European Parcels Market: Price Pressure Eclipses Growth through Internet Trade
After several years of strong sales growth for courier, express and parcel (CEP) services, in the coming years the figures in Europe are expected to slip back. Average annual growth in revenues in international CEP markets, for example, will decline from 8.6 percent today to 6.6 percent in 2010. The almost constant growth in transport volume resulting from steadily rising internet trade is being eclipsed by considerable price pressure. This is one of the conclusions from the latest study conducted by A.T. Kearney. Transport costs are being driven ever higher by the rising price of oil, and this could lead to a significant shift in the choice of means of transport in future. Although costs are rising, for highly time-critical goods such as express parcels there will be no alternative to air transport even in years to come. CEP providers need to tighten up their own market positioning and service provision profile and compensate for price pressure and increases in factor costs through strict cost management. The key challenges are the pressure to differentiate, the expansion of international networks, zonal pricing, closed supply chains and continuing consolidation.
“In 2007 a total of 4.8 billion network-capable parcel and express shipments were dispatched in Europe (EU 16), bringing in revenues of EUR 42.7 billion. This approximates to five percent of the total European logistics market, which is considered a key growth segment in the European economy”, says Ferdinand Salehi, partner and Head of Travel & Transportation at A.T. Kearney: “All in all the average growth in revenues achieved in the period 2004 to 2007 was 5.7 percent. Within this, revenue growth in the international markets – favoured by globalisation – was almost twice as high, at 8.6 percent, as that in national markets.”
Impacts of the high oil price on the global transport industry
For highly time-critical goods such as express parcels or spare parts, but also for high-value moisture-sensitive goods, there will still be no alternative to air transport in the future. Nevertheless, in the short and medium term opportunities to benefit from this within Europe will be available to service providers who build on a good road network, as in this case fuel costs are a considerably less weighty factor than in air transport.
“If fuel costs continue to rise, however, less time-critical goods could be switched from air carriage to sea freight,” says the author of the study Dr. Walter Maderner a principal with A.T. Kearney. Textiles, for example, account for a not inconsiderable 13 percent of all air freight from Asia to Europe, and about 20 percent of that from Asia to the USA. For time-critical and price-sensitive products it may become essential to relocate production, because fuel costs can account for up to 50 percent of manufacturing costs. For shorter transport routes, within Germany for example, there can be expected to be a greater shift from road transport to the well-developed inland waterways system over the long term. Increased use will be made of railways, too. More intelligent integration of product flows in overland transport will continue to be necessary. The utilisation rates of trucks leave further room for optimisation.
