UK Parcels Market Insight Report 2019 VAT

Introduction 2

About this report
Executive summary
About Apex Insight

Contents 7

List of charts and tables

Parcels market 10
The parcels market includes next day or deferred delivery of parcels from around 0.75-40kg in weight
Key features of the market include high operational gearing, low capital intensity, scale economies arising from consolidation and low customer retention
B2B, B2C and C2X segments have converged but retain distinct characteristics
Franchised models are receding but other forms of outsourcing are widespread
The last mile for home delivery remains both a challenge and an area of innovation

Market size, growth and segmentation 28
Actual vs forecast
Our market size estimate is based on company revenues
Non-parcel activities of the main networks have been excluded and parcels activities of other operators have been included
The market has grown strongly since 2013
Figures from Ofcom support our views of market size and growth
The B2B, B2C and C2X segments are impacted by different drivers hence have grown at different rates
The market is often segmented by speed of delivery, type of item and international/domestic delivery
Consumers are increasingly opting for premium delivery services
Growth of internet retail is supporting the shift towards more deferred / economy deliveries, although the picture is more complex
Domestic deliveries account for the majority of the market
Larger / heavier items are not compatible with highly automated parcels sortation processes
Volume trends
Price trends
Evidence supports lack of price increases

Market drivers 36

The main drivers of the parcels market are online shopping and the overall level of economic activity
Pricing is largely driven by competition
UK GDP growth slowed in the uncertainty around Brexit
B2B parcels has broadly tracked, but been lower than, movements in real GDP
Retail sales has continued to grow
Of the range of routes via which an online purchase can reach a consumer some, but not all, require a parcel delivery
Online retailing has grown considerably over the last decade.
Certain categories of online purchase do not lead to a parcel movement
The UK is a worldwide leader in internet shopping
International sales by UK e-retailers are growing more quickly than domestic sales
Average internet shopping transaction values have stopped falling
Rates of returns – which are not captured by e-commerce statistics – are (slowly) rising

Competitive landscape 53
UK parcels operators can be divided into several categories
The leading international groups have continued to gain share at the expense of UK-only players
There have been several long-term share movements over the last decade
The UK parcels market is now on the border between ‘moderately concentrated’ and ‘competitive market’
The fastest growing companies have been the newer players, followed by DPD (and DPD Local), and Hermes
TNT and DX have seen falling revenue over the last 12 years while growth of DHL, UK Mail and Yodel has been modest
Estimated volumes by carrier
Differences in average revenue per parcel reflect carrier focus
Features of carrier business models underpin both segment focus and profitability
Revenue per depot by carrier
Revenue per employee by carrier
Tuffnells, Hermes and Amazon Logistics have business models which reflect the requirements of their respective niches
Having increased from 2011-16, margins have fallen back in the last couple of years
The overall industry picture masks some significant variations in profitability
Several of the more profitable companies have also been amongst the fastest-growing
Those with losses have specific factors explaining their performance
Carrier rankings suggest some winners – but care is needed in interpreting

Forecasts 84
Our market forecast considers the three main segments (B2B, B2C and C2X) separately
GDP is expected to grow steadily and inflation to increase
Our forecast is based on the B2B parcels segment maintaining its recent historical relationship with GDP growth
We expect to see growth in retail sales continue at a similar rate
Forecasts for growth of click-and-collect
Growth in international internet retail sales is expected to continue to be faster than domestic sales
We expect to see further growth in home delivery, but at a slowing rate
Market value forecast to 2023
Market volume and price forecasts to 2023
Risks to the forecast

Appendix 98

List of Figures

Royal Mail parcel operations
Yodel depot
Consumer apps
Parcel shop
Amazon locker
Percentage of parcel shop customers buying something else by network
Hermes self-employed courier delivery
DHL cargo bikes
DPD all-electric urban depot
Zedify cargo bike depot
Quiqup courier platform
DHL in-boot delivery
Amazon drone delivery
Robots and driverless vehicles
UK parcels market size and growth 2012-18
Market segmentation
UK domestic home deliveries by service type
Parcels market – historical volumes by segment
Parcels market – historical average revenue per parcel
FedEx UK: revenue and parcel volume
FedEx UK: revenue per parcel
UK GDP in current prices (money GDP), inflation (GDP deflator) and real GDP
B2B parcels market and real GDP growth
UK retail sales
B2C parcel channels
UK online retail spending: value as % of all retailing
UK online retail spending: % growth
UK e-retail spending (IMRG): value as % of all retailing
UK Internet sales (ONS): value and as % of all retailing
Internet sales resulting / not resulting in an parcel delivery
Internet retail as % of total retail by country
Average spend per online shopper by country
UK e-retailers: domestic and international transaction value
Implied number of B2C transactions
Internet shopping returns rate by category of item
Implied number of UK home shopping movements
Leading UK parcels networks – latest revenue
Carrier size and growth
UK parcels market share trends
UK parcels market competitiveness: Herfindahl-Hirschman index
Long term revenue growth by carrier
Estimated parcel volumes by carrier
Average revenue per parcel by carrier
Operating models and segment focus
% of top UK online retailers which use each carrier
Revenue per depot by carrier
Revenue per employee by carrier
EBIT margins – overall sector and by carrier
EBIT margin by carrier
RoS vs RMS for UK carriers
MoneySavingExpert carrier scores / % regarding the carrier as ‘good’
Which? Magazine: ‘Would you recommend…?’
TrustPilot scores
Nominal UK GDP, inflation (CPI) and real GDP: historical and forecast
B2B parcels market and real GDP - historical and forecast
UK retail sales / % annual change
Internet retail sales which typically do / do not result in a parcel delivery – historical and forecast
UK e-retailers: domestic and international transaction value (£bn) - historical and forecast
Implied number of B2C transactions / millions per year - historical and forecast
Implied number of UK home shopping movements / millions per year - historical and forecast
UK parcels market size and growth: historical and forecast / £m - historical and forecast
UK parcels market size and growth: historical and forecast / m parcels - historical and forecast