E-commerce: Is luxury truly coming to terms with the channel?

After years of hum and haw, the luxury sector has finally come to terms with e-commerce. The 2020 Covid-19 pandemic and the lockdowns that followed spurred the industry to enter new territory. Today the sector is in search of new models that will allow brands to retain an aura of prestige in e-commerce while taking into account a new, necessary priority: environmental responsibility. At first glance, e-commerce seems at odds with this set of values because it creates a surplus of everything: more transport, more logistical resources, more packaging, more digital technology, etc.

That being said, assessing the exact environmental cost of online sales is still a challenge; evaluating the sector requires considering the variety of existing marketing and logistics models, and their fluctuation— after all, this is a new sector and one in perpetual movement. And it’s worth remembering that products sold online and in traditional physical locations are mostly identical and manufactured in the same way, and that they may very likely have traveled via the same modes of long-distance transport.

However, a 2021 France Stratégie report points out that the two channels differ in two final stages: merchandise warehousing and delivery to the consumer. In this respect, e-commerce produces more greenhouse gas (GHG) emissions. In the first stage, the increasing number of warehouses needed encroaches on natural areas, contributing to the artificialization of soils. In the second, experts are calling into question habits that were allowed to form without consideration for their consequences. What could be more ordinary than express delivery to a consumer’s home using a diesel vehicle? And yet, this should be avoided. In a more environmentally sound scenario, the consumer would agree to wait a few days to pick up an order delivered to a relay point or a store. If a bike or electric car is used during the last few kilometers of delivery, even better! And of course, the consumer would resist the promise of free delivery and returns, and refrain from ordering the same article of clothing in different sizes or colors with the intent of sending back the unsuitable products.

Smurfit Kappa is working to reduce the void rate in its e-commerce packaging ©Smurfit Kappa

According to France Stratégie, overall GHG emissions from e-commerce stem from the manufacture of goods sold rather than from logistics and transport. In this context, the role of packaging appears ambiguous. On the one hand, packaging is necessary to protect these carbon-hungry goods. On the other hand, packaging itself is a product with a manufacturing process that impacts the environment—and a product that is destined to become waste. In e-commerce, each individual order requires packaging for transport, as well as inserts that are sometimes (over) used to protect the contents. Luxury products are often small and fragile, and they contribute to this excess and even more when they end up in an oversized box.

Eliminating empty space remains key

A study by Forbes Insights for the cardboard packaging manufacturer DS Smith demonstrates the value of reducing the void that exists in and around packaging. Transporting empty space in containers between factories and ports represents 122 million tons of CO2 emissions per year, equivalent to that of a country the size of Belgium. Moreover, the void rate is higher for e-commerce (43%) than for traditional channels (25%). Following a series of tests on e-commerce packaging from its own businesses and its competitors, the LVMH group discovered that the void rate for small-format beauty products exceeded 90%.

"We are working hard to reduce the weight and surface area of our cardboard packaging, which also enables us to reduce our void rate," says Gérard Mathieu, Director of Marketing and Innovation at Smurfit Kappa France. "With this goal in mind, we are optimizing simulation tools that will allow us to calculate a void rate, a carbon footprint, costs, etc. for projects that require it. Modeling a transport grid is interesting because there are two modes of pricing in transport: by weight and by volumetric weight. In the second case, the volume of the box is also taken into account. Tremendous additional costs may be generated if the volume is significantly greater than the weight it contains." This might be the only time when a kilo of feathers "weighs" more than a kilo of lead!

A range of Smurfit Kappa's e-commerce packaging solutions for the wine segment ©Smurfit Kappa

The industry ideal is standardized boxes that adapt to their contents, can be filled on automated lines, stacked easily on palettes, and stored to maximize space in containers and trucks. Several initiatives are in the works, such as double-height boxes that can be made shorter by simply folding them. Ranpak has just released a version called Cut’it! EVO: this automated machine for the end of the packaging line detects the highest filling point of a standard case, cuts the corners of the box accordingly, folds the flaps to reduce the height, and closes it with a lid.

Systems like this reduce the void rate—as well as the number of supplier packaging references— but not cardboard consumption. Plus, the complex reality of e-commerce can undermine efforts towards standardization, particularly because of the variety of packagers: the same product can be sold either directly by the brand on its website, through a specialized market-specific site (wines, cosmetics, etc.), or on a generalist platform like Amazon. And then there’s the question of how to manage orders with varying and unpredictable contents. All food for thought.

"E-commerce always requires customized solutions," says Mathieu. "We’re developing fitted packaging ranges for wine and clothing, for example, but these concepts are reworked on a case-by-case basis, especially in luxury, which prioritizes the customer experience." Adaptation also takes the form of increasingly sophisticated insert systems that must reconcile less weight with more resistance.

"In a traditional distribution channel that connects manufacturers to stores, a package is generally handled five times. In e-commerce, this can reach up to 50 times if the package transits through a large number of international, national, and local transport centers—and if it heads back in the opposite direction when the consumer is absent. Each transfer implies a risk that the product will fall and be damaged," explains Béatrice Charrier, Marketing Manager for DS Smith’s Consumer Packaging business unit in France.

