Spend Matters welcomes this guest article by Verity Michie of Mintec.
Latest figures show the U.S. economy has performed below expectations in Q3, at a disappointing 1.5% growth. This slower growth has been linked to slower consumer spending.
However, with Christmas just around the corner, preparation and panic may be starting to kick in. As U.S. millennials turn to online shopping for food, presents and decorations in the build-up to Christmas, online retailers will have packaging on their minds.
Online shopping is becoming more popular, with U.S. online retail sales having increased 30% since 2014. Christmas shopping accounts for around 20% of the total annual retail sales, and 14% of Americans admit to starting their holiday shopping in September. For online retailers such as Amazon, stocking up on packaging will have started well before then.
Retailers use corrugated boxes to ship items and they tend to contain either packing peanuts or bubble wrap for added protection. Corrugated boxes are made from three different types of containerboard; kraftliner, testliner and fluting. Kraftliner and testliner compose the outer and inner sides of the box and fluting is placed between the two sheets for structural strength. Packing peanuts are usually made from polystyrene, but recycled polystyrene or starch-based varieties are also available as a more environmentally friendly alternative. Bubble wrap is made from low-density polyethylene (LDPE) film grade that has been punctured, suctioned and stuck together to trap pockets of air. The benefits of using packing peanuts and bubble wrap are that they are lightweight and moisture-resistant.
U.S. containerboard prices have been falling since mid-2014, meaning corrugated packaging prices are down 4% on last year. The U.S. is a major producer of containerboard but also a major exporter, with China being the major destination of U.S. exports. With the recent strength of the U.S. dollar against the Chinese yuan, U.S. exports became more expensive and demand fell. This coincided with increases in containerboard production, adding downward pressure to containerboard prices.
For polystyrene and LDPE, falling feedstock prices, increased supply and falling demand, have all caused U.S. prices to show downward trends since mid-2014. Prices have fallen 25% for polystyrene and 30% for LDPE since this time last year.
With online shopping, one downfall is the cost of postage and packing (P&P) — that’s the price of having the luxury of not leaving the house. Last year was the first year since the invention of the car where average miles driven in America actually fell.
With the price of P&P unlikely to increase, we now have another excuse to shop by the fire. Especially since the large retailers would have stocked up on their packaging needs when prices were falling.