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E-commerce has emerged as a major disruptive force impacting and transforming businesses and business models around the world. ‘online retail’ or ‘e-retail’ or 'e-tail' has emerged as one of the largest and fastest growing segments of the e-commerce industry. The e-commerce logistics channel is significantly more complex than the traditional retail channel. Unlike traditional retail, online retail requires products to be handled extensively. A product may have as many as 20 touchpoints from packing to distribution to delivery before reaching a customer. Packaging of a product, thus becomes crucial.
Although offline stores will continue to drive a large portion of retail sales, the e-commerce impact has taken retailing by storm! The size of the online retail market in India is chalked at USD 16 billion whereas China leads the pack at USD 610 billion. While overall retail sale is expected to increase by 12% in the next five years, online sales are projected to increase by 35%+ in India. The packaging industry in India is thus poised to exhibit strong growth on the back of increasing consumerism and higher penetration of packaged products, facilitated by e-tailing.
The transit packaging market in India is set to grow four times over the next four years from USD 170 million to USD 660 million. India’s share of the overall parcel shipments worldwide is less than 1% as opposed to the US and China which together account for more than 60% of the parcels shipped, as per Pitney & Bowes Parcel Index, 2016.
However, packaging for e-commerce in India is still in the early stages of development. As the online channel gains greater significance in overall retailing, packaging will necessarily need to evolve in order to replicate and enhance online consumer experience. The success of product packaging, therefore, rests on how seamlessly the shopping experience is integrated across channels as both brick and mortar as well as virtual stores co-exist. Packaging 2.0, thus, will be an all-encompassing and holistic approach - focusing on every step of the value chain while embracing sustainability.
Several leading manufacturers are thus resorting to inorganic opportunities and establishing their presence in emerging developing markets, including India, which are largely controlled by domestic manufacturers. A strong consolidation drive has been a noticeable trend over the past few years. Consequently, mergers and acquisitions in the packaging sector in India have been on the rise as many global companies have established or are looking to establish presence in one of the fastest growing markets. M&A activity has picked up pace with over 15 transactions in the packaging industry in India since 2012.