I googled if amazon plastic mailers are recyclable and this video became next on the autoplay. Thanks big brother Google.

  31. All this packaging and the waste generated by shipping is sadly not good for our environment. I hope everyone realizes this and be accountable from their part in respect for the Mother Earth we live on

  32. Why isn't Amazon being held responsible for packaging? They could absolutely take the boxes back. There's no reason to put the burden on the consumer and municipal recycling system.

  33. Amazon doesn't care about the recycling. They're worried about bottom line and it's not going to hurt their bottom line if the people complaining about plastic leave.

  34. At 6:20 woman is too lazy to flatten box before putting into recycling bin, at 11:40 man doesn't remove bottle cap. Learn how to recycle, people!

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