Paper and Packaging Prices Increasing, Report Finds
According to a report from IBISWorld, a global business intelligence provider, the prices of paper and packaging products are on an upward trend as input costs rise for upstream suppliers and consumer shopping trends drive demand for shipping materials and services (i.e., more purchases being made online). The markets that are anticipated to bear the brunt of these rising prices include corrugated boxes (price to increase 3 percent); molded fiber packaging (price to increase 4.2 percent); and packaging services (price to increase 2.5 percent).
The bottom line for retailers: you're going to be paying more to fulfill online and catalog orders. And that's not to mention all of the paper brands use in their marketing efforts, from catalogs to circulars to package inserts to direct mail pieces.
"Catalogers have been battered by increased shipping costs from UPS and FedEx," notes Jim Coogan, founder and president of Catalog Marketing Economics, a catalog circulation planning consulting firm. "Now, adding insult to injury, the cost for boxes and packaging is increasing. Catalogers need to pay close attention to their total outbound shipping costs to prevent their bottom lines from eroding this holiday season. Outbound shipping costs include their UPS and FedEx costs, including all those hidden surcharges, as well as the cost of packaging materials and boxes.
"The one bright spot on the horizon is the increasingly competitive costs for the United States Postal Service for their cost to ship outgoing packages. The USPS has committed to being a viable shipping alternative to the duopoly of FedEx and UPS, and catalogers are shifting significant volume over to USPS in 2014."
Does this news mean retailers’ profit margins get even thinner or do the increased costs get passed on to customers? That's a decision that's going to be made on a brand-by-brand basis. IBISWorld offered the following tips to retailers on how to protect themselves from rising paper prices, helping to make that decision as easy as possible (or maybe even a moot point):
- In the corrugated boxes market, take advantage of the commoditized nature of the product and shop around for the cheapest price.
- For molded fiber packaging, look to viable substitutes if you feel your supplier is charging too much.
- Buyers in the packaging services market can leverage the price competition that comes from low market share concentration.
- Bundle purchases with other paper and packaging goods (e.g., tape, cushioning, stationery) from the same supplier to help secure a lower price.
- Inquire about volume discounts as well as the benefits of entering into a longer-term contract with your paper supplier.
I'm curious as to whether you've seen steadily increasing prices for your paper and packaging products? And if so, what have you done — if anything — to offset those rising costs? Let us know by posting your thoughts in the comments section below. I'd love to get a dialog going on this important topic.
