What is the Amazon effect?
E-commerce’s ongoing disruption of the traditional brick-and-mortar retail market is known as the Amazon effect. As online shopping becomes the norm, many physical stores have closed their doors, unable to compete with the convenience of click-shopping and the unbeatably low prices of online retailers.
And Amazon’s influence extends well beyond the retail market; the recycling industry has had to deal with a shakeup of their own. Spikes in home delivery of consumer goods has not only increased the volume of old corrugated containers (OCC), commonly known as cardboard, but also contamination levels.
E-commerce forces recyclers to grapple with shifting OCC sources.
As a result of e-commerce, recyclers, particularly material recovery facilities (MRFs), must contend with a shift in material origins. Traditionally, MRFs and other material handlers collected recycled cardboard mostly from distribution centers (DCs) and large retailers – they produced relatively contaminant-free OCC streams.
However, many of these reliable sources are being pushed out of business or closing physical stores to shift focus on e-commerce sales by consolidating distribution. National retailers, including Macy’s, Sears, Kmart, J.C.Penney, Radio Shack, H.H. Gregg, Sports Authority, and Wal-Mart, have been closing stores across the US at a rapid pace.
With the explosion of online consumption, greater volumes of cardboard are ending up in curbside bins. The problem is that curbside collection programs, particularly single-stream recycling, tend to increase the contamination rates of OCC by difficult-to-remove materials, such as glass and food. Consumers aren’t known to recycle based on end market needs.
OCC sources may be shifting, but the demand for cardboard continues to increase.
In 2016, about 4 out of 5 Americans had made a purchase via desktop or mobile phone, according to Pew Research Center statistics – that’s nearly a four-fold increase since the new millennium. And, currently, 15 percent of adults make at least one online purchase per week, while 28 percent make numerous online purchases every month.
This increase in online shopping is also reflected by reports kept by the US Postal Service and other carrier services. In the past 8 years, there has been a 65 percent rise in the number of packages delivered to homes via US postal workers – private-carrier UPS says this number will only continue to increase, predicting a greater proportion of deliveries to homes than businesses by 2019.
E-commerce is undeniably driving demand for corrugated cardboard, especially as home deliveries often require more packaging to protect products. Many goods arrive in a generic shipping container enclosing protective packaging, which, in turn, surrounds a branded box.
With this in mind, it should be no surprise that demand for OCC and paperboard is expected to reach $41.2 billion by 2020.
Moreover, falling production of newspaper and other high-grade fibers means packaging and paper mills are in greater need of OCC to replace former feedstocks.
Cardboard is a profitable opportunity if MRFs and other handlers can adapt.
The challenge for the recycling industry is not the lack of OCC sources – there’s more cardboard in circulation now more than ever, but capturing a higher proportion of clean cardboard and paper packaging from residential streams.
To achieve this, investments in recycling infrastructure are a must. MRFs and other handlers ought to install new sorting equipment or retrofit existing equipment to increase their identification and sorting accuracy, as well as implement material audits to identify contamination sources. Successful sorting will allow handlers to enjoy the relatively consistent and higher prices OCC tends to fetch as compared to other commodities such as plastic.
If you own or operate a MRF or handle large volumes of scrap and would like to learn more about how you can adapt to handle changing OCC streams, contact Berg Mill Supply. Our industry veterans have over 50 years of experience helping businesses capture the best possible value for recyclables.