Starting this month, Wal-Mart is keeping score. And yes, size and shape matter.
The retail titan is kicking off a new phase of its three-month-old package-reduction program with the debut of a scorecard that compares how the chains’ 60,000 suppliers worldwide package their goods.
Wal-Mart—which is challenging marketers’ on-shelf promotion strategies and making them rethink the way they build P-O-P displays—has a goal of cutting packaging on products in its stores 5% by 2013. That will save nearly $11 billion a year, mostly for brands using less cardboard and plastic and more eco-friendly materials. (That’s a mere 0.005% of the $2.2 trillion global packaging industry.) Wal-Mart itself will save about $3.4 billion a year, the retailer says.
All of the firm’s suppliers will be required to fill out the scorecards. Manufacturers will rate themselves on nine metrics, track the progress of their own reduction efforts, and share their scores with Wal-Mart.
In February 2008, Wal-Mart will start using the self-reported data (which they will admittedly have to trust to be honest) to compare suppliers’ packaging cuts, use of greener materials and efficiency in sourcing. Eventually, Wal-Mart buyers will consider packaging scores when they negotiate with manufacturers. “It’s one factor of many that the chain will consider in their buying decisions,” says an industry source.
The scorecard was designed by Wal-Mart’s Packaging Sustainable Value Network, a consortium of 200 packaging experts that the firm convened last year.
Each supplier gets an overall score relative to other suppliers in the same product category, and relative scores in each of the nine metrics (see chart). A manufacturer that falls in the 50th percentile for “Cube Utilization” (think tightly packed pallets and shipping containers) might score only in the 20th percentile for “Recycled Content.” Those segmented scores let suppliers easily see where they can most improve.
The scorecard will also track P-O-P use. P-O-P displays in stores’ “action alley” have to get more eco-friendly, not smaller, says Patrick Sbarra, president of New Creature, a P-O-P firm that designs displays for Wal-Mart.
“It’s not about making a smaller visual presentation, but about improving the materials used,” Sbarra adds.
The go-green initiative also poses a challenge to marketers’ promotion strategy on shelf. “How much of a package’s design is to protect a product, and how much is to promote it?” asks one packaging expert. “If you over-package an item in the process of making it more visible on-shelf, will you take your lumps on the scorecard, and then with the buyer?”
But Wal-Mart can’t reform the packaging industry alone, says Jim Peters, director of education for the Institute of Packaging Professionals. “The sustainability issue is bigger than any one retailer or packaged goods manufacturer. We need to get all the players involved in making this work.”
Wal-Mart started thinking green in 2005, with a pilot program on its private-label toy line, Kid Connection. Wal-Mart says it reduced packaging on just 300 items, and saved a bundle in one year: 3,425 tons of corrugated materials, 1,358 barrels of oil, 5,190 trees, 727 shipping containers and $3.5 million in transportation costs.
Compare that score to the potential savings on packaging for 160,000 products—Wal-Mart’s full inventory—and green is looking pretty good.
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