Emerging packaging category expected to grow 4% a year. Here’s what you need to know.
In 2015 Microsoft conducted a study to determine the impact of an increasingly digitized lifestyle on the brain. The study included surveys as well as EEG data. One key finding was that our attention span has dropped from 12 seconds to 8 seconds. This is a critical finding for brand owners and retailers, driving many innovations in marketing. This article will focus on one such innovation, the ready-for-shelf package.
Since we know that we have eight seconds, here is a short list of what will be discussed:
- What is a ready-for-shelf package?
- Common requirements
- Advantages and disadvantages
- Market outlook and trends
At the end of this article you should have a good sense of this market, some key challenges, as well as having some sense of future trends as discussed by key industry players.
What is a Ready-For-Shelf Package?
Traditionally, in consumer goods we categorize packaging into three types: primary, secondary and tertiary. The primary package is defined as directly being in contact with the product. For example in the case of shampoo, the plastic bottle is the primary package. If that same shampoo arrived at the store in a case of 12, that corrugated box is then called the secondary package. Lastly, if many such arrived to the store, the pallet and shrink wrap would then be referred to as the tertiary package.
Historically, the consumer would only come in contact with the primary package. All other packages would only be used to get the product to the store, and discarded before sale. Perhaps you remember working a retail job in your youthful summers, where your task was to stock and face merchandise on shelves? Ready-for-shelf packaging is redefining what that looks like in retail.
A ready-for-shelf package is a secondary package that is displayed in store to the end consumer. There are many synonyms and acronyms used in this space. Two other common names include retail-ready packaging (RRP) and pretty darn quick (PDQ) packaging. Some would also include point of purchase (POP) displays in this category. For the sake of brevity we will stick to using the RRP acronym.
There are many different types of RRPs in the market today. They can include pallet displays such as stacking trays and bins, sidekicks, end cap displays, as well as trays that sit on shelf or counter. Here is a visual guide to some of them at Loblaws, Home Depot and Walmart in Toronto.
Now that you are visually familiar with these packages, I am sure you have personally interacted with them in store, and have probably noticed an increase in the amount of them in the market.
The RRP market is fairly new, having started in the UK around 2006. This market has largely been dictated by the needs of the retail stakeholder in the supply chain. The grandfathers of RRP are the likes of Tesco and Sailsburry. In 2010, Canada was the next adopter of this retailing solution causing some issues in manufacturing for brand owners. Rob Gerlsbeck commented in Canadian Grocer that this growth was like “the tail wagging the dog” as Canada only represents 10% of North America’s retail volume for the average brand owner. Canadian Loblaw and Walmart were the Canadian pioneers in this area, and they have since been joined North America-wide. With the US now onboard, we are likely to see a flood of progress in this area.
Today, large retailers have the power to dictate how product will arrive in store. If you would like to sell your delicious chocolate treats at the likes of Loblaw, Walmart or Costco, you will need to provide the product packaged according to their guidelines. This can be quite complex. For example the 2016 release of RRP requirements for Walmart is a 90-page presentation document that indicates everything from structural requirements, size, and messaging. In many ways the RRP must not only support the values of the brand owner, but also of the retailer, as it is meant to be a seamless part of the retail environment.
Common Requirements of RRP
While we will discuss how all stakeholders stand to benefit from the acceptance of RRPs, the retailer is the key driver in this type of packaging. Having the ability to stock full trays on shelf means that it takes a fraction of the time to stock product. This is especially important in fast moving consumer goods (such a confectionary) that are restocked often. The most notable difference between today’s RRP and yesterday’s secondary container, is that the RRP will now reside on shelf where the consumer can see it. Thus, it needs to be treated as an important piece of brand collateral.
Today most retailers have a set of guidelines for accepting and requiring retail-ready packaging. The above-mentioned Walmart requirements document identifies five ways in which RRP must behave in the store. This document also identifies which stakeholders benefit. When working at Walmart your retail-ready packaging must be:
- Easy to identify: easy to find in the warehouse, this includes clearly visible SKUs, brand names and product details.
- Easy to open: you have 10 seconds to open the package without the use of any tools (such as knives)
- Easy to shelf: a low individual weight (under 22 lbs) and the correct size to fit on shelf
- Easy to dispose: paper should be used where possible and where mixed materials must be used, they need to separate easily for recycling
- Easy to shop: the RRP should help and not hinder the consumer in finding the product
While other retailers may have slightly different requirements, the core concept behind RRP remains constant. This is critical for RRP adoption, because the burden to manufacture different RRPs for different retailers would be too great. This lack of standardization in fact is what has slowed adoption to date. Even though the market is growing and beginning to standardize, as a brand owner you can still expect to be responding to different supply chain needs depending on the retailer.
Now that we understand what a retail-ready package is and what it looks like, we will discuss the advantages and drawbacks of this type of package.
Advantages and disadvantages of RRP
The three key advantages of RRP displays are:
- Faster product replenishment
- Better product findability
- Improved on-shelf availability
The most obvious advantage for using RRP resides with the retailer—to more easily place product on shelf. Stocking a store filled with thousands of goods is very labour intensive. The number of products in store is growing exponentially and packaging is being updated more frequently than ever before. In a competitive marketplace, brand owners are fighting for their package design to be noticed. Not to mention that they have to rival increasingly popular and successful private label brands!
