Package inserts, new form of advertising

See Now for Sale: The Empty Space Inside Retailers’ Packages: Saks, Zulily and other businesses are looking to offset rising shipping costs by selling package inserts to advertisers. Maybe it is not surprising that retailers' profit margins have been falling with increased competition from e-commerce. So they are looking for new revenue sources.

"In the sliver of room between a new pair of shoes and the books you ordered online, retailers have found a different way to monetize the empty space in your packages.

Saks Fifth Avenue, Zulily and Barnes & Noble College are among several businesses that have joined a new marketplace allowing advertisers to buy and insert paper ads in customers’ boxes. More than 25 retailers have listed slots for sale in their packages in the weeks since the website, called UnDigital, went live.

The rise of online shopping has taken a toll on retailers as shipping costs and investments in e-commerce capabilities have cut into profits. Retail margins on average fell to 8% last year from 10.2% in 2012, according to consulting firm AlixPartners. Over that period, e-commerce sales expanded to 17.6% of total sales from 10.5%.

Retailers hope they have a remedy: Wring more money out of the space inside the box.

For years, companies have been adding product samples or targeted coupons in their packages in hopes of encouraging shoppers to place another order at their stores. Some retailers brokered occasional deals with existing vendors or advertisers. With UnDigital, retailers are offering their packages to a broader range of potential advertisers.

On the UnDigital platform, retailers post monthly listings with a number of packages and the maximum number of inserts per package. Advertisers can specify the number of packages in which they want inserts at a price set by the retailer. The average price per insert is between 10 and 12 cents, and the average number of inserts per box is two to three."

"Though the cost of an insert ad is much higher than a digital ad, an insert can be a more efficient way to reach a shopper, said Ian Yung, senior director of business development at Touch of Modern. “It’s rare that someone will order something online and not open the package.”

 Some shoppers say they open packages but don’t bother looking at the inserts."