Market trends

Exceptional circumstances: the new normal

These are exceptional times for the envelope and related businesses. We are in the middle of a transition period, which creates both challenges and new opportunities for all of us.

Two trends in particular are transforming the world in which we operate: digitalisation and ecommerce. In the shorter term the Covid-19 pandemic has had a marked effect on our industry.

See also: Paper-based communication and Ecommerce

The envelope industry traditionally has three cornerstones: transactional mail, office supply and direct mail.

Main trends affecting the sector

Data for 2021: Q1 and Q2 only

VOLUME TRENDS

Digitalisation of information has resulted in a steady drop in the demand for envelopes in the transactional mail and office supply segments over the past two decades. Invoicing, banking and administration, for example, have switched largely to digital communication.

However, there are indications that volumes are starting to stabilise. The factors that have led to decline in the past two decades are now well established. Digitalisation of communication has, largely, already happened and the postal communication that remains seems likely to continue at a similar level.

Over 2020–2021, Covid-19 led to both a decrease and an increase in the demand for envelopes. As businesses slowed down and/or operated remotely, more communication was done digitally. Direct mail practically stopped in many countries, and office supply demand was low with so many people working from home. But as governments reached out to citizens for vaccination programmes, communication was both digital and by mail to ensure widespread access and compliance.

Whether or not working from home will become significantly more widespread in the long term, and what – if any – will be the impact on the office supply segment, is unknown.

Data from FEPE members from Q1 2021 suggest that overall production in 2021 is likely to return to pre-Covid levels.

See also: Statistics

ecommerce-2-2607114_640

ECOMMERCE GROWTH

Ecommerce has been a strong growth area in the past few years and the pandemic accelerated it even further. This provides new opportunities for our industry. Smaller and lighter items are increasingly mailed in envelope pockets, gussets and similar products manufactured by our industry.

This development is expected to continue in the years to come. According to recent market studies, consumer behavior will not change significantly after the end of the pandemic. Consumers have come to appreciate the ease of buying online and will continue to do so even after Covid-19.

See also: Ecommerce

directmail

DIRECT MAIL: from quantity to quality

While transactional and office supply are largely volume businesses, direct mail’s value goes beyond just volume. The trend is towards fewer campaigns targeting general messages to a mass audience, and more campaigns sending highly-targeted messages to selected audience segments, including customers who have voluntarily opted in to receive them. Such targeted and personalised mailings have a much higher success rate, so businesses invest more in each message. What they save in mass distribution costs can be channelled into higher-quality, more visible and appealing messages. This is a healthy business segment for many FEPE members, especially those with the know-how and facilities to create personalised solutions.

See also: Direct mail

e-Green BB group
Photo courtesy of Bong

PRODUCT INNOVATION

The changes in the envelope market lead to increased demand for innovative envelope and light packaging solutions.

SUSTAINABILITY – Sales of board-back envelopes, full-board envelopes and other similar products grew by double digits in 2020–2021. With increasing pressure to reduce the use of plastics, and to provide a wide range of light, sustainable packaging, there are massive opportunities for ecommerce-related growth and product development within our industry.

See also: Sustainability

COST-EFFICIENCY – Small packages that will fit in a mailbox are particularly sought after, to save on logistics costs and decrease the reliance on consumers being at home to receive deliveries.

Both legislation and consumer preference mean that envelope producers are seeing a higher demand for envelopes made from sustainable materials, like paper. However, while they see a high demand for sustainable solutions, their customers are often not ready to pay more. (Note: readiness to pay more for a more sustainable product varies by country.) There is therefore pressure on producers to provide solutions that are more sustainable without costing more. An innovative approach is required to deliver satisfactorily on both counts!

IMPACT – Particularly in the direct mail segment, retailers and advertisers are continually searching for impactful solutions. Envelope producers are increasingly required to offer highly personalised and unique products that can be changed with each new campaign.

Envelopes for the future

Change = new opportunities

Despite the market trends that have reduced the demand for standard envelopes, the envelope is not dead! It’s just changing.

People will continue to rely on getting important information delivered to their homes, whether it’s a medical result or a wedding invitation. Businesses will continue to communicate with customers by mail, including direct mail. And the rising reliance on ecommerce guarantees that people will increasingly get products delivered too. Products that will come in all sorts of packaging, from small simple envelopes to pouches to cardboard boxes, and other yet-to-be-invented solutions.

All of this is good news for envelope producers and innovators.