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Home > News > A Nation Awash in Cardboard, but for How Long?

A Nation Awash in Cardboard, but for How Long?


From google.

E-commerce has buoyed the paper industry for years by increasing demand for Cardboard Box.

So what happens when online stores decide to cut costs by shipping packages in fewer and smaller containers?

In the short term, probably not much. But in the long term, it gets more complicated.

At the turn of the millennium, e-commerce accounted for only 1% of retail sales in the U.S. But by last year, together with mail order, it accounted for 17%, excluding cars and gas, according to Fastmarkets RISI, which analyzes the forest-products market and has examined the relationship between online shopping and paper packaging.

(By itself, e-commerce accounted for 9.7% of retail sales, but for its analysis, Fastmarkets combined it with mail order, which has similar shipping requirements.)

As the e-commerce and mail-order sector have grown, Cardboard Box, the most common type of shipping container in the U.S., have hitched a ride.

In 2018, about half of all domestic corrugated-box shipments for the retail sector-consuming 40 billion square feet of material-were used for e-commerce and mail-order deliveries, according to Fastmarkets.

In the past, some of these boxes would have been diverted to traditional bricks-and-mortar stores, but Fastmarkets attributed at least 80% of the boost in demand to e-commerce and mail-order.

In part, that`s because online and mail-order outlets use about seven times as many boxes per dollar spent as bricks-and-mortar stores.

Even so, the box industry`s profits have grown slowly, perhaps because the majority of the products are generic and generate intense price-based competition, according to IBISWorld, a market-research firm that has analyzed the cardboard-box and container-manufacturing industry.

The average profit margin, measured as earnings before interest and taxes, increased from 5% of revenue in 2014 to an estimated 5.8% in 2019-or a total of $3.9 billion out of $67.9 billion in revenues, according to IBISWorld.

At the same time, the number of paperboard mills and manufacturers has declined. Nearly 300 mills operated in 2001 with about 41,000 employees, according to the Bureau of Labor Statistics, and more than 3,000 manufacturers operated with 211,000 employees. Now, there are 255 mills with about 31,000 workers and fewer than 2,400 manufacturers with around 150,000 workers.

The American Forest and Paper Association, a national trade organization that represents the paper and wood-products industry, attributes the decreases to streamlining.

[The number of facilities has gone down, but the capacity of existing facilities has gone up," said Terry Webber, executive director of packaging at the association. [We`re investing in our mills so they have more capacity."

The supply of new paperboard, according to figures provided by the Forest and Paper Association, has increased from 46 million tons in 2000 to 47.9 million tons last year.

Going forward, the relationship between e-commerce and paper packaging will weaken, Fastmarkets predicts, thanks to the increased use of shipping alternatives such as plastic mailers, efforts to [right size" packages to do away with outsize boxes, and attempts to reduce [overboxing," when a product must be stowed in a second, sturdier container because its original packaging is too flimsy to survive shipping.

What, if anything, would you change about the way your online orders are packaged and shipped? Join the conversation below.

[We`re not worried about it," Mr. Webber said. [We don't know that it`s going to have an impact."

Egged on by irritated customers, Inc., the largest online retailer, has branded its plans to reduce packaging waste as a way to eliminate [wrap rage."

But cutting down on packaging could also save the company substantial amounts in shipping and transportation costs.

Last year, the retail giant spent $27.7 billion on shipping, including transportation, according to its annual report, up from $21.7 billion in 2017 and $16.2 billion in 2016.

To help mitigate the cost, the company employs a team of machine-learning experts and physicists to calculate how much material can be removed from standard corrugated boxes without risking shipping mishaps, and its [frustration-free packaging" program requires the packages it dispatches to meet one of three certification tiers, including [ships in its own container."

Since Aug. 1, the company has required items larger than 18 inches by 14 inches by 8 inches or weighing 20 pounds or more to be certified as ready-to-ship without the need for additional packaging.

But here`s the conundrum: As Amazon seeks to curb its packaging excesses, it also aims to increase its sales. And you know what that means.

More boxes.

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