For DS Smith, the void rate for e-commerce packaging is significantly higher than for traditional retail channels ©DS Smith

Innovating to protect contents

Packaging must pass very strict Ista-6 Series performance tests specific to e-commerce. This may also include primary packaging. With this in mind, Aptar Beauty + Home’s Personal Care division has decided to make all its pumps compliant with this certification, while continuing to make improvements based on eco-design. Out of all of the company’s products, lotion pumps were identified as being the most fragile because their spout can break by pivoting on itself. To remedy this, Aptar released the Future pump which integrates a locking/unlocking ring that circumvents the need to add an additional component like a security clip. Plus, the polyethylene pump is made of a single material. A Future service capsule designed according to the same principles was also recently launched.

When it comes to inserts, all cardboard solutions are now the priority. Thermoformed shells, expanded polystyrene, foam, and air cushions are out. However, these plastic-based methods have several advantages: they offer good protection, lightness, and ease of use. Cardboard must bend over backwards to compete. Verpack is meeting the challenge by inventing adaptive, micro corrugated inserts and 100% cardboard coffrets strong enough to transport a heavy bottle of spirits. Competing with plastic requires some ingenuity. Editions du Chocolat, a division of Audelà du Chocolat, has patented a thin envelop for sending chocolate through the mail at letter rate. Handcrafted and made of several layers of corrugated cardboard, the packaging adapts to different contents. Presented as a corporate gift offer, this BtoB project can be personalized with brand colors.

Flat, monomaterial e-commerce packs for chocolate from Editions du Chocolat ©Editions du Chocolat

From re-use to re-sale

DS Smith has developed the E-nest, a shipping box with sturdy, integrated paper. A light coating of glue renders it self-sealing: when crumpled, it can be used to hold and protect lightweight products, such as cosmetics or fashion accessories, from abrasion. Another novel development is a quilted paper honeycomb pouch proposed by Raja, which has also released alternatives to plastic in logistics, including stretchable paper for palletization, rolls of recycled bubble paper, and kraft strapping to close or group packages. Will future innovations favorbio-based materials other than paper?

Raja's honeycomb paper filling is an alternative to plastic bubble wrap ©Raja

The champagne brand Veuve Clicquot has already adopted a box called Ecoyellow made of 50% hemp grown in the Champagne region (at cooperative La Chanvrière) and 50% recycled paper. A fast-growing plant that captures more CO2 than a tree, hemp has strong fibers that reduce the box’s weight by 12%. The project is the result of a partnership with Canopy Planet, a not-for-profit organization working to preserve forests that seeks to reinvent packaging supply chains through its Pack4Good program.

Veuve Clicquot worked with Canopy to produce a secondary pack integrating 50% hemp ©Veuve Clicquot

Every new material must prove that it can be recycled. Following a study aimed at optimizing the way French households recycle e-commerce packaging, Citeo has highlighted several crucial points. For example, multi-material elements can’t be sorted when consumers stack them together before putting them in collection bins. Another lesson: the sorting instructions written on packaging are not read. When a package arrives, consumers are only interested in discovering the contents. So it might be worthwhile to convey this information beforehand (on the order form, the delivery confirmation slip…). Lastly, long-term reusable packaging appears to be promising avenue of research: it would reduce clutter in domestic garbage cans and contribute more to a circular economy. The shipping company DHL Express, for example, is working on a pilot project for this type of packaging which would leave with the delivery person once the order has been delivered.

The French startup Living Packets offers a range of connected boxes that can be reused up to 1000 times, promising CO2 emissions about 80% lower than single-use packaging. Integrated electronics provide complete traceability, an automatic return function, and potentially a personalized customer experience using digital technology. Made of polypropylene foam, the boxes are used with a patented tablet. The device has a very solid screen that uses e-paper by E Ink, renowned for its ultra-low energy consumption: information is displayed in the form of a fixed image on the screen, replacing never-ending printed labels.

Living Packets' transport solution is being studies for B2C applications ©Living Packets

"Integrating services into packaging encourages reuse," says Denis Mourrain, Co-founder of Living Packets. The company’s solution is currently intended for B-to-B use in industry (where returnable bins are already in use), but a diversification into B2C, including the luxury sector, is being considered. Inside the box, a system of inserts "pinches" the product in place. The residual void can be significant, but this is compensated by the packaging’s standardized format. "The myriad forms of packaging that we’re seeing are no longer palletized, but rather placed in large bags. The room saved inside the package is lost outside," says Mourrain.

E-commerce already makes use of reusable plastic bags that consumers send back to a cleaning center by dropping them in a mailbox. In Finland, Original Repack has been using the system since 2013 and it is now being copied around the world. In France, Hipli has just launched a new version: the parcel can be reused by individuals for personal shipments and the operation managed with a recently developed application.

