European parcel volumes back to pre-recession levels

The European courier, express and parcel market has seen volumes rebounding to pre-recession levels, but revenues have not yet fully recovered, according to a new industry study. The research from management consultancy A.T.Kearney on 13 European countries points to e-commerce and the business-to-consumer segment as major drivers of growth that saw the market volumes reaching 5bn in 2010, past the 4.8bn mark last seen in 2008.

But the 6% growth in volumes has not been matched by growth in revenues, which were still 5% below 2008 levels in 2010 at EUR 42bn.

Germany, the UK, Poland and Russia are leading growth in the European market, but only in Turkey, Poland, Russia, Germany and Switzerland are both volumes and revenues above those seen in 2008.

The study suggests revenues will return to “pre-crisis” levels by early 2012, said the consultants, predicting that bar another global economic downturn, shipment volumes will reach 5.7bn within the next two years,  growing by 4% domestically and 6% internationally through 2013.

Ferdinand Salehi, partner at A.T. Kearney and Head of the firm’s Transportation, Travel & Infrastructure Practice, said: “Now that the years characterized by cuts and austerity measures have passed, the focus has once again shifted to growth strategies. All competitors will benefit in their own way from the B2C boom – integrators, for instance, most probably in the higher-priced B2C segment due to their structure.”

E-commerce

Causes of the lag in revenues within the European market include demand for cheaper shipping, tightening margins, and a greater proportion of lightweight parcels in the domestic mix thanks to e-commerce, pulling down revenue per shipment.

However, the lag in revenue growth was also blamed on “tough” negotiations with larger customers during the 2009 downturn.

The Kearney study notes that while e-commerce is driving much of the growth, it is mainly domestic in nature – European consumers are not yet making the most of the ability to shop cross-border.

B2C shipping volumes now make up 43% of the market in domestic shipping, but within international it accounts for just 10% of volumes.

Nevertheless, international shipping grew faster than domestic in 2010, partly because it had more room to rebound since the recession saw twice the decline in international shipping than domestic, with its weight-per-shipment up as the global economy recovers.

Thanks to the impact of email, document shipping is now “stagnating and even declining”, the study said, with growth seen only in emerging markets like Turkey and Russia, which does not yet have a high internet penetration.

Standard vs express

The study suggested that European shippers were being enticed away from express shipments by the increasing effectiveness of standard international and domestic services, as well as the need to cut supply chain costs.

“During the economic downturn, many customers switched from express to cheaper standard shipping, and in many cases they have not yet reversed this decision. To some extent, this is because the difference in transit times compared with express are minimal,” said Lars Ryssel, manager and consultant at A.T. Kearney, and co-author of the study.

In some shipping routes, the study notes, there are barely any differences in transit time between express and standard shipping, with the major benefit within express now being a guaranteed delivery time.

“Many CEP providers are already offering express quality at standard prices. As a result, we can expect to see the distinctions between the two segments become ever more blurred at domestic level,” said Ryssel.

The Kearney study said customers are more willing to pay for speed in intercontinental shipments, and many international shippers are now returning to express.

Outlook

Looking ahead, the consultants said consolidation would likely continue in domestic markets as B2C niche players broaden their horizons to B2B offerings, while the integrators look to boost their B2C credentials.

On the international side, the major players already hold a 90% share of the market, so consolidation is expected to be minimal.

“We expect to see no further organic consolidation in the international express segment, because the market is already highly concentrated,” said Ryssel. “What