Companies Don’t Need Regulation to Cut Back on “Excessive Packaging”

Former Obama staffer Rahm Emanuel famously said, “You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things that you think you could not before.” There is a corollary here: never overlook an opportunity to invent a crisis. Perhaps it would be better said, “never pass up an opportunity to turn a blessing into a curse.”

Hence we have periodic dustups about “excessive packaging.” Last year, the Public Interest Research Group took Amazon to task for “excessive” plastic packaging. Canada’s Institute for Research on Public Policy wants the Canadian government to take inspiration from the EU and China when it comes to “excessive” packaging for grocery items. The Public Interest Research Group of Illinois has an online petition urging Costco CEO Ron Vachris “to stop using excessive, supersized packaging for Costco products.”

The word “excessive” is doing a lot of work here, and it’s not clear exactly what it means. Why would a money-hungry corporation waste money on tape, bubble wrap, and corrugated cardboard when it could have had higher profits instead? I doubt shareholders would put up with it, and while regulations have made leveraged buyouts more difficult, boards of directors and CEOs still have to be wary of shareholders noticing that they could be squeezing even more profit out of the resources at their disposal if they just cut back on packaging.

Furthermore, what looks “excessive” and “wasteful” to one person might make perfect sense when you consider an organization’s goals. Theft prevention is one reason for big, bulky packaging. A thief can easily slip a loose Funko Pop toy or action figure into a pocket. A packaged Funko Pop or action figure in a plastic bubble attached to a cardboard card won’t fit. The “excessive,” “wasteful” packaging makes items harder to steal and substitutes for more security cameras or for keeping items like these under lock and key. Market tests show that “excessive” packaging persists because people are willing to pay for convenient self-service shopping.

Second, packaging is advertising. Consider cereal boxes: big, brightly-colored cereal boxes are eye-catching, and a few minutes with Google will send you along the fascinating history of the struggles between grocers and cereal manufacturers over box size and shelf space. It’s wise to think that if a company is doing something that doesn’t make sense to you, there’s probably a reason that will make sense if we think about it for a while.

I’ve recently taken up a collecting hobby again, and I’ve noticed an emphasis on “box art” in toy hunt vlogs. For collectors, the “excessive” packaging is part of the product. Funko Pops are attractively packaged. Recent Star Wars action figures are on cards that resemble the cards the original Star Wars toys were on in the late 1970s and early 1980s. The Honda Ohnaka, Greef Karga, and Bo-Katan Kryze figures displayed in my office are still in their original packaging because the packaging is cool.

Finally, my dip into eBay sales has made me doubt the “excessive packaging” claims even more. Boxes, mailers, tape, bubble wrap, labels, and printer ink cost money and take up space, and anything that makes a package bulkier or heavier might make it more expensive to ship. It’s not a big deal if I use a little too much tape because I’m shipping a few things a week out of my garage as a substitute for watching TV. It is a big deal for companies like Costco and Amazon that are shipping a few things a second out of large warehouses and distribution centers. Amazon ships 3.5 million packages a day. Saving a penny a package would add almost $13 million a year to Amazon’s bottom line. That’s a very tiny fraction of Amazon’s 2023 net income of $30.4 billion, but it’s enough that it’s worth Amazon’s while to pay someone to pay attention to it.

Are companies like Amazon and Costco wasting resources on superfluous packaging? I doubt it, and I doubt they need much encouragement from environmentalists and activists to do something they have an overwhelming financial incentive to do regardless, and it might not be wise for environmentalists and activists to spend precious political and moral capital giving companies credit for doing what they were going to do anyway.

Art Carden is Professor of Economics & Medical Properties Trust Fellow at Samford University.