Citeo estimates that a third of individuals reuse e-commerce packaging – after all, the e-consumer is also an e-vendor. This re-commerce trend is reaching the luxury sector, where there is a craze for collecting vintage and iconic pieces. In a report conducted by Boston Consulting Group for the Colbert Committee, this second-hand market, estimated to be worth €33bn in 2021, is expected to exceed €50bn in 2025. Online sales platforms like Vestiaire Collective or the very elite Re-SEE belong to this niche.

the concept of resuseable e-com packs, such as RePack's solution, is catching on ©RePack

Reimagining the "wow" effect

The challenge for the luxury sector is to comply with environmental requirements while remaining glamorous—to find another way to be seductive. How will e-commerce practices evolve? In the last several years, the unboxing phenomenon has led to an orgy of packaging: first box, second box, sleeve, tissue paper, ribbon, samples, gifts, messages in envelopes, etc. All of it displayed on screen with exaggerated enthusiasm. But mentalities are changing, and this may very well one day lead influencers to criticize what they once celebrated.

The new mantra is: "Don’t overdo it." For example, Guerlain encourages online customers to choose a suitable kraft box from DS Smith’s E-nest concept, simply adorned with the brand’s emblem, a bee-shaped cutout. Indeed, cultivating visual surprise needn’t be a fancy affair. Rissmann, for example, offers a shipping box that employs a simple paper ribbon to hold a smaller, beautifully printed box. The Pop-up Box by Procos integrates an additional sheet of paper that, when the box is opened, conceals the contents while creating a pop-up effect. This customizable sheet can be adapted to suit brand desires. The wine and spirits sector also manage to combine technical qualities and aesthetics through all-cardboard solutions. Perrier- Jouët’s VIP kit was developed to be delivered by courier in an elegant modular box with a pop-up made by Smurfit Kappa. And DS Smith designed a cognac cocktail kit for Camus that gradually reveals the different elements within to the consumer. The ideal of luxury in restraint is spreading. Now it just needs to catch on to reach its full potential.

A shipping box from Rissmann uses design to create a wow effect ©Rissmann

Luxury & e-com: The boom may be over, but growth continues

According to the annual luxury study conducted by Bain & Company and Fondazione Altagamma, e-commerce continues to grow in the area of personal luxury goods (ready-to-wear, accessories, jewelry and watches, beauty) worldwide. After an exceptional increase of 50% in 2020 and 27% in 2021, this market is expected to grow by a further 16% to reach approximately €74bn in 2022. Although customers are returning to stores, in 2022 e-commerce maintained a share of 21% of total distribution (versus 22% in 2021 and 12% in 2019).

Another e-Marketer / Insider Intelligence study, focused on the US and China, predicts that e-commerce for personal luxury goods will continue to grow strongly in these two countries but at a slower pace. By 2026, this category is estimated to reach $7.9bn in the United States and $36bn in China, which is projected to outpace the US with an average annual growth rate of about 20% over five years compared with 14% for the US.

As for alcoholic beverages, IWSR estimates that global online sales will be worth more than $4bn by 2025, a cumulative increase of 66% over five years (study based on 16 markets on five continents). By 2025, e-commerce is expected to represent about 6% of off-trade alcoholic beverage sale (sales outside of bars, restaurants, etc.) versus 2% in 2018. Wine is the main category by value in this circuit, although some countries, including China, are more focused on spirits. The United States is expected to be the world’s leading market for online alcohol sales thanks to average annual growth of about 20%.

Regulating excess packaging in key market

At an e-commerce conference organized in Paris by the National Packaging Council in October 2022, Régine Frétard, Head of Packaging Regulations for perfumes and cosmetics at LVMH Research, presented recent and upcoming regulations in several countries aimed at reducing the environmental impact of e-commerce packaging. The following is a summary of her presentation.

• In 2021, China implemented regulations specific to e-commerce that recommend using recyclable and reusable packaging and discourage so-called excessive packaging. Considering that a package consists of several "layers" that can include primary packaging, a case, cellophane, a box, and a shipping box, China limits these layers to four in e-commerce. If the shipping package has a brand logo on the interior or exterior, it is considered an additional layer. Non-biodegradable tape will be outlawed by the end of 2023.

• South Korea, which already has regulations in place regarding e-commerce packaging, has implemented a void rate of less than 50% from late April 2024. Exemptions are being considered for boxes that correspond to the post office’s smallest format with a total width + length + height under 50cm. Plastic elements (film, inserts, tape, etc.) are to be avoided.

• Taiwan has announced a draft of regulatory restrictions, applicable in July 2023, which, to date, focuses on materials: it would ban PVC, encourage the use of natural-colored papers composed of at least 90% recycled fibers, and require a minimum of 25% recycled plastic in plastic packaging.

• In Europe, the directive on packaging and packaging waste 94/62/EC states that packaging "must be designed and manufactured in such a way as to limit its volume and mass to the necessary minimum (...)" but without further details. Modifications concerning e-commerce are expected. They could introduce a maximum void rate, but also make it easier for consumers to report excessive void to a competent authority. In France, this type of reporting has been possible since 2022 via a provision in country’s Anti-Waste and Circular Economy Law (AGEC).