E-retailers could deliver 50% of their parcels themselves by 2025 as the €100 billion B2C parcels market continues to grow rapidly around the world, according to an in-depth new study from McKinsey.
Online retail will continue to increase around the world over the coming decade, with annual global growth reaching 10% by 2030, which would be five times above the growth rate for conventional retail, the study “The endgame for postal networks: How to win in the age of e-commerce” found.
As a result, the share of retail business conducted online will increase from 9% today to 25 – 30% by 2030. This megatrend will generate up to 8 trillion additional retail sales worldwide by 2025 alone, McKinsey predicted.
Moreover, this growth will continue to drive the international parcel logistics market, which is already worth about €240 billion, according to the study, which put the current value of last-mile delivery to consumers at more than €103 billion.
China is now by far the biggest B2C parcels market, with an annual average of 70 parcels per person, a review of 17 countries found. Germany is number two, with 24 parcels per person per year on average, followed by the UK (22) and the USA (21). Other large B2C markets, in terms of average annual parcels per person, are Ireland (15), Austria (14) and the Netherlands (12).
In general, however, the e-commerce trend is being powered by the emergence of new markets such as Eastern Europe and sub-Saharan Africa, the buying habits of older customer groups, and the addition of categories such as furniture, McKinsey pointed out.
“Today, postal services, logistics companies, and online retailers are competing for enormous potential in the global market for e-commerce logistics,” commented Florian Neuhaus, a McKinsey partner and logistics expert.
The biggest global online platforms (Amazon, Alibaba, JD.com) currently account for 40% of all online purchases worldwide and are increasingly expanding their own logistics offerings. “According to forecasts, retailers will process more than 50% of B2C parcel volumes themselves in 2025,” the consultants said.
This prediction indicates that Amazon, Chinese players and other e-commerce leaders will take large volumes in-house and away from their traditional delivery partners, including postal, parcel and express companies, in the coming years, according to observers.
Meanwhile, mail will continue to decline in the coming years, McKinsey’s logistics experts said. Volumes have dropped by 30% from their high points in major markets, and today there are only four letters for every parcel. McKinsey’s forecasts indicate that mail could shrink by a further 25-30% by 2025 (from a 2018 base), leaving the volume of parcels and regular mail equal at a 1:1 ratio.
“These market dynamics bring significant growth opportunities, particularly in less developed markets, but also create challenges for postal companies and parcel delivery providers around the globe,” Neuhaus explained.
“We see a substantial need for transformation at established players. Those who fail to take bold action in this area will leave cost-savings potential of easily 20% on the table – and lose ground in the race for market leadership to more agile challengers,” he warned.
In the study, McKinsey recommended seven areas for action by postal operators that could reduce their overall costs by 20%, largely based around operational efficiencies and automation. In addition, postal operators needed to develop a ‘customer-centric product strategy’, digital and data strategies, introduce more innovations and plan future capacity very carefully in line with customer needs, the consultancy said.
