Earlier today I had a recent Jeff Bezos interview playing in the background as I worked (highly recommended, by the way – easy to see why Buffett calls him the smartest CEO in America). About 26 minutes in, the interviewer started asking about sustainability, which prompted Bezos to start talking about getting rid of fancy product packages.
As Bezos points out, the only reason why producers waste so much money on packaging is to make the product look nice hanging on the shelf. Obviously this is irrelevant to Amazon, so why have the package at all?
One retailer known for applying a cleaver to packaging is Wal-Mart, which I wrote about in a recent article that appeared on Seeking Alpha.
At one point, Wal-Mart stood at the cutting edge of retail innovation. Remember how video games used to come packaged in a nice cardboard box? I still have some of them in my basement – relics of an era before the “Wal-Mart effect” shaped the industry.
For the manufacturers, the boxes stood out on the shelves and made their products more visible. But Wal-Mart long ago recognized the inefficiency and stupidity of essentially selling air. The packaging materials cost money, and the additional weight and space on the pallet added to shipping expenses. If Wal-Mart could force the companies to eliminate the money spent on cardboard, then they could then split the savings with the supplier and plow their share of the proceeds into lowering price. Plus they could cram more games on the shelf, thus driving sales per square foot. A penny saved on a stick of deodorant sounds like nothing, but when you sell millions a year it starts to add up.
This is the sort of development which ought to alarm brick-and-mortar retailers, who are now going to be forced to adapt their own business models. If Amazon can get rid of expensive and pointless packaging, then that is only going to add to their competitive advantage.