New Apex Insight research on consumer and small business parcels sending (C2X) reveals further growth but challenges ahead.

Consumers and small businesses wishing to send occasional parcels have traditionally been served by national postal services with customers taking their parcel to their local post office and queuing up to send it.

Historically, most parcels carriers did not target smaller customers. This type of traffic was challenging for their business models, which rely on consolidation of pick-ups to obtain superior economics and the fixed costs of setting up an account made small customers unprofitable
However, the rise of home shopping has led to significant increases in the volumes of items being returned by consumers. And marketplaces, in particular eBay, have many small sellers who need a way to dispatch items they sell but, like consumers, may not have the scale to operate accounts with established parcels carriers.

As a result, consumers, and small businesses are an increasingly important segment which has attracted the attention of traditional carriers and new entrants such as parcel shop / locker networks and online price comparison sites / brokers. Examples of networks include Hermes’ Parcel Shops, UPS’s Access Point network, DPD Pickup as well as independent networks such as InPost across Europe, Mondial Relay in France and Spain and Collect+ in the UK. Examples of brokers, which offer services from a range of carriers, typically at rates which would not be accessible to the consumer, include Packlink in several European countries, Parcel2Go in the UK, and Sendabox in Italy.

Many established carriers, as well as selling via brokers, have now introduced specific services for one-off or small volumes of consignments which they sell directly to consumers and small businesses via their websites and call centres. UK Mail’s ipostparcels was an early example with a distinct brand, but most of its competitors have now copied this approach. Our research on pricing shows that some are now very competitive, in certain areas of the market.

Prospects for further segment growth are healthy – certainly few doubt that home shopping will continue to grow in all countries, and European law increasingly supports and protects the right of consumers to return items.

However, there are some potential clouds on the horizon. For example, eBay’s growth is less rapid than in the past in its more mature markets such as the UK and Germany, and an increasing proportion of sales on its marketplace are from larger retailers. And there is an increasing tendency for larger retailers to organise, and pay for, their returns (as has long been the case in Germany), taking the sending decision out of the hands of the consumer and leading to a significantly lower revenue per parcel. Furthermore, our survey of UK small business senders confirms that there is considerable dissatisfaction with carriers and switching levels remain high.

Amongst the new players, it is not yet clear which business models and which companies will prevail as the winners. The market presents opportunities and threats for the various different models but volume growth has meant that any eventual shakeout has been delayed.

The full market report: European Consumer & Small Business Parcels Services: Market Insight Report 2015 includes insights from interviews with customers, profiles of the leading players, as well as growth forecasts for the market and its key drivers. There is also a UK-only version of the report: UK Consumer & Small Business Parcels Services: Market Insight Report 2015


E-fulfilment is a high-growth logistics segment now worth in excess of £4bn in the UK

By Frank Proud

The UK is an advanced e-fulfilment market relative to others in Europe with a large proportion of households now regularly shopping online. However, even in the UK, the internet accounts for just 11% of overall retail, indicating the potential for significant further growth.

We estimate that the number of retail transactions requiring fulfilment exceeded half a billion in 2014. This represented a market of over £4bn in value for e-fulfilment, or the logistics processes necessary to support an on-line retailing operation. This usually comprises the core elements of warehousing, IT system provision, transport management, and returns logistics. Actual transport services are typically outsourced to parcels networks or other carriers, with the fulfilment provider retaining a margin. In addition, value added services, such as contact centres, packaging, repairs, assembly & configuration or website development, are often provided as part of a solution.

The overall level of retail sales and the proportion which is carried out on-line are the main drivers of market growth. Also, in recent years, international transactions have become more important, encouraged by the reduction in the premiums charged for international vs domestic delivery. Given its lead in internet retail, this is a key benefit for UK sellers and many have already established significant international sales. Estimates are that around 22% of UK e-retailer sales in 2014 were to overseas customers. This has grown from 14% in 2012, and we expect a similar rate of increase in future.

Delivery services have continued to innovate and improve, offering quicker delivery, more options and streamlined returns. Free delivery and returns reduce the barriers which prevent customers from ordering. Click and Collect, which now represents over £2bn, has been important. It has been embraced by large retailers who combine physical and online presence as it allows them to use their store networks as a differentiator in online sales.

While outsourcing e-fulfilment is increasingly common for smaller e-retailers and marketplace sellers, some large retailers have started to bring the service back in-house, recognising its strategic importance to their proposition. In doing so, they are following the lead of Amazon, which, having originally outsourced its logistics, has now become a pioneer and innovator in this area.

Major logistics groups like DHL, Kuehne + Nagel, CEVA, UPS and Dentressangle offer e-fulfilment as part of a broader offer, which often includes transport services. Their international operations may be particularly attractive for large e-retailers looking to expand via international sales. At the smaller end, the market remains fragmented and there are a number of specialists, such as Allport, iForce, Clipper, Torque, Amethyst and Spark Response who serve both medium-sized and some large e-retailers.