With so many SKUs, having staff shelving product one item at a time is not productive. The average Loblaws store for example has about 40,000 packages. A retailer would need an army of stock people to ensure that product is on shelf. Instead of handling one item at a time, the whole RRP is placed on shelf, significantly reducing time spent.
Additionally, the more people that handle a package, the more likely it is to fail. Being able to place rows of RRPs reduces the possibility of error. RRPs sit on neat rows on shelves, making it easier for stock people to see when items are missing and needing to be replenished. With large retailers such as Walmart also requiring that this packaging is easy to open without knives, we see fewer damages while stocking as well.
From the consumer’s perspective a well-designed RRP can make products easier to find in store. A great example of this is in the frozen pizza market, where you see the pizza upright and facing you, so the large product shot can be viewed easily. This is much better option than having to open the freezer door to look inside. RRPs also provide brand owners with another canvas on which to showcase their brand message. With packaging regulations being updated, less and less space is left on package for marketers. Another printed surface, which is not regulated in the same way, is an opportunity to help a consumer find your product.
We know that seeing is halfway to buying, so in-store organization is critical. Fun fact: if you can get a consumer to pick up your product on shelf, it is much more likely to land in their cart. A 2008 study from Ohio State University, indicated that touching a product creates a sense of ownership—even if you only hold said object for 30 seconds! Further, consumers should not feel overwhelmed when shopping. With the store being more organized and less visually cluttered, consumers will find what they are looking for more easily. Not to mention that you are also less likely to make an error as a consumer when an item is out of place. There are few things worse than bringing a product to cash that you thought was on sale, but in fact was stocked incorrectly!
Logically, the ease of stocking when using RRP can improve product availability and consumer experience in store. What then, are the key drawbacks of moving forward with RRP? While this list does not apply to all RRPs in the market, some key drawbacks can include:
- Increase in package cost
- More complex package engineering
- Colour management issues across substrates
- Harder on the environment than the standard shipper counterpart
The cost of manufacturing a package that is displayed on shelf is higher. Brand owners must invest in presenting the brand to consumers. While, there is a benefit in having more printed surfaces, this does mean that these surfaces need to be better decorated. Four-colour printing, with vibrant graphics will vie for consumer attention. While RRP is ramping up, this may provide brands with the added appeal needed to offset the higher price, but if retailers continue to insist that all products must arrived in RRPs then that advantage may wean over time. It is important to note that while retailers often drive packaging specifications, they are often not the ones absorbing the cost because fast moving goods are so competitive. Thus, brand owners are often left to absorb the cost increase for package innovation.
The price of RRPs is higher because the package has both higher quality printing and substrates, but also because it requires more time and expertise to manufacture. Creating a package that is low cost, appeals to clients, adheres to fairly rigorous retail requirements and protects the product is no easy feat.
Another challenge to overcome is that the RRP and product are often made of different substrates (for example corrugated RRP and plastic bottles). As these items are displayed together, matching brand colours across substrates becomes more important. There are software tools now available from Pantone, Sun Chemicals and others that will help manage this issue. Further intelligent design can improve the issue. For example visually interrupting colours with another colour makes it more difficult for us to tell there is a mismatch.
Lastly, there is an environmental difference to producing RRPs. Many retailers require that RRPs are made for easy recycling. For example the Walmart standard requires that boxes are easy to collapse, and that materials are easy to separate. And while a corrugated box is still an excellent choice when it comes to recyclability, a fully decorated and uniquely die cut box takes more resources to manufacture than a plain, single colour, standard shipper.
Market outlook and RRP trends
According to a study conducted by Smithers Pira, retail ready packaging is expected to reach $82 billion globally in 2021. This market is seeing a 4% year-over-year growth in North America and Europe, and 6% in Asia-Pacific and Africa. Interestingly, as the report points out, while the dollar worth is distributed globally, the volume of materials is largely coming from Asia-Pacific. From an equipment perspective RRP, and to a greater extent POP, are responsible for large parts of the growth in wide format inkjet—much of which has been a hot topic discussion since the last drupa.
There are two key trends that offer interesting opportunities in RRP broadly categorized into data driven marketing and supply chain integration. Timelines in retail, and therefore all the way back to the brand owner, are shrinking. Thus, the ability to respond to market demands in an agile manner is important. “I’ve seen more unprinted RRPs with labels applied,” explains packaging expert, Trung Nguyen. “Labels offer better lead times without compromising the quality of the package,” he continues. The ability to provide labels instead of printing on corrugate or paperboard, may in turn mean much leaner production and flexible ordering systems that better respond to seasonality in the market.
Further, from a technology perspective, we have all of the capabilities to produce RRPs that respond to regionalized needs, as well as having the technology to gather campaign effectiveness. If we are producing trays or displays using digital technologies, there is an opportunity to feature local sports teams in each state or province, for example. This is more difficult and expensive to produce so it is important to know whether the return on investment is there. ROI is difficult to pinpoint for RRPs, but this will improve with time. ‘Working well with retail and print partners is critical to achieve desired results,” shares Nguyen.
RRPs of the future may even track your behavior in store! We already have smart shelving technology that can track the rate at which product is sold and reordered, for example. One sophisticated opportunity involves displays that actually “look” at consumers. Currently only used in marketing research applications, the technology is there. The question is who will own and therefore sell the data. If I were to guess, I would say retailers would have to be the leaders as their stores are host to the products. However, with private label brands being as popular as they are, does tracking consumers at store level using RRP offer too much of a competitive advantage for the retailer?
Certainly, much like other packaging opportunities this is an interesting growing market to watch!