UK Business to Consumer Parcels Market Insight Report 2016

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Published: April 2016
Pages: 28
Format: PDF

 

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Description

About UK Business to Consumer Parcels Market Insight Report 2016

This report focuses on the UK business to consumer parcels segment. It provides estimates of:

 

– the size and growth of the segment,
– its rate of growth
– the B2C revenues of the main carriers serving the segment

 

The report provides qualitative findings from a series of in-depth interviews which we carried out with a sample of 50 business-to-consumer parcels customers. The interviews were carried out during February-March 2016. Interviewees were randomly selected from across a range of different types of retail, including multichannel and pureplay online retailers. Interviews were conducted by telephone and generally lasted from 25-45 minutes. The interviews explored the following areas in detail:

– Buying behaviour – how to do customers go about selecting their parcels carriers?
– Sole and multiple suppliers – what do customers do and what are their reasons?
– Satisfaction with carrier performance – how well, and in what areas are carriers meeting customer expectations, where are they falling short, what are the priorities for improvements, and which ones would customers pay extra for?
– Volume trends – how have customers’ volumes changed, to what extent is this a function of their own production volumes vs other factors such as changes in supply chain organisation, and what do they expect to happen in future?
– Pricing trends – what do customers actually pay for the services they receive, how have they changed in the past and what do they expect in future?
– Switching behaviour – how often do customers review their use of carriers, do they switch regularly and what is most likely to trigger a switch?

The report contains our conclusions from the work, supported and illustrated by evidence from customers’ comments.

 

Why Is B2C Parcels Important?

Over the last decade, business-to-business (B2C) parcels has increased from being a relatively small part of the parcels market to representing the majority, with growth driven by the take-up of internet retail.

 

As this has happened, the needs of retailer customers have increasingly driven innovations in parcels technology and service offerings. Given that it continues to offer attractive growth prospects, nearly all of the leading UK carriers now serve the B2C segment with varying degrees of focus.

 

– Hermes focuses almost entirely on B2C parcels, as do the international e-commerce delivery specialists, WnDirect and P2P Mailing.
– Yodel, which shares a mail order background with Hermes, has a significant proportion of B2B volumes
– The other main carriers, who all originally had a B2B focus, have all embraced B2C, to varying extents. DPD, UK Mail and Parcelforce are now mainly B2C carriers who also serve B2B customers, while FedEx and TNT, do less B2C work but focus on providing a quality service to B2B customers as their main priority.

 

This report aims to explore what is happening in the B2C segment now and how it might develop in the future. It is intended for:

– Parcels carriers who are active in the B2C segment
– Investors in these businesses
– Market regulators and policymakers
– Banks, analysts, consultants and other parties with interests in the sector
– Customers of business-to-consumer parcels services

 

B2C Parcels Market Summary

B2C carriers

The leading domestic B2B carriers are the Royal Mail, DPD, Hermes and Yodel. DHL and UPS, although mainly B2B, also have significant B2C volumes. Of the smaller carriers, we believe that APC mainly serves the B2C segment.

 

UK B2C parcels market segment size and growth

We estimate the B2C segment size to be around £4bn. The key driver is internet retail, which has grown at a rapid rate over the last decade. Expectations are for growth to continue in the future.

 

Use of multiple suppliers

Most interviewees in our sample use more than one supplier. Reasons given for this included:

– Having back-up in case of carrier problems
– Using different carriers for different classes of items (eg size,
destination, value, etc)

 

Satisfaction

Overall satisfaction scores were very high with an average of just under 4.5 out of 5. Customers highlighted several specific areas of their service that they were pleased with, including customer service, systems, tracking and tracing capabilities as well as prices.

 

Seasonality and carrier performance during the 2015 peak

The degree of Christmas seasonality recorded by interviewees varies considerably according to the type of items they sell, with some having December volumes up to 6 times higher than in the summer months. Most interviewees felt that their carriers had performed well during the 2015 peak. In most, but not all, cases, issues mentioned were relatively minor and infrequent.

 

Service improvements and features sought

Most interviewees had no unprompted requirements regarding future service improvements. When prompted, improvements in parcel tracking and delivery features, such as notification messages and 1-hour windows, were the most sought- after enhancements. Most customers would not expect to pay for new service features, although there is greatest willingness to pay extra for weekend deliveries. Those using, and looking to use, sameday deliveries remain a minority.  Most retailers interviewed do not specify a service to be used for returns.

