COVID-19: B2B down, B2C up, but then down – what is the overall impact on parcel delivery?

It’s clear that the COVID-19 pandemic has had a major impact on the parcels industry, but what exactly has the impact been?  In the last couple of weeks, views of what effect the virus will have on the global economy and on online retail have changed rapidly.

Current expectations from a range of forecasters (banks and international organisations such as OECD) who have released new predictions are that global GDP will fall significantly in Q1 and Q2 (by c.10% and c.30% respectively vs the equivalent quarter in 2019), and that there will be a significant recovery in Q3.  The net result of this is that they expect global GDP growth will be close to zero for the full year, with better performance in developing countries than in the major industrial nations.

The best data available on the parcels market specifically is from China, which was impacted earliest by the outbreak. The most up to date market figures show that it saw overall market volume fall by 11% and revenue by 13% in January 2020 vs January 2019.  China Post, but not other carriers, have released figures for February which show that it performed better in February, with parcel volumes being flat and revenues being 4% up vs February 2019

Our own research suggests that parcels volumes in Europe are holding up relatively well.  B2B volumes are falling while B2C – in particular, Amazon – is enjoying a mini-boom from substitution away from physical stores, many of which are now closed, as well as additional deliveries of medical equipment and supplies.  We expect this B2C boom to subside as consumers reduce levels of non-essential purchases as lockdowns continue.  The market is likely to return to more normal conditions only when the general economy recovers, possibly with some lag as some manufacturing operations may take longer to resume.


UPS and FedEx announce identical rate rises in the US market. Again.

FedEx and UPS historical rate increases

FedEx has just announced its rate increase for US parcels customers for 2019, and once again, it and UPS are introducing identical rate rises for their core ground services, at 4.9%

Over the last decade or so, the two leading networks have tended to mirror each other’s increases. Given that the increases are somewhat ahead of inflation – currently running at 2.3% in the US – some observers, who have interpreted this as evidence of duopolistic behaviour on the part of the leading two carriers, also believe that successive increases have created the space for competitors and new entrants – such as Amazon’s third party parcel service.

Historically, UPS in particular would never offer discounts from its rate card, even for the largest shipper. However, volume discounting is now common in the US, as in other markets. This means that the rate increases are more of an issue for smaller shippers than the largest, who can negotiate discounts.

It is widely believed that the view that it was overpaying UPS and FedEx for deliveries was an important factor in persuading Amazon to carry out its own deliveries.

Since 2014, both carriers have made smaller increases than previously

The increases are below those announced by postal operator, USPS last month, of 9-12%. USPS has come under increasing pressure from President Trump and other parties to increase the rates it charges to large volume customers such as Amazon for final delivery of parcels

These, and other issues, are explored in our recent report on the US Parcels Market: US Parcels Market: Market Insight Report 2018


Cargo bike services rapidly gaining traction, investment and government backing


A PedalMe bike loaded up with cargo (Photo: Euston Food Bank)

While the press likes to talk about drone deliveries, a visit to the ‘Freight in the City’ Exhibition in London last week confirmed that another, more down-to-Earth delivery solution, is quietly gaining significant traction: the cargo bike. A series of fleets have now been deployed in several UK cities as well as across Europe.

DHL, which is a significant user of cargo bikes in Germany, also carries out some of its last mile parcel deliveries in both London and Manchester by cargo bike. In Manchester it has three bikes delivering on dense, inner city routes each day, achieving 10-12+ stops per hour.

Leading same day courier, CitySprint, has a fleet of 25 Bullitt bikes in London. With a capacity of up to 100kg, the company emphasises that they are able to take as much as a small van.

PedalMe, which offers both passenger and freight services, uses modified Urban Arrow bikes which are able to take 2 adult passengers or up to 150kg in cargo. The company reports that it does a lot of work for food and beverage companies. One of its advantages is that, because bikes are quicker than vans at getting through London traffic, it has been able to extend the delivery range of its customers: for example it can deliver warm food from a restaurant in the East End to Shepherd’s Bush in half an hour. Both its passenger and freight services work via an Uber-style booking app.

