Global Parcel Delivery Market Insight Report 2020
This report was researched during January and February 2020, before COVID-19 had spread globally and become a pandemic.
In the last couple of weeks, views on the impact of the virus on the global economy and on online retail have changed rapidly. Current expectations are that:
– Global GDP will fall significantly in Q1 and Q2, with a recovery in Q3
– Online retail has benefitted from large-scale substitution of purchases from physical stores, many of which are now closed. However, this is increasingly likely to be offset by people reducing non-essential purchases.
In this report we provide our original forecast, as prepared in February 2020, along with an update reflecting our latest views on how we now expect the market to perform during this year (2020) and what implications this has for later years.
We expect this view to be updated as events unfold and intend to issue revisions of our commentary on a regular basis until market conditions return to a more stable pattern.
The global parcels market was almost US$430bn in 2019, up from just under US$380bn in 2018.
Asia Pacific is the largest regional parcels market by value, accounting for around 42% 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 62% of the Asia-Pacific regional total by value. Chinese volumes reached 64bn in 2019.
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 Italy and the UK having been the fastest-growing of the main countries (8.5% and 7.1% CAGR respectively).
Online retail is the main driver of growth in parcel delivery volumes.
– Global online sales were in excess of US$3.3trn in 2019, having grown at a rate of 22% per year.
– The largest online retail country markets are the US, UK, China and Japan.
– China has had online retail growth of more than 33% per year.
Growth is high in both emerging and developed economies.
Globally, online accounts for slightly over 10% of total retail sales, up from around 5% in 2012.
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, led by Amazon. But a series of third-party providers, such as Deliv, CitySprint and Stuart, offer other retailers same day services: either immediate delivery for a premium price, or routed services providing afternoon / evening delivery
Postal operators are becoming more focused on parcels as their mail volumes fall. As they do so, they are becoming more commercial and more international.
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 such as improved equipment reliability and flatter supply chains.
In response to the growth, and demands, of online retailers, significant effort is being put into improving last mile services, both by incumbent carriers, large retailers themselves, and other parties such as independent parcel shop and locker networks. In some cases this is being done with active support from governments and transport authorities who see reengineering of last mile delivery as vital to reduce pollution and congestion in major cities
Leading online retailers, led by large marketplaces such as Amazon and Alibaba – which now account for almost a third of global online retail between them – 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 automated sorting and robotics in hubs and depots to trials of drones and robots for the last mile and use of blockchain contracts
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
– 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 bulk of UPS and FedEx revenues.
We expect that the market will continue to grow over the period 2020-2024. 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.
We believe that China will overtake the US to become the largest market by value by 2022. 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 several key strategic challenges for the integrators, including:
– How to work with the mega-retailers and marketplaces – e.g. Amazon and Alibaba – to benefit from their volumes without being marginalised by their potential for vertical integration
– How to find a role in the Chinese market to give them exposure to its size and growth
– How to manage large vehicle fleets in the face of increasing environmental legislation
What does the report cover?
The report covers the parcels market at the global level and region-by-region.
– There is necessarily most focus on the top 10 country markets (US, Canada, Germany, UK, France, Italy, China, Japan, India and Brazil), although our historical and forecast market size and growth estimates are provided for all countries.
The report provides historical and forecast market sizes covering the period from 2013-2023. Adjacent services, such as mail, pallet distribution, groupage, freight forwarding, same-day courier and contract logistics are excluded wherever possible.
Ten key trends which are impacting the market are discussed in detail.
Market information is quoted in value terms and on a constant currency basis (to remove distortions due to exchange rate movements). Volume information is presented where available.
The report includes in-depth profiles of the following companies:
– Deutsche Post DHL
– SG Holdings (Sagawa Express)
– Japan Post Group
– United States Postal Service (USPS)
– Royal Mail Group
– La Poste Group (GeoPost)
– Amazon Logistics
The report draws on:
– Apex Insight’s work on the parcels markets in several key countries and regions
– Our consulting work in the industry which has included advising on market and strategic issues and the attractiveness of parcel company acquisitions
Clients purchasing it are entitled to have an expert call with our analysts to discuss its findings and any questions that they may have on it or the market in general.
Changes since the previous version
This report has been updated and extended since the previous edition in March 2019. Significant additions and changes include the following:
– All company financials, economic statistics and other figures have been updated to include the latest data. Where those figures are not available, our estimates of them have been re-evaluated and updated. More detailed financials for country operations have also been included.
– Drivers of the market have been updated and our market size and growth estimates reviewed and revised accordingly.
– The report now includes our historical and forecast market size and growth estimates for all countries.
– Our on-going work on the parcels sector has also allowed us to improve our market estimates by including more accurate revenues and some revenues from additional carriers and identifying, and therefore excluding, other non-parcels activity.
What are the sources and methodology?
The main sources for the report are
– Extensive desk research on the global parcel delivery market and its operators covering company accounts, websites and other sources
– Published information on key market drivers such as economic data and estimates of online retail levels and practices
– Interviews with senior-level contacts in the market
The key input to our market size estimates is a bottom-up analysis of the revenues of the parcel companies we have identified as operating in each of the main countries covered.
Adjustments have been made to compensate for missing data and to reflect the extent to which these companies are involved in other logistics activities in addition to parcels.
We have used this data as the basis on which to construct our market model.
– The model produces historical and forecast growth estimates covering the period from 2013-2023 which are based on trends in company revenue and drivers such as economic performance and levels and patterns of home shopping.
– The main model inputs and assumptions are discussed in detail in the report.
Who is it useful for?
The report is intended for:
– Owners and operators of parcel networks
– Customers of those networks, in particular, retailers who sell via the internet
– Investors in these businesses
– Market regulators and policymakers
– Banks, analysts, consultants and other parties with interests in the sector
Who was it written by?
The report was written by Frank Proud and Paul Chapman
Frank founded Apex Insight in 2012 and set up our Parcels and Delivery practice
His background is strategy consulting, with two firms, Bridgewater and Burlington, which were originally founded by ex-Bain teams. He has advised many clients across the logistics industry, from start-ups to global leaders.
Subsequently, he was a senior member of the Transaction Support team at EY, advising private equity firms and corporate acquirers on commercial due diligence and other acquisition-related issues.
He leads Apex Insight’s consulting work for investors and clients in the logistics industry.
He has an MA in Economics from Cambridge University.
Paul has extensive experience across a wide range of parcels, delivery and logistics markets
As well as having a leading role in Apex Insight’s research, he has worked on consulting assignments for clients and investors in the sector.
His previous experience includes being Logistics Research Manager at Datamonitor, co-founder of Analytiqa and a marketing / strategy role at Christian Salvesen.
He has a BA in Modern Languages with Business Studies from Swansea University