Internet trade has put the European market for courier, express and parcel (CEP) services backon track for growth, according to a new survey by consultants A.T. Kearney who predict a return to
pre-crisis levels by next year and moderate growth in 2012-13.The volume of shipments rose by 6 percent in 2010 compared with the year before to 5 billion andrevenues increased by 4 percent in the same period to around €42 billion. As such, the market hasmore or less returned to pre-crisis levels.
Over the coming two years, shipment volumes will increase to 5.7 billion, but strong demand forcheaper standard services will continue to put CEP providers under pressure. This is one of theconclusions from the latest study conducted by the management consultancy firm A.T. Kearney intotrends in the European CEP market. The growth rates in the industry demonstrate once again that itis living up to its reputation as a harbinger of performance in the economy as a whole.
“Business is picking up again for Europe’s CEP providers,” said Ferdinand Salehi, partner atA.T. Kearney and Head of the firm’s Transportation, Travel & Infrastructure Practice. “Atdomestic market level, B2C and e-commerce shipments in particular were the engines behind thegrowth experienced in 2010, but this business was also on the rise internationally. This, however,shows that internet trade is still for the most part limited to within domestic borders andconsumers are making little use of the ability to purchase goods anywhere in Europe.”
Business-to-consumer (B2C) business has been growing faster than business-to-business (B2B)trade in almost all of the domestic markets studied, except Russia, where B2B outpaces B2C. This isprimarily driven by the (still) low level of internet and smartphone penetration. Indeed, 43percent of Europe’s domestic shipment volumes are currently businesses sending to consumers.Internationally, however, B2C still plays a minor role with roughly 10 percent of shipments goingto private households, but it is growing at a rate of 12 percent annually.
While shipment volumes in 2010 (5 billion) returned to and even slightly surpassed the 2008level (4.8 billion), this was not the case for revenues. Even if revenues have risen 4 percentcompared with 2009, this figure is still currently 5 percent lower than three years ago. This meansthat revenue per shipment (RpS) had declined. The main reasons for this weaker performance ofoverall revenues are difficult customer renegotiations and a preponderance of lightweight B2Cshipments. What’s more, standard services in Europe offer a comparatively high-quality product.
“We do, however, see the European CEP industry returning to its 2008 revenue levels by early2012 at the latest. And we also expect the volume of shipments to grow by 4% annually between nowand 2013,” Salehi forecast, “with Germany, the UK, Poland and Russia being the key growthregions.”
In Germany, France and the United Kingdom, standard shipping continues to grow in importancecompared with express business, in the domestic markets. For instance, in Germany it currentlyholds a 96% market share. Ireland, the Netherlands, Poland and Sweden are the only countries inwhich the international express segment is growing faster than the standard segment. Standard isexperiencing growth on intercontinental routes and in areas focused on reducing supply chaincosts.
“During the economic downturn, many customers switched from express to cheaper standardshipping, and in many cases they have not yet reversed this decision. To some extent, this isbecause the difference in transit times compared with express are minimal”, explained Lars Ryssel,manager and consultant at A.T. Kearney, and co-author of the study. “Nevertheless, pricing stillremains a challenge, because customers complain about standardized prices. In the domestic marketin particular, the only difference is often that the providers of express deliveries guarantee aprecise delivery date. In fact, many CEP providers are already offering express quality at standardprices. As a result, we can expect to see the distinctions between the two segments become evermore blurred at domestic level,” Ryssel said.
The study also revealed that the European CEP market last year grew more strongly atinternational level than domestically. Very little difference was found in growth patterns betweenintra- and intercontinental destinations. Key intercontinental growth routes continue to be Europeto China and Hong Kong, and Europe to the United States.
“In addition, we expect consolidation to continue, especially in the domestic markets,” Rysselcontinued. “Niche players in the B2C business are broadening their product offerings to includeB2B, while international network players are doing exactly the opposite by targeting B2C. We expectto see no further organic consolidation in the international express segment, because the market isalready highly concentrated and the top six networks already control 90 percent of the market. Whatwill be worth watching out for, however, are collaborations between the big players and smaller,local postal providers.”
Rising production costs (in line haul, pick-up, and delivery) and fuel surcharges in the nextthree years will lead to slight price increases of up to 3 percent and force up revenue pershipment. However, CEP providers will not be able to pass all of these additional costs on to theircustomers.
“According to the results of our study, and in the light of ever increasing usage of email, thevolume of document shipments is stagnating in Europe. Only emerging markets such as Turkey andRussia report growth in documents – both places where a rush of new businesses requires documentservices,” said Ryssel.
While the weight per shipment (WpS) has declined at the domestic level due to growth in morelightweight B2C and e-commerce shipments, it has increased in the international segment.
“After a few shaky years, the European courier, express and parcel industry is once again backon track for growth. At least that’s what the solid growth figures are indicating. Nevertheless, ifthe people in charge are to steer their companies to success over the coming years, they will haveto prepare for the challenges they will be faced with in the future – continuous market changes,evolving customer needs, and macroeconomic uncertainty,” Salehi concluded. “Now that the yearscharacterized by cuts and austerity measures have passed, the focus has once again shifted togrowth strategies. All competitors will benefit in their own way from the B2C boom – integrators,for instance, most probably in the higher-priced B2C segment due to their structure.”
The study looked at 13 different countries: Belgium, France, Germany, Ireland, Italy, theNetherlands, Poland, Russia, Spain, Sweden, Switzerland, Turkey, and the United Kingdom. Theanalysis focused on the express and standard network business, with express including the fastestpossible services with guaranteed delivery times and standard comprising exact-date deliveries. Theupper weight limit of deliveries covered by the study was 2,500 kilograms.