 

Volume and price trends

Most customers reported that their volumes had increased in the last year although the picture was not consistent with:

– Half of the sample having seen little change
– A significant minority having seen double-digit increases.

Expectations are for further volume increases in the next year. More customers expect parcels service prices to increase in the next year than in the recent past, with the expectation that the fall in fuel prices could reverse and the introduction of the National Living Wage being factors.

Switching

The average number of alternative carriers which customers perceive to be available to them is 3.4. Only a minority of interviewees have dropped a carrier in the past. The most common reason for having switched is in response to a failure in service.

UK Business to Consumer Parcels: Market Insight Report 2016 .......1
About this report...2
What does the report contain? ....2
Why is it important?........2
Summary.........3
Background .........3
B2C carriers.........3
B2C segment size and growth ........3
Use of Multiple Suppliers...3
Satisfaction ..........3
Seasonality and carrier performance during the 2015 peak .....3
Service improvements and features sought.........3
Volume and price trends ...3
Switching ......4

About Apex Insight.......5
Company background .......5
Consulting services ....5
Related research ........5
Research subscriptions .....5

Contents.......... 6
List of figures ........8

About the interviewees.......9
Interviewees represented a broad range of types of retailers...9
Virtually all use standard parcels services, in many cases, alongside other delivery services.......10
Royal Mail is the most widely-used carrier.........10

UK B2C carriers ......... 11
B2C segment size and growth.......13
The market has grown rapidly.......13
The increase in B2C e-commerce has been the key driver....13
Most, but not all, interviewees expect online sales to continue to grow in future14
Insights from interviews .........15
Use of multiple suppliers ........ 15
Number of suppliers used .........15
Reasons for choice......15 Satisfaction........16
Overall levels ........ 16
Reasons ........16
Changes ........ 18
Seasonality and carrier performance during the pre-Christmas peak .........18 Seasonality .... 18
2015 peak performance......18
Peak performance vs the previous year.........19
Service improvements and features sought.......20 Priorities ......... 20
Willingness to pay for additional service elements.......22
Usage of sameday services ...... 23
Specifying of returns services ...24
Volume trends ... 24
Historical experience ...24
Future expectations .....25
Pricing trends ....25
Historical experience ...25
Future expectations .....26
Switching behaviour ........26
Awareness of alternatives to current carrier/s .......26
Frequency of review ....27
Past switching behaviour and reasons ....27
Interviewee sample by type of retail ...9

Which delivery services do you use?.......10
Which carriers do you use? .......10
UK business-to-consumer parcel carriers.......12
UK B2C parcels segment size / £m .........13
UK e-retail spending (IMRG): value as % of all retailing / £bn, % .....13
Do you think that internet retail will continue to increase as it has done in the last few years?......14
How many suppliers do you use? .....15
What are the reasons for your choice?....15
How happy are you with your current arrangements on a scale of 1-5, where 1 represents very unhappy and 5 represents very happy? ....16
Change in service quality....18
How well did your carriers cope with the pre-Christmas peak volumes? ........18
How did carrier peak performance compare to last year?...19
Top priorities for future improvements (unprompted) ...20
How important for you is full parcel tracking? ........21
How important for you are value-added delivery services such as providing customers with notification messages or delivery windows?......21
How important for you is the carrier’s ability to cope with large/heavy items? .....21
How important for you is the carrier’s ability to give you a one-stop-shop for all your parcels needs (including international + domestic)?.....21
How important are weekend deliveries or collections?........22
How important are sameday deliveries?.........22
Would you except to pay more for additional value-added services? ......22
Which services would you except to pay for?........23
Do you do many sameday deliveries? .....23
For returns, do you specify how the customer should send the item back, or leave it up to them? ........24
Volume trends: parcels you send (% change over 1 year).........24
How do you expect your parcels volume to change in the next year? [%] ......25 How have prices for parcels services changed in the last year? [%] ......25
How do you expect them to change in the future? [%]........26
How often do you review your parcels carriers? / years......27
Have you ever stopped using a carrier?.........27
What was the reason for switching?........28
How long since last switch? / years.........28

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