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

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.
 
Outlook
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

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.

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.
 

Outlook

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.