Paper shortage hits U.S. retailers when they need it most

The growing demand for boxes and packaging materials during the pandemic has reduced paper production in North America, and it could not have come at a worse time for retail companies.

“We’re starting to hear, ‘We’re out of paper,'” said Polly Wong, president of San Francisco-based direct marketing firm Belardi Wong, noting that some of her clients have already missed their advertising campaigns. fall due to problems. at printers. Wong estimates that 100 million catalogs will not be printed or reach American homes in time for the biggest spending season of the year. “It kind of put our industry in a panic.”

As some factories convert to cardboard to cope with the surge in e-commerce shipments and others shut down completely, over 2.5 million metric tonnes of printing and writing paper capacity in North America. North – nearly a fifth of 2019 levels – have been offline since the start of last year. That’s according to Kevin Mason, managing director of ERA Forest Products Research, a financial research firm specializing in paper and forest products.

Normally, printers would look to source overseas, but soaring logistics costs and strong demand for packaging from other markets have limited this option. US imports of paper and board by volume fell 9.7% last year. Now supplies of certain qualities are so tight that some commercial printers cannot get the paper they want “at any price,” Mason said.

Retailer catalog issues are just the latest disruption fueled by the pandemic hitting the industry. Toilet paper and paper towels – prized items at the start of closures – are again scarce in some places, with a handful of grocers reinstating purchase limits to combat hoarding. Book publishers also report difficulty obtaining the paper and transportation they need to launch new titles. Demand for paper products was already high, with the retail sector expecting its biggest back-to-school shopping season in at least five years after a year of virtual learning.

Supply chain issues have also disrupted overseas markets. UK supermarkets have faced sporadic shortages of everyday items, such as toilet paper, in the run-up to and in the aftermath of Brexit. London-based packaging maker DS Smith, which operates nine paper mills in Europe and two in North America, cited “significant increases in the price of paper” in its earnings call earlier this month. “The paper market, as a market as a whole, is extremely tight. We have seen a lot of price increases on paper. I wouldn’t be surprised if there were further increases because it’s so tight, ”CEO Miles Roberts said on the call, noting that the company was able to secure material through its“ deep connections. long-term “.

The paper crisis in North America is more about plant capacity and limited labor than rising raw material costs. Lumber futures – which hit a record $ 1,733.50 per thousand board feet in May, helping to push up the cost of everything from toilet paper to parquet – have since fallen by from normal, closing at $ 638.80 on Thursday.

As for the limited capacity in the United States, “we’ve never seen it before,” said Mark Groff, vice president of sales for the Eastern region at Nahan, a catalog printing company. based in Minnesota with clients that include Patagonia and Warby Parker. . “It affects all of the printers in our business, which affects our customers. The average price of paper rose 16% this summer, he said. Nahan expects the tightening to persist until 2023.

The shortage is hitting companies like Pennsylvania-based fireplace company Breeo, which released its first print catalog in May after the pandemic spurred a sales boom the year before. The campaign was successful, so the marketing team started discussing printing a vivid vacation catalog. But the shortage of paper helped to cancel this plan; instead, he’s going to send postcards, said Alex Smoker, the company’s marketing director.

The recent tightening marks a major change for a sector disrupted in recent decades by the Internet. Although mail-order catalogs have been a mainstay of American shopping – consumers could once buy entire homes from the Sears catalog – demand for paper has declined in an increasingly digitized world, prompting many stationery stores to change. of cap. In fact, direct mail marketing declined so much between 2008 and 2015 that the Direct Marketing Association changed its name to Data & Marketing Association in 2017 before it was taken over by another business group. But print is slowly making a comeback. In 2018, even internet giant Amazon added a catalog of physical toys to grab business after Toys R Us went bankrupt.

The trend only accelerated during the coronavirus pandemic. With more and more people spending time at home, retailers who send out physical catalogs have found a captive audience. At the same time, soaring online advertising costs combined with Apple’s new advertising tracking rules, which reduce the ability of businesses to reach their target audiences, have prompted more and more retailers to print. Although paper catalogs were once thought of as a mess, much of this marketing has since shifted to email inboxes, making physical sending almost a new thing.

Screen fatigue reduces the success rate of online advertising, and over the past year, “we’ve all been overwhelmed with more and more digital content,” said Jonathan Zhang, associate professor of marketing at Colorado State University. “Part of the appeal of having a magazine or a printed document is that it cuts through the clutter.”

Bloomberg’s Deirdre Hipwell, Jasmine Ng, and Spencer Soper contributed to this report.

About Ricardo Schulte

Check Also

Harnessing community media is vital for civil society…

I like millennials redefining the word “influencer” because it gives authority and respect to those …

Leave a Reply

Your email address will not be published.