DÜSSELDORF, Germany, November 30, 2011 /PRNewswire/ --
A.T. Kearney study investigated the market for courier, express and parcel (CEP) services - Total volume of shipments back to pre-crisis level - e-commerce major growth engine - Standard services continue to grow
Internet trade has put the European market for courier, express and parcel (CEP) services back on track for growth. 2010 saw the volume of shipments rise by 6 percent compared with the year before to 5 billion and revenues grow by 4 percent in the same period to around €42 billion. As such, the market has more or less returned to pre-crisis levels. Over the coming two years, shipment volumes will increase to 5.7 billion, but strong demand for cheaper standard services will continue to put CEP providers under pressure. This is one of the conclusions from the latest study conducted by the management consultancy firm A.T. Kearney into trends in the European CEP market. The growth rates in the industry demonstrate once again that it is 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," says Ferdinand Salehi, partner at A.T. Kearney and Head of the firm's Transportation, Travel & Infrastructure Practice. "At domestic market level, B2C and e-commerce shipments in particular were the engines behind the growth 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 and consumers 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 is primarily driven by the (still) low level of internet and smartphone penetration. Indeed, 43 percent 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 going to private households, but it is growing at a rate of 12 percent annually.
Volumes increasing again
While shipment volumes in 2010 (5 billion) returned to and even slightly surpassed the 2008 level (4.8 billion), this was not the case for revenues. Even if revenues have risen 4 percent compared with 2009, this figure is still currently 5 percent lower than three years ago. This means that revenue per shipment (RpS) had declined. The main reasons for this weaker performance of overall revenues are difficult customer renegotiations and a preponderance of lightweight B2C shipments. 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 early 2012 at the latest. And we also expect the volume of shipments to grow by 4 percent annually between now and 2013," Salehi forecasts, "with Germany, the UK, Poland and Russia being the key growth regions."
Standard continues to grow
In Germany, France and the United Kingdom, standard shipping continues to grow in importance compared with express business, in the domestic markets. For instance, in Germany it currently holds a 96 percent market share. Ireland, the Netherlands, Poland and Sweden are the only countries in which the international express segment is growing faster than the standard segment. Standard is experiencing growth on intercontinental routes and in areas focused on reducing supply chain costs. "During the economic downturn, many customers switched from express to cheaper standard shipping, and in many cases they have not yet reversed this decision. To some extent, this is because the difference in transit times compared with express are minimal", explains Lars Ryssel, manager and consultant at A.T. Kearney, and co-author of the study. "Nevertheless, pricing still remains a challenge, because customers complain about standardized prices. In the domestic market in particular, the only difference is often that the providers of express deliveries guarantee a precise delivery date. In fact, many CEP providers are already offering express quality at standard prices. As a result, we can expect to see the distinctions between the two segments become ever more blurred at domestic level," Ryssel says.
International growth and domestic consolidation
What's more, the study reveals that the European CEP market last year grew more strongly at international level than domestically. Very little difference was found in growth patterns between intra- and intercontinental destinations. Key intercontinental growth routes continue to be Europe to China and Hong Kong, and Europe to the United States.
"In addition, we expect consolidation to continue, especially in the domestic markets," Ryssel continues. "Niche players in the B2C business are broadening their product offerings to include B2B, while international network players are doing exactly the opposite by targeting B2C. We expect to see no further organic consolidation in the international express segment, because the market is already highly concentrated and the top six networks already control 90 percent of the market. What will 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 next three years will lead to slight price increases of up to 3 percent and force up revenue per shipment. However, CEP providers will not be able to pass all of these additional costs on to their customers.
Importance and volume of document shipping declining at domestic level
"According to the results of our study, and in the light of ever increasing usage of email, the volume of document shipments is stagnating in Europe. Only emerging markets such as Turkey and Russia report growth in documents - both places where a rush of new businesses requires document services," says Ryssel.
While the weight per shipment (WpS) has declined at the domestic level due to growth in more lightweight 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 back on track for growth. At least that's what the solid growth figures are indicating. Nevertheless, if the people in charge are to steer their companies to success over the coming years, they will have to prepare for the challenges they will be faced with in the future - continuous market changes, evolving customer needs, and macroeconomic uncertainty," Salehi concludes. "Now that the years characterized by cuts and austerity measures have passed, the focus has once again shifted to growth 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."
About the study
To determine the status of the CEP industry in Europe, the study looked at 13 different countries: Belgium, France, Germany, Ireland, Italy, the Netherlands, Poland, Russia, Spain, Sweden, Switzerland, Turkey, and the United Kingdom. The analysis focused on the express and standard network business, with express including the fastest possible services with guaranteed delivery times and standard comprising exact-date deliveries. The upper weight limit of deliveries covered by the study was 2,500 kilograms.
About A.T. Kearney
A.T. Kearney is a global management consulting firm that uses strategic insight, tailored solutions and a collaborative working style to help clients achieve sustainable results. Since 1926, we have been trusted advisors on CEO-agenda issues to the world's leading corporations across all major industries. A.T. Kearney's offices are located in major business centers in 38 countries. For more information, please visit http://www.atkearney.de or http://www.atkearney.com.
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