Major retailers slipping ads into each other’s e-commerce boxes

Dive Brief:

• Retailers including Saks Fifth Avenue, Zulily and Barnes & Noble College are paying for space inside other retailers’ e-commerce packages by using a new service from startup UnDigital, which officially launched today, according to a company press release emailed to Retail Dive.
• So-called “package insert marketing” is nothing new, but it’s been made much easier by a new online marketplace, UnDigital, which gives advertisers access to more than 300 million packages for such ads, the company said.
• The effort could be a win-win at both ends, as retailers look for ways to mitigate the high cost of e-commerce fulfillment and others continue the unending search for new marketing avenues.

Dive Insight:

Retailers including Amazon have sought to minimize packaging to combat shipping costs and dampen the barrage of criticism about the flood of cardboard that e-commerce unleashed. The puzzle of e-commerce fulfillment is an important but often glossed over aspect of the changing retail landscape.

Nearly 60% of retail supply chain executives surveyed by the Retail Industry Leaders Association said they believe it isn’t possible to fully recover fulfillment costs, and even more –– 70% –– agree that the cost of fulfilling and delivering online orders erodes gross margins.

Yet e-commerce, still a small fraction of overall retail sales (less than 10% by the U.S. Commerce Department’s measure), is growing faster than the overall market. But consumers are now inclined to order online only when shipping is free or cheap. If retailers — Amazon included — can’t realize savings by wringing efficiencies out of their supply chain, they’re either doomed to smaller margins or must push customers to pay their way. 

Nevertheless, they may want to save some room in their packaging for paid ads.

Undigital has brought digital efficiencies to a time-honored practice. Retailers and advertisers set their parameters on its platform. The average price per insert ranges between 10 and 12 cents, boxes average two to three inserts on average, and links on the ads track conversion rates, according to the Journal’s report. UnDigital takes care of printing and other logistics and sends ads to fulfillment centers.

The system can handle a range of volumes, so smaller companies are able to participate, according to UnDigital CEO-founder Ryan Millman.

That sounds like a potential way for small retailers to get in the game. Then again, results are not in yet for how effective such ads will be, considering how accustomed consumers are to dispensing with their packages in this era of e-commerce.