Intelligence of Things

Unpacking Smart Packaging’s Insights And Engagement Promises

Unpredictable arrival times. Unauthorized sales and distribution. Retailers around the world often have little visibility into their supply chain’s final leg. Can smart packaging make a difference? In this month’s Intelligence of Things Tracker, PYMNTS compares retailers’ use of RFID-tagged packages for instant supply chain updates, against digitally-linked barcodes.

Consumers interact with product packaging on a daily basis. Packaged goods often reach consumers’ hands after traveling across oceans and being shipped between manufacturers, distributors and retailers. Faced with that kind of transit, brands want supply chain visibility: they don’t want to be left in the dark on where their products are in their journeys or on how quickly items are selling once they get to their retail destinations. Additionally, companies are looking to use smart packaging to engage with consumers in new, more compelling ways.

As brands seek greater transparency and control, some IoT players are suggesting packaging do more than display product descriptions, logos and barcodes. With digital features, it can connect to cloud-based platforms, relaying supply chain and inventory information back to brands, and consumers can communicate with the brand and product after scanning the packaging with their smartphones.

Renewable materials provider Stora Enso creates intelligent packaging using radio-frequency identification (RFID), explained chief information officer Teemu Salmi. This allows consumers to use smartphones to view products’ digital identities. Meanwhile, smart products platform EVRYTHNG is using printed codes that customers can scan on their phones in order to view digital identities, according to CEO Niall Murphy.

Supply chain and inventory insights

With RFID- and code-enabled smart packaging models, products are connected to a digital platform, enabling companies to collect data and respond to consumer interactions. For example, a company could program the platform to display product care information when customers use their smartphones to engage with the near-field communication (NFC) tag or code on the package.

Giving products digital identities also makes for easier inventory assessment, Salmi and Murphy agreed. With Stora Enso’s solution, a company can receive a signal from the RFID-equipped packaging to take a quick assessment of the product’s stock levels. EVRYTHNG’s solution allows brands to use code-based digital identities to track in-store inventory as items are sold. Each item’s code would be scanned upon purchase, with that information registered in the platform.

Real-time product data could be particularly valuable to brands that sell through third-party distributors, which are typically less timely about reporting sales volume data, Murphy said. Inventory transparency is critical to brick-and-mortar retailers hoping to compete in an increasingly omnichannel and fast-paced retail world.

“Many retail brand organizations that have not previously adopted this technology are reacting to competitive pressures, and [are] therefore moving on this now,” Murphy said.

Salmi also noted that smart packaging can help companies predict when a shipment will arrive.

Stora Enso’s solution has had its strongest uptake from large, multinational companies that want better supply chain visibility.

“You have consolidated visibility into packages across the total supply chain,” Salmi said. “If you have a package going from point A to point B to point C, you would know where in that chain your goods are, and when you can anticipate their arrival.”

Customer interaction

Companies can also get — and provide — important information when customers scan a product’s code or engage with its RFID tag. If a customer scans a code in Singapore, when the product was supposed to be sold in Japan, that alerts the company that there could be a parallel trade problem.

“Parallel trade is a very significant issue for many brands around the world,” Murphy said. “They simply don’t have the visibility [into] the last mile of distribution, or the last market region of distribution of their product items.”

Enabling customers to use their phones to interact with a product gives them new ways to connect with brands and for brands to reach back with digital loyalty offerings, Salmi said. These might include giving customers a freebie for every fifth time they purchase and digitally engage with a product. Customers can also access digital identities to get more information on the product before purchasing it. This could include origin data or recommendations for other related items.

Smoothing sales

Associating a customer-accessible digital identity with a physical package could reduce the labeling burden for companies. Rather than print new packaging for each local market, it could simply have consumers scan a code and be directed to market-specific, cloud-based information, Murphy said.

Both Salmi and Murphy anticipate smart packaging will be leveraged to support cashier-free stores. Murphy explained that fast-paced, smartphone-happy millennial consumers are likely to embrace in-store, mobile-based transactions through which they can scan and pay for an item by mobile app. The cashier-free movement is already heating up in Japan, Salmi noted. Faced with a dwindling labor force, the country called for 100 billion retail products to be RFID-tagged by 2025, which supports automation. RFID and other technologies present a simpler alternative to concepts like Amazon Go, Salmi said.

Smart packaging also supports eCommerce, allowing consumers to reorder products by scanning labels on their phones.

“If I have a particular pair of jeans that I like, and I want to buy another pair, I could scan the product, and then ask to reorder another version of the same thing,” Murphy said.

RFID vs. codes

Salmi and Murphy outline similar benefits to intelligent packaging. Both noted that the proliferation of smartphones means most consumers are able to engage with products, but they see different technologies leading the way.

Stora Enso envisions RFID tags being applied to high-value products, where authentication and tracking is especially important. This technology has seen in-store implementation from brands like H&M and Decathlon, and most smartphones come with NFC reading capabilities. Additionally, the use of passive RFID means retailers do not have to provide batteries or other power sources, reducing costs for scaling, Salmi said. Many Stora Enso customers use smarter packaging for better supply chain visibility, making RFID’s ability to support automatic tracking crucial.

“The problem [with printed codes] is you cannot automate such a process,” Salmi said. “You still need some kind of manual activity to read barcodes, whereas RFID is read automatically.”

In Murphy’s view, while RFID has been a go-to solution for retail inventory management — and may continue to see use — printed codes are a cost-effective way to apply IoT capabilities to low-cost, fast-moving items. Most smartphones now come with the ability to read QR codes, making it reasonable to expect consumers to engage with products this way.

“The camera on the smartphone is how the consumer expects to interact with the physical world,” Murphy added.

Another key factor is the release of a new global standard for printed that upgrades the format to support not just scanning by POS systems but also by smartphones to access digital identities. This standard helps normalize the use of QR and similar codes. Without this development, EVRYTHNG would have to appeal to individual brands to change their technology, creating a struggle to reach widespread implementation.

“The upgrade of world barcodes is a fundamental shift,” Murphy said. “It was the case that adding digital experiences to a product was a value-add, and now it’ll become [normal for] that information [to be] available. [Otherwise] you’d have to be convincing people to put new types of technology, new types of labeling [and] new types of production processes [into use]. That would be an incredible inhibitor.”

As both RFID tags and GS1 Digital Link codes spread, manufacturers, retailers and consumers may find the world of consumer packaging changing. It seems once-plain packages could become a whole lot more interactive and rich with features.

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