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.
 

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.
 
 
 

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