The ramifications of a shift in the retail landscape and in the rising cost of goods from China.
I am sensing a ripple in the Sustainability Force. It has been created by events that I believe are affecting our friends in Bentonville.
The first event involves the move by two competitors - JC Penney and Sears - to breathe life into their flailing businesses by significantly reducing retail prices. JCP has even gone so far as to mimic Walmart’s core “every day low pricing” strategy.
The second factor is the rise of inflation in China, due in part to increased demand from its rapidly expanding middle class and the growing global discomfort with Chinese worker pay and working conditions (read Apple, Inc.). The resulting impact is the rising cost of Chinese goods available for export.
Both factors - competitive pricing moves and increased cost of goods - hurt Walmart where it counts most: profit margins. Thus, while I believe that the good folks in Bentonville are committed to the concept of sustainability, they are being forced to shift their focus from the ecologic to the economic leg of the three legged financial-environmental-social sustainable development stool.
What does this mean for the packaging industry? In the past, it meant doing more with less. But how much left is there to squeeze? The industry has done an excellent job of cutting materials in an effort to help its customers cut costs. Thus, significant gains in the material reduction arena will most likely be few and far between.
I would suggest that a better strategy would be to focus efforts on using packaging to increase sales velocity at retail, thus helping retailers to re-build their margins.
There are many ways in which packaging might make this happen. Here are two:
· Generate increased visual appeal on-shelf. This could be through the use different and/or multiple materials, printing methods, and design approaches.
· Build a relationship with consumers by making it easier for them to achieve high levels of product satisfaction. This might be by reducing product removal constraints, minimizing spoilage, better portion control and improved in-store “merchandisability”.
Like it or not, the most important objective of any organism or organization is simply to survive. In the business world, economic survival is, by definition, the ultimate test of sustainability. Packaging can play a major role in making it happen.
May the Sustainability Force be with you.
Robert M. Lilienfeld is a Fox TV environmental commentator and Editor of The ULS (Use Less Stuff) Report, a newsletter dedicated to conserving resources and reducing waste. Along with Dr. William J. Rathje, he co-authored the book Use Less Stuff: Environmental Solutions for Who We Really Are and the 1995 landmark New York Times Op-Ed piece entitled Six Enviro-Myths. His website is www.Use-less-stuff.com.