The largest UK fleet is probably Zedify, which has around 100 cargo bikes and trikes – which can take payloads of up to quarter of a tonne – in Brighton, Cambridge, Edinburgh, Glasgow, London and Norwich.

We expect growth to continue. PedalMe is on a very sharp trajectory (growing at 24% per month from an admittedly low base) and reports having to turn lots of business away. It is currently crowdfuding, and has already raised enough money to place orders doubling its fleet from current level of 12 to 24 by February. City Sprint reports that its fleet is flat out doing 4,000 jobs per month, and has also just started a trial 2-hour cargo bike delivery service with Waitrose. And the announcement in September by Transport Minister, Jesse Norman, of £2m of government money being made available to encourage the take-up of electric cargo bikes should help further when it kicks in.


Apex Insight client reviews shows high satisfaction with report quality and value-for-money

At Apex Insight, we enjoy speaking to clients who use our reports. Anyone who buys from us is entitled to have a conference call to discuss the report and ask any questions they have arising from, or as a result of, it. We also carry out regular customer satisfaction research to see what clients think of our work, how we can improve it and what new areas they would like us to cover.

In our most recent exercise we approached all clients who had purchased a report from us in the last year for their input. We managed to speak to 30 and asked them a range of questions including how they scored our reports, from 1-5, for quality and value for money. The charts show the scores we received with the overwhelming majority scoring us either 4 or 5 out of 5 on both measures.

Apex Insight client feedback

While we are very pleased that these scores remained high, as they have been in previous years, we were also grateful for the input from those clients who identified areas where our reports can improve further. We are now working on incorporating these suggestions into our forthcoming reports.

We realise that it can be difficult for new clients to buy from a research provider for the first time. To give a degree of comfort, several clients have given us testimonials that they are happy for us to reproduce on our website. To provide more detail, here is a wider selection of client comments answering, in their own words, two questions: ‘How useful was the report to you?’ and ‘How does the Apex Insight report compare to those from other research providers?’

Names, companies and report titles have been witheld to preserve confidentiality.

‘How useful was the report to you?’

“It was invaluable because we came to the UK and wanted something to teach us how this market works here. And we needed to raise funding. Our investors needed a credible analysis of the market. Using your report we were able to get our funding: £2m” – New market entrant

“I feel Apex Insight reports are written by someone who is familiar with the market, that people in the marketplace are comfortable with what Apex writes, and the banks trust the numbers. I was comfortable presenting the information to our Board” – Corporate

“This is one of our strategic markets and we have many years of experience of it. We found the Apex Insight report very useful. All the areas we wanted were covered well, in particular the analysis of what is a complex value chain. It was more complete in this regard than other sources” – Corporate

“It is comprehensive and does what it says on the tin! A lot of it is based on publicly available information, but it would take me ages to put together if I did it. I think it is comprehensive” – Corporate

“We have been using the Apex Insight reports a lot over the last few months… comprehensive and provide key information, covering the market from different angles: the macro- economic view, market drivers, operating models and so on. There was information on how the numbers were calculated which gives confidence. Our new CEO came from outside this industry and he found the report useful” – Corporate

“It is really useful. The methodology is good: the logical path it takes you through from volume to value and product type. The graphs are good visuals, good comparisons of service offering, and the market trend part was also good” – Corporate

“It’s been useful. It’s the main report I use. I look at it 2-3 times a year. It gives us a bigger-picture view which we then can add to with the more detailed view we have of the market” – Corporate

“The report was very useful and gave good insights and was a good introduction to the sector. It was clear and easy to use. The forecasts were sensible and the industry experts quotes throughout were also good” – Strategy consulting firm

‘How does the Apex Insight report compare to those from other research providers?’

