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Wednesday, May 29, 2024

Striking a balance

Steve Brownett-Gale highlights the importance of affordable, high-quality packaging solutions during an ongoing, cost-of-living crisis

 

The cost-of-living crisis continues to be a huge issue in the UK. The current inflation rate stands at 6.7 percent, and this has had a knock-on effect across many industries.

Thousands of consumers have altered their spending habits, with at least one-third opting to buy own-brand and cheaper goods, as branded products rocket in cost.

Toiletries and personal hygiene products are just one of many examples of rising prices, with the latter around 10 percent more expensive than last year.

So, what can businesses do to reduce costs without compromising product and packaging quality?

The cost of unnecessary packaging

Packaging solutions have increased in price due to the higher cost of production caused by the global hike in energy prices, materials, transportation and labour, and plastic tax.

Manufacturing plants require significant energy consumption to operate, but with the global energy price index standing at 174.98, as of July, organisations have had to increase the price of their products to recoup costs.

High energy prices have also impacted the cost of fuel, which makes transportation of products more expensive and contributes to a higher price point.

Material costs are equally a problem for businesses, as essential packaging components like plastic continue to be affected by supply chain disruptions which are driving price increases. Prices are skyrocketing due to the UK’s Plastic Packaging Tax, which charges £210.82 per tonne of plastic packaging circulated in the UK market.

Companies can spend as much as 15 percent of a product’s retail price on packaging costs, which are further exacerbated by extravagant and unnecessary packaging designs. These typically require a more complex design and manufacturing process which needs more labour, energy, and materials.

Luxurious packaging solutions will often require careful handling and transportation, which may generate further costs to meet environmental compliance guidelines.

The nicer looking the packaging, the higher the price point. Therefore, brands must find a balance between quality and affordability to avoid losing customers.

Exploring more cost-effective solutions

Businesses can maintain affordable price points by prioritising packaging functionality and swapping bold and outlandish designs for a more minimalist and sleeker look.

Costs are reduced by opting for smaller packaging sizes, as these are less expensive to produce and ship, and can reduce single-use packaging waste.

Global retailer Amazon has managed to reduce its packaging weight per shipment by over 41 percent since 2015, preventing the unnecessary use of over two million tonnes of packaging.

These changes not only appeal to consumers – who often find excessive packaging frustrating – but they help businesses meet sustainability and compliance targets.

For example, skincare brand The Ordinary is iconic for its no-nonsense packaging and branding, yet the company is worth an estimated $2.2 billion.

Its use of basic bottles and dropper lids and simplistic outer packaging helps to maintain an affordable price point without compromising the quality of the contents, making it a cult brand in the beauty world and amongst consumers.

To further mitigate costs, businesses should consider implementing refillable and reusable packaging solutions to minimise long-term costs.

Packaging made from glass or sturdy plastic can be washed and used for other purposes, and refillable packaging can reduce waste and offer a more affordable means of accessing a product, packaging free.

Improving consumer brand perception and trust

There’s a common misconception that affordability equates to ‘cheap’ products that are ineffective and not as impressive as high-end alternatives.

However, affordable packaging solutions can be aesthetically pleasing yet functional without breaking the bank. In fact, products with a minimalist design that are more affordable are associated with a more high-end, sustainable image by consumers.

Effective branding does not have to be sacrificed for affordability, as simple designs can incorporate essential branding elements like logos, colours, and labels to successfully convey brand image.

Simple designs that provide clear brand messaging are also much easier for consumers to understand and can help them complete purchases hassle-free and without concern about cost.

Businesses that prioritise consumers over profit by keeping costs low via more affordable solutions can make customers feel like their struggles are being recognised.

This helps to build trust with an established and returning customer base for consistent purchasing.

Setting an industry example

Opting for affordable packaging can set a strong industry example, as cost-effective options increase savings across the entire supply chain and manufacturing process.

Businesses can cut down on materials, labour, and transportation expenses and therefore reduce the retail price of their products without sacrificing profits. This can help with pricing consistency, which is important to consumers, as research suggests that consumer purchasing habits can be influenced by price changes.

Wholesaler Costco’s Kirkland Signature range is a notable example of this, as the brand aims to provide high-quality products at an affordable price by packaging items in no-nonsense solutions.

This is complemented by its bulk-buying platform, which helps consumers to save money by purchasing large quantities that won’t need re-purchasing for long periods, which will help with long-term savings.

Affordable packaging may help to prevent the growing issue of ‘shrinkflation’, which will deter consumers from buying, which can assist with economic recovery.

French supermarket Carrefour warned their shoppers of ‘shrinkflation’ by placing signs with price warnings on products that had reduced in size despite remaining at the same or higher price point to tackle the issue.

Maintaining a lower price point by enacting cost-saving packaging solutions can sustain customer interest and loyalty which can prevent industry economic challenges.

A great example of this comes from beauty brand Glossier, whose minimalist packaging and branding have helped it cut down on production costs and keep its products at an affordable and consistent price point.

Sustainable efforts

By pursuing affordable packaging solutions, brands can also meet sustainability targets as the reduction in the use of materials, labour, and waste can boost environment efforts by decreasing carbon footprint.

The more minimalist appearance of affordable packaging prioritises material efficiency, which includes getting rid of unnecessary features to minimise waste and conserve resources and energy.

The streamlining of the production process will also reduce energy consumption, as elaborate and intricate packaging designs require more energy to produce, but minimalistic designs require less energy to manufacture which will limit emissions.

Businesses can promote recycling efforts and processes to consumers by opting for simple packaging that is easier to recycle. Affordable solutions typically contain fewer materials and coatings, which simplifies recycling which will appeal to consumers, as more than 60 percent of consumers would pay more for a product packaged sustainably.

Brands like M&S have expanded its efforts to reduce unnecessary packaging use by opting for plastic-free and refillable shopping options to cut costs and benefit the environment whilst simplifying its packaging solutions.

Steve Brownett-Gale is Marketing Lead at Lifestyle Packaging

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