Why We’re Choking on Amazon Cardboard
(Bloomberg Opinion) -- In the courtyard of my apartment building in Berlin, one of the eight containers for various kinds of garbage (Germans are fanatical about trash separation), the blue one, is for paper and cardboard. It’s emptied every Wednesday and it’s always chock-full by Thursday. My wife and I have taken to watching the container and running to it after the weekly pickup with our pile of cardboard from Amazon and other online stores; that’s mostly what our neighbors cram into the blue bin, too.
This is a sign of the times. Smithers Pira, a company that studies packaging, paper and print-industry supply chains, estimates that globally, e-commerce companies use $20 billion worth of corrugated materials per year and predicts that the market for e-commerce packaging will expand at an annual rate of 14.3 percent through 2022. That dwarfs the predicted 2.9 percent yearly growth rate for the packaging industry as a whole.
The problem is that e-commerce companies haven’t really mastered the art of packaging for sustainability and customer convenience, despite claiming to work in this direction. They often use the cardboard inefficiently, and they’ve transferred to customers the responsibility for making sure it gets recycled. That makes life difficult for the recycling industry and sends more packaging materials to landfills. Unless they fix this soon, regulators should intervene and push them in the right direction.
Executives at Bartscherer & Co. Recycling GmbH, the company that owns the blue container in my yard, have noticed that things are changing.
“In the past few years, the share of packaging and parcel materials in the containers has increased significantly and the share of newspapers and magazines has dropped accordingly,” Martin Lange, the company’s managing director, told me. “But the cardboard is much cheaper in the recycling industry than newspapers and magazines. That means the load in the blue container is worth less than just a couple of years ago and the waste collection industry must work more effectively to remain profitable, given high transport costs and the acute labor shortage that’s causing wages to go up.”
Before the e-commerce era, much of the packaging in which products arrive from manufacturers was collected by retailers in a centralized way. Now, according to Kyla Fisher, a program manager at Ameripen, an industry advocacy group, “insights from industry analysts indicate that we are seeing a 30- to 40-percent increase in corrugated containers in the U.S. curbside recycling system.”
Thanks in part to this momentous change, the recycling rate for cardboard has dropped to 88.8 percent last year from 92.9 percent in 1999, according to the American Forestry and Packaging Association. No such statistics are available in Germany, but just by watching the containers in my yard, I can see what’s going on: When the blue one is full, some of my neighbors will stuff their Amazon boxes into the black bins whose contents go to the landfill or the burning plant.
It’s inevitable that the online trade's decentralization pushes more packaging out to consumers. That doesn’t mean, however, that we should get as much of it as we do.
According to Fisher, Amazon is the standard setter in packaging for online retail, largely because of its size. But it’s notorious for putting small items in large boxes; in many cases, common sense would dictate that a packaging worker pick a smaller one, but it doesn’t happen. There are even urban legends attempting to explain the phenomenon; a particularly widespread one says Amazon tries to optimize the box sizes to fill company trucks so they carry as little air as possible.
Amazon itself has never explained exactly how its packaging system works. I asked the company about it, but the only specific bit of information it shared in response was that its average fulfillment center uses “more than 30 box sizes.” Amazon’s statement also said that the e-commerce giant has a team constantly working on innovations to cut waste and that in the last 10 years, its “Frustration-Free Packaging” effort “eliminated more than 244,000 tons of packaging materials” and “avoided 500 million shipping boxes with items that can ship in their own packaging.”
The numbers are meaningless because it’s not clear how much packaging the company has used in the 10 years — and besides, as a customer, it’s hard to see much waste elimination going on. While I was working on this column, two packages came with items ordered through Amazon, and neither made much common sense.
A web camera, already packed quite sturdily by its manufacturer, Microsoft, was stuffed into a cardboard box too big for it but made cozier with lots of wrapping paper. I couldn't fathom the reasons for not shipping it in the original box.
A small package containing children’s pajama pants came in a box that could have fit no fewer than five such items. Amazon maintains that it has switched to shipping such items in envelopes rather than boxes. That’s clearly not always the case.
Both deliveries match my experience as a longtime Amazon customer. That’s because of how an e-retailer’s priorities stack up thanks to a more complex distribution process than in bricks-and-mortar retail.
“Where a product went from manufacturer to retail warehouse, to store and then home with the consumer,” Fisher from Ameripen told me, “now it goes from manufacturer to fulfillment center to potentially multiple distribution centers to delivery center and finally to the consumer’s home. The general rule of thumb is where traditional retail has on average five touch points, e-commerce has an average of 20.”
This complicated journey increases the number of times the product will be dropped or mashed together with others. While some manufacturers, often pushed by online retailers, try to fit their packaging to these new conditions, it’s not always possible because e-commerce isn’t the only distribution channel and packaging often must serve as a form of advertising in a traditional store.
It might seem that the occasional damaged item isn’t worth all the waste created by shipping lots of air and wrapping paper inside bigger-than-necessary boxes. But e-retailers see it differently.
According to Sealed Air, the packaging company that invented bubble wrap, 20 percent of e-commerce product returns are due to shipping damage, and the cost of replacing a damaged product “can be 17 times the original cost to ship.” Besides, also according to Sealed Air, 58 percent of Americans say receiving a damaged product would negatively impact their relationship with a retailer. This means Amazon and others will err on the side of caution, even if it means sending me more cardboard to squeeze into that blue container. Whatever computer systems it uses to optimize packaging, and whatever instructions workers get in fulfillment centers, will serve the minimization of shipping damage, not waste.
E-commerce isn’t just disrupting traditional retail: It’s upset a whole ecosystem. Manufacturers, traditional retailers, customers and recyclers have all developed cozy routines over decades, but as e-commerce grows — it has already reached 23 percent of retail sales in China, 9 percent in the U.S., and almost 8 percent in Germany — these routines unravel. All the affected industries won’t settle into new ones overnight.
“What will drive reduced environmental impact is how well the various components of the system work together to ensure optimal resource use,” Fisher told me. “E-commerce is a new and still emerging delivery method, and with all new systems it takes time to work out the challenges and opportunities.”
This would imply that no regulatory interference is necessary at this point to make sure packaging materials are used more efficiently and recycled to the same degree as in pre-internet days. I wouldn’t be so sure about it, though. With nearly $1 trillion in market capitalization, Amazon could be doing more to help with the recycling of the packaging mess it creates wherever it ships. As it is, small and medium-sized firms such as Bartscherer are left to deal with it.
Amazon should also be more open about what it does to reduce packaging waste, and such openness rarely comes without regulatory intervention. It might also make sense for manufacturers to adhere to specific packaging standards when shipping internet orders, whether independently or through e-commerce intermediaries. While the standards can emerge through a self-regulation process, it would be natural for governments to take an interest, too.
Meanwhile, we’ll keep watching that blue container every Wednesday morning and rushing to it with our flattened Amazon boxes as soon as the Bartscherer employees leave.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Leonid Bershidsky is a Bloomberg Opinion columnist covering European politics and business. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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