We expect the market to continue to grow in the future at a rate well above that seen in most segments of the logistics industry. This is because the key drivers are positive: economic recovery in the UK is likely to support ongoing retail sales growth; the proportion of retail sales transacted online has scope to rise significantly higher; and international sales made by UK retailers are set to increase further

Our report

Apex Insight’s report on the UK e-fulfilment market includes insights from interviews with logistics service providers, findings from our research on published and company sources, background on the leading companies as well as our estimates of historical and forecast market size and views on future development of the market.


European parcels market growth continues with FedEx and Amazon making key moves

By Frank Proud

The most exciting developments in the European parcels market in the last year have been the move by FedEx to acquire TNT, combining its global and financial strength with TNT’s European market position, and the moves by Amazon, Europe’s leading parcel shipper, into taking a more active role in deliveries. The first will firmly move FedEx into the group of leading European-wide carriers, alongside Deutsche Post DHL, La Poste / DPD, The Royal Mail / GLS and UPS, while the second is a potential threat to all carriers, in particular those for whom Amazon’s volumes have become critical to the viability of their networks.

European parcels market map

Market size and growth

The parcels market has continued to grow in most countries in spite of the uncertain recovery from recession. A key factor has been the growth of home shopping, which grew by over 15% to approach €400bn in 2014. This has acted as a spur to innovation – in promoting the development of processes to improve the delivery experience, from defined time-slots, to text messages to the further roll-out and establishment of new chains of parcel shops.

Apex Insight believes that the overall European parcels market exceeded €50 billion in 2014. Growth has been fastest in Poland – where a fast-growing economy has adopted modern logistics practices – and the UK, which has led the way in online shopping with average spend per head over €2,600 in 2014. It has been slowest in the more challenged economies of Southern Europe as those economies struggle to recover from the Eurozone crisis.

Carrier innovations

Leading carriers continue to develop new customer service innovations to inform the customer about delivery progress and alternative options. Text message and smartphone apps provide user-friendly front-ends to some complex technology: UPS launched MyChoice, DPD has Follow My Parcel and Predict and the Royal Mail offers text message notifications.

Parcel shop and locker networks have continued to grow to cope with click and collect demand. UPS has rolled out the Kiala network rapidly in the UK and Germany, DPD has announced it will set up a network in the UK and InPost has now rolled-out its lockers to 22 countries.

Future growth and consolidation

Expectations of a more positive economic outlook than in the recent past as well as continued growth in home shopping bode well for the market and are reflected in our growth forecasts: the parcels market as a whole should benefit from recovery. The UK and Poland are expected to continue to be the fastest-growing market and the outlook for Italy and Spain has improved significantly since last year.

Our model suggests that consumer deliveries are likely to account for over a third of the overall market by 2019 and potentially a majority of deliveries in some countries. Nevertheless, we believe there are risks to market growth, such as faltering of the weak economic recovery, the development of different channels for internet retail fulfilment 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. Independent players who are not part of an international partnership may find that they face increasing challenges in retaining / winning customers.

Our report

Apex Insight’s report on the European parcels market includes insights from interviews with customers, profiles of the leading players, as well as growth forecasts for the market and its key drivers. The eight main territories which it covers in depth (Germany, UK, France, Spain, Italy, Netherlands, Belgium and Poland) represent over 75% of European GDP and, our market model suggests, almost 80% of overall parcels revenues.

This report has been completely updated and significantly extended since the previous edition in early 2014. This edition has around one third more pages. Significant additions and changes include updating of market size/growth estimates and all other figures, creation of a European-wide competitor market map, separate sections on the Netherlands and Belgium to replace ‘Benelux’ chapter and more detailed internet retail and B2C parcels information by country.


Why are parcel lockers not working in the UK last mile?

Despite the internet shopping boom and the march of click-and-collect, ByBox has recently withdrawn its consumer service and our ongoing last mile delivery research suggests that InPost is struggling to gain traction with volumes at its parcel lockers remaining low.

At the same time, Parcel shops, which perform a very similar function, are performing well, with growing volumes supporting the growth of the existing chains and the roll-out of a new one by DPD. And parcel lockers have been successful elsewhere – in particular in Germany, where DHL’s Pakstations are widespread. And ByBox’s lockers are successful in UK B2B applications, such as getting parts to and from field engineers

We don’t yet know the answer, but these are possible reasons.

The wrong business model?
Both parcel locker networks launched their consumer offering as an open network to serve a range of carriers rather than under the wing of a leading carrier. They did so at the time that many carriers were deciding that they wanted to have their own networks with, for example, UPS acquiring Kiala and rapidly rolling out its Access Points. But some of the parcel shop networks, in particular Collect Plus, do deal successfully with multiple carriers.

Unfavourable economics?
Parcel lockers are far more expensive to deploy than a parcel shop network. But the ongoing operating costs for lockers are clearly much lower – and ByBox and InPost had already made the investment in any case, so the cost argument doesn’t seem decisive.

Consumer resistance?
There is some evidence that UK consumers have not warmed to parcel lockers and that some people have struggled to use them. But if the German consumer can get the hang of it, why can’t people in Britain?

We aim to explore this in our upcoming research in the sector.