The E-commerce Effect

The E-commerce Effect

A common theme from anyone following the North American corrugated box and containerboard market is that the current rally in demand is due in large part to the positive impact from e-commerce. However, there are a number of opinions floating around regarding the actual degree of this increase. Upon request of several people for our opinion on this issue, we delved into the subject.

The Federal Reserve publishes a series that tracks e-commerce’s share of total retail sales, and this series confirms the strong growth in this sector. E-commerce accounted for less than 1% of total retail sales at the beginning of the new century, but rose to 4.5% of sales in 2010 and 9.5% in the first quarter of 2018. Growth in e-commerce sales has averaged more than 15% per year since 2010, and the percentage growth has been quite consistent during this period. But starting in 2014, e-commerce hit the critical mass where this double-digit growth led to a tremendous increase in spending. E-commerce spending grew roughly $7.6 billion per year from 2011-2013, but then jumped to $10.4 billion in 2015 and $15.5 billion in 2017.

However—and isn’t there always a “however” in an economic analysis?—it is safe to say that the growth in e-commerce sales does not automatically transfer into a similar growth in final corrugated box demand. For one thing, the strong growth from outlets such as Amazon has had a negative impact on traditional brick and mortar stores. Additionally, a substantial amount of consumer goods are imported from overseas, limiting the additional utilization of boxes to distribution centers rather than throughout the US supply chain. And finally, e-tailers are quite aware of the increasing costs for packaging materials and are considering options to bring fulfillment costs under control.

So where does that leave us? Back to making subjective estimates.

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