New Ti report investigates how express companies are adapting to a sector dominated by e-commerce and assesses the impact that increased competition is having on companies’ strategies
New Ti report investigates how express companies are adapting to a sector dominated by e-commerce and assesses the impact that increased competition is having on companies’ strategies.
- As customer expectations drive additional complexity into already low margin operations, is online retail really a panacea for the parcel market?
- Ti’s market sizing and forecasting study* estimates that the global parcel market expanded by 7.7% in real terms in 2015.
- Ti’s forecasts show the domestic and international market sizes growing in real terms at a 2015-2019 compound annual growth rate of 9.1% and 5.6% respectively.
24th October 2016, Bath UK: Ti’s latest report, Global Express and Small Parcels 2016, asserts that while global parcel volume growth remains healthy, largely thanks to consumer related e-commerce, it questions whether online retail is really the panacea it is often made out to be. Should express operators target the B2B e-commerce sector as a strategy to sustain growth going forwards?
“Express markets have undergone seismic change since the advent of e-commerce. Many analysts believe that e-commerce has been the saviour of the express sector, however, customer expectations continue to drive additional complexity and cost into already low margin operations”, explains lead author Joel Ray, Head of Consulting at Ti.
Ti’s market sizing and forecasting study* estimates that the global parcel market expanded by 7.7% in real terms in 2015, with domestic and international growth at 8.4% and 5.0% respectively. Looking ahead, the overall market is projected to grow in real terms at a 2015-2019 compound annual growth rate (CAGR) of 8.4%, with the corresponding domestic and international figures at 9.1% and 5.6% respectively.
Explosive growth rates in e-commerce, allied with the high level of media attention garnered by the sector, has resulted in many other companies encroaching on the playing field. These comprise new entrants, other logistics companies, as well as existing operators from other geographies. This increase in competition poses a continued threat to traditional integrators and express companies which are already witnessing an erosion of revenues due to major customers (large volume retailers) undertaking a greater level of activity that used to be the domain of the operators – be it Click & Collect deliveries to retail outlets or pre-sorting and line-hauling to local delivery depots.
In addition, in order to compete in this fast growing ‘consumer e-commerce’ segment of the market, recent entrants are investing heavily in new delivery models, along with IT to support these, whilst at the same time targeting higher margin town and city locations. This results in the lower cost operators – posts and independent national players – often being left to handle the most difficult and unprofitable rural traffic. Low margins are clearly a concern for many.
Overall, the report’s four main chapters – Market Structure, Industry Innovations, Market Size and Forecasts and Provider Profiles – explore a number of fundamental questions that the industry faces, such as:
- How can traditional express companies continue to fight off the onslaught of geographic, horizontal and disruptive competitive pressures?
- Where are the real opportunities for growth? Domestic markets, cross-border or inter-regional?
- Is B2C e-commerce the panacea for the parcels sector, or is the B2B sector likely to represent a more attractive target in the future?
*In addition to global figures, market sizes have been estimated for 78 countries and 12 regions, for the years 2008-2015, in addition to a forecast for 2019. Growth rates for each market have been estimated for the years 2009-2015, as well as a forecast in the form of a CAGR from 2015-2019. For each geographical market, domestic, international and total market sizes and growth rates have been estimated.
About Transport Intelligence
Transport Intelligence (Ti) is one of the world’s leading providers of expert research and analysis dedicated to the global logistics industry. Utilising the expertise of professionals with decades of experience in the mail, express and logistics industry, Ti has developed a range of market leading web-based products, reports, profiles and services used by all the world’s leading logistics suppliers, consultancies and banks as well as many users of logistics services.
Michael Clover, Business Development Manager, E: firstname.lastname@example.org