“It was the best report I read on this market… nobody questioned your figures” – Government

“As a company we buy a lot of different research. Overall, I think this Apex Insight one is the best I have seen. It is UK-specific, which is relevant for me, and it delivered everything I was looking for: sensible market figures and insights into competitors, their performance and their current contracts” – Corporate

“We commissioned someone to go out and see what is available on the market and were told that this report by Apex Insight was the best one.” – Public service body

“I have bought 3 or 4 reports from Apex Insight, and once I read them I knew this was the place to go and I don’t need to look elsewhere” – Investor

“It was the first time I had seen firm-ish statistics on our market as there isn’t a great deal out there. I have looked at quite a lot of other reports but they are not at this level. The Apex Insight one is ‘on the money’, it has granularity … I intend to buy the 2017 edition when it comes out.” – Corporate

“We have bought Apex Insight and another report because they cover different things…I would not say that one was better than the other. The Apex one is more of a market insight and the other one is more of a consumer insight” – Corporate

“It was well thought out, accurate and thorough. In the past we have used other sources, but the Apex Insight one is better” – Investor

“It gives a comprehensive overview of the market with good primary data, country-specific stats and breakdowns and detail on the leading players. The Apex Insight report gives recent data, ie figures from 2016, while many other reports give old stats from previous years. Also the Apex Insight one is a bit more granular and has more colour. It is all good, we are still using it” – Investment bank


Global parcel delivery market approaches $350bn

Apex Insight’s latest report: Global Parcel Delivery Market Insight 2018 reveals that the global parcels market was almost US$350bn in 2017, up from just over US$310bn in 2016.
Asia Pacific is the largest regional parcels market by value, accounting for around 40% of the global market. North America and Europe together represent a little over 50% of the market.
China is the key growth market, representing almost 60% of the Asia-Pacific regional total by value. Chinese volumes reached 31.2bn in 2016, over 50% up on 2015.
The US is still the largest country market in value terms, although China has surpassed it in volume. In Europe, Germany remains the largest market with the UK having been the fastest-growing of the main countries (7% CAGR).
Online retail is the main driver of growth in parcel delivery volumes. Global online sales approached US$2.3trn in 2017, having grown at a rate of 25% per year. The largest online retail country markets are the US, UK, China and Japan. Growth is high in both emerging and developed economies. China has had online retail growth of more than 40% per year. Globally, online now accounts for just over 10% of total retail sales, up from around 5% in 2012.
As the chart shows, there is little evidence of growth rates tailing off in countries – such as China and the UK – where online has the highest share of total retail.
Comparison of online retail sales in major economies, 2012-2016
global parcel delivery market
Source: eMarketer, Apex Insight
Market trends
In response to the growth, and demands, of online retailers, a lot of effort is being put into developing better last mile solutions, both by incumbent carriers, large retailers themselves, and other parties such as independent parcel shop and locker networks
Leading online retailers, led by large marketplaces such as Amazon and Alibaba, are increasingly getting involved in delivery, reflecting the strategic importance of it to their business models. Their large volumes give them significant market power.
Carriers are investing in improving their information systems, both to provide better information on delivery to end customers and to improve their operational effectiveness
New technology is being applied more and more widely throughout carrier operations, from robotics in hubs to trials of drones and robots for the last mile and use of blockchain contracts
The traditional hub and spoke model remains very important, but some carriers and new entrants to the market are exploring both variations on, and alternatives to, it.
Same day deliveries are becoming more widely offered
Third party brokers continue to grow in serving the C2X segment, in particular in European markets, where there are often several alternative carriers
B2B parcel volumes are growing at slower rates than GDP in most markets as a result of several widespread supply chain trends.
Competitive landscape
The market is served by a combination of national postal operators, the global integrators and smaller, privately owned couriers.
The integrators have a global market share of around 37% by revenue. Postal operators have around 24%, with other private sector carriers having the remaining 39%. The integrators focus on international traffic, in particular in and out of their core markets of Europe and North America. This has a much higher revenue per parcel, hence their volume market shares are significantly lower than their shares by value. Asia and, in particular, China – where they have not been able to establish significant domestic operations – represents the biggest strategic opportunity, and challenge to their otherwise strong market position.
Some postal operators, such as the big 3 European operators (including DHL, owned by Deutsche Post), China Post and Japan Post, and also those in some smaller markets, have developed significant parcels operations. These have helped them offset the decline in their mail volumes. Most postal operators are strong in domestic services. Many also offer international services, via alliances and partnerships, which are usually competitively priced but cannot match integrator service levels.
There are a large number of other privately-owned carriers worldwide. The largest are the Japanese carriers, Yamato and Sagawa, the Chinese carriers: SF Express, ZTO, YTO, Yunda and Best Express and Hermes, which is strong in Germany and the UK and has a presence in other European countries.
UPS is the largest carrier by parcel revenues. However, FedEx has closed the gap since its acquisition of TNT Express, with third-placed Deutsche Post DHL around half the size. Despite their global profile, their large US domestic businesses account for the majority of UPS and FedEx revenue.
We expect the market will continue to grow over the period 2017-2022. This is supported by expectations of continued online retail growth, both in leading home shopping markets such as China, the US, UK and Japan; and less-mature markets, which are expected to catch up, to a degree, over the next few years. The on-going globalisation of supply chains with increased reliance on just-in-time production leading to ever-higher dependence on parcel carriers is also an important factor.
We believe that China will overtake the US to become the largest market by value by 2019. The lack of exposure to the rapidly-growing Chinese domestic market means that the global share of the integrators is likely to continue to fall.
We see the two key strategic challenges for the integrators as being how to find a role in the Chinese market to give them exposure to its size and growth and how to work with the mega-retailers and marketplaces – eg Amazon and Alibaba – to benefit from their volumes without being marginalised by their potential for vertical integration.
See here for more details on the report


European parcels market reaches €60bn – latest Apex Insight research

Our latest report, European Parcels: Market Insight 2017, reveals that the European parcels market reached €60bn in 2016 having grown in recent years despite sluggish economic performance in much of the Eurozone, largely because of the ongoing growth of home shopping. Market growth has been most rapid in the UK (8% CAGR), where internet retail has had the greatest impact, and in Poland (4.6% CAGR) where a fast-growing economy has adopted modern logistics practices. Growth has been slowest in the more challenged economies of Southern Europe, in particular, Italy.
Total internet retail sales in Europe approached €450bn in 2016, having grown at 14% per year since 2011 with double-digit growth in all of the main eight countries
– The highest level of internet retail is in the UK, where average spend per head was approximately €2,300 in 2016.
– France and Germany have also become large markets: when combined they are similar in size to the UK.
European internet retail
Alongside growth in B2C volumes from internet retail, other key market trends include:
– Continued innovation in deliveries – such as tighter time windows, better tracking and in-flight diversion – enabled by technology, starting in B2C and spreading to B2B.
– Same day delivery increasingly becoming a mainstream option, in particular for younger consumers in large cities.
– Retailers, led by Amazon, taking a more active role in getting parcels to customers by using click and collect models or, where they have the scale to do so, their own delivery operations.
– The B2B segment suffering from weak Eurozone economic performance and also product and supply chain trends such as increasing miniaturisation, better reliability and centralised European warehouses.
– Growth in C2X from returns and hobby sellers, enabled by growth of new models such as brokers and parcel shops, giving consumers a greater range of low-cost alternatives to their national postal operator
– Continued roll-out of parcel shops and locker networks

Competitive landscape

The market leaders are the national postal operators of Germany, France and the UK including their respective parcels networks: DHL, DPD and GLS, and the integrators, with the combined FedEx/TNT business likely to overtake UPS. These five now account for around two thirds of the market.
However, there are still some significant independent groups such as Hermes – which is the largest – and the members of the road transport network alliances such as Eurodis and Net Express..
The market has continued to consolidate.
– The key move has obviously been FedEx’s acquisition of TNT, which it expects to take four years to integrate.
– There have also been acquisitions and investments by international operators such as DHL, GLS and DPD to build up their presence in key markets – the UK, Spain and Italy respectively
The most interesting new entrant is Amazon Logistics which now has its own delivery operation of scale in the UK (delivering 28% of its own parcels), an acquired network in France (Colis Privé) and a growing locker network in the UK, France and now Germany.


We expect to see continued market growth with the rate for each country being largely a function of:
– Macroeconomic outlook, which is more positive for the next five years than the last five in all countries apart from the UK, where the shadow of Brexit looms
– Internet retail forecasts, which are for growth to continue but at a slower rate as home delivery inevitably becomes mainstream and hence mature.
– We expect the UK, given the large size of its B2C segment, and Poland, which is still catching up with western Europe, to continue to be the fastest-growing markets with Italy and, in particular, Spain performing better than in the past.
Nevertheless, there are risks to market growth such as faltering of the economic recovery as a result of Brexit or other factors, faster maturing of internet retail than we anticipate, the development of different channels for internet retail fulfilment and returns should parcel carriers not deliver the right last-mile experience and even, for certain products, 3D printing.
We expect to see a steady increase in market consolidation as the leading operators fill remaining geographical and capability gaps in their networks. In this environment, independent players who are not part of an international partnership may find that they face increasing challenges in retaining / winning customers.


UK C2X parcels market reaches 350m items in 2016

Parcels sent by consumers and micro-SMEs represent a growth area with nearly 350m sent in the UK in 2016, or about one per adult every two months.

The C2X segment includes parcels sent either personally to family and friends which we believe acccounts for about 120m parcels, after the sale of an item via eBay or other listings and hobby sites (130m items), or in order to return unwanted home shopping items (a further 90m).

It is the subject of a new report: UK Consumer and Small Business Parcels Services (C2X): Market Insight Report 2016. The report sets out how we think the market has grown since 2011 and our forecasts to 2021. It is based on our research into the segment and its drivers, and our market model – updated in the light of trends such as slower growth at eBay and the increase in retailer-paid returns. We also explain how we expect market shares to trend and what we believe it is realistic for the Royal Mail to retain, given increased competition.

As well as reviewing the positioning of the Royal Mail in the segment we consider the range of newer providers. These include brokers, such as Parcel2Go and Parcel Monkey, and networks, such as Collect+, myHermes Parcel Shops and the locker network, InPost. Our detailed review of pricing by weight and service category confirms that, while Royal Mail continues to be competitive for smaller parcels, where its universal service delivery network enables it to be a low cost supplier, it is less so for larger items.

Key questions for different parties include the following.
– How much of the Royal Mail’s C2X volumes are smaller items for which it remains competitive versus larger items where others such as Hermes now have the advantage on price.
– How might the ending of the Royal Mail / Post Office exclusivity arrangement affect the market?
– Can networks such as Collect+ and InPost scale up to meet growing demand and to achieve the density required to be truly convenient?
– Can brokers such as Parcel2Go and Parcel Monkey add service attributes to help them reduce the risk of disintermediation by carriers going direct to small customers?
– Might other carriers follow the approach of Hermes in focusing on this segment to build a substantial share more quickly?

The report, which has been fully revised since the previous version last year, is available here: UK C2X Parcels Market Insight 2016


Global Postal Operators Benchmarking Report & Rankings

Apex Insight has just published a new report – Global Postal Operators 2016 – Benchmarking of Performance, Strategy and Diversification – along with its 2016 Post Office Rankings

The report benchmarks the postal operators in each of the top 20 global economies, plus Singapore. The operators covered are:
1. United States Postal Service (USPS)
2. China Post
3. Japan Post
4. Deutsche Post (Germany)
5. Royal Mail Group (UK)
6. La Poste (France)
7. India Post
8. Poste Italiane (Italy)
9. Brazil Post
10. Canada Post
11. Korea Post
12. Russia Post
13. Australia Post
14. Correos (Spain)
15. Correos de Mexico
16. Pos Indonesia
17. PostNL (Netherlands)
18. PTT Turkey
19. Swiss Post
20. PostNord (Sweden + Denmark)
21. Singapore Post

The 128-page report contains:
– The post office benchmarking study, which covers 36 different metrics grouped into the categories of Scale, Performance, Growth, International Diversification and Business Diversification, each accompanied by commentary and interpretation
– Analysis of relevant market trends, such as decreases in mail volumes and revenues from ongoing e-substitution and increases in parcels volumes from the growth of online retail
– Case studies on 11 of the leading operators (USPS, Japan Post, Deutsche Post, Royal Mail, La Poste, Poste Italiane, Canada Post, Swiss Post, PostNL, PostNord and Singapore Post) reviewing their context, performance and strategies in depth.

The Rankings focus on the leading postal operators which are the subject of case studies in the Benchmarking repot. They give an overall position for each operator as well as a summary of how each compares to its peers across the range of metrics and within each of the categories (scale, performance, growth, International diversification and business diversification).

The top-ranked postal operator is Deutsche Post – based on its leading positions both in scale and in diversification via its global DHL logistics operations.

For more information about the report, please visit the report page: Global Postal Operators 2016 – Benchmarking of Performance, Strategy and Diversification

To download the Rankings, visit the page: Apex Insight Post Office Rankings 2016


Apex Insight supports acquisition of P2P Mailing by The Delivery Group / Next Wave Partners

P2P Mailing, based in Basildon, is a leading provider of international e-commerce delivery services, enabling UK retailers to deliver to overseas customers cost-effectively.

NextWave Partners is a UK mid-market private equity house with over £100m of funds under management.

The Delivery Group is a buy-and-build platform chaired by former UK Mail CEO, Paul Carvell, which also owns Secured Mail – a leading e-commerce delivery and downstream access mail provider – and CMS – which provides managed mail services and delivery of financial documents in London and other major financial centres.

Frank Proud from Apex Insight acted as an advisor on the market as part of the commercial due diligence carried out to support the transaction. Work included applying Apex Insight’s knowledge of the market to quantify the opportunity for P2P Mailing, evaluating its competitive advantages and the robustness of its business model, and drawing out implications for achievability of its forecasts.

The work confirmed that there is strong growth in demand for cost-effective international delivery services and that P2P Mailing’s offering in this area is superior to that of traditional parcels carriers.

About Apex Insight
Apex Insight is an independent provider of research, analysis, commercial due diligence and other consulting services covering business services markets in the UK and Europe.
In addition to Dalepak, our recent work has covered markets including mail / parcels services, travel commerce, consumer credit services and television production.


Apex Insight advises Sovereign on Dalepak logistics deal

Dalepak, based in Northampton, is a leading provider of value-added logistics and e-fulfilment services, serving customers in beauty products, giftware and other sectors.

Sovereign Capital is a leading UK mid-market private equity house with over £900m of funds under management. Sovereign specialises in buy-and-builds and has delivered over 240 transactions since 2001.

Apex Insight carried out commercial, operational and IT due diligence to support the transaction. The work included quantifying the market opportunity for Dalepak, understanding its competitive advantages, evaluating the robustness of its business model, assessing the strength of its main operational processes and IT systems and drawing out implications for achievability of its forecasts. It also involved working effectively in partnership with HMT, who carried out financial due diligence.

Interviews with a broad range of Dalepak customers revealed that the company is seen to deliver a very high level of service which differentiates it from competitors. Other findings included:
– Dalepak’s markets offer it significant opportunity to continue to grow.
– The Dalepak Directors are highly regarded by clients for their logistics, IT and solution-design skills.
– The company’s ability to incorporate very specific requirements to create bespoke solutions matching its customers’ needs closely is seen to be a particular strength.

Trevor Stokes from Sovereign said:
“Apex Insight’s commercial due diligence work was very useful to us, to the banks and the management team because they were able to set out the critical questions for this deal and to answer them effectively. In doing this, their experience from having been part of an MBO team, as well as having advised on many similar situations, was invaluable.”

About Apex Insight
Apex Insight is an independent provider of research, analysis, commercial due diligence and other consulting services covering business services markets in the UK and Europe.
In addition to Dalepak, our recent work has covered markets including mail / parcels services, travel commerce, consumer credit services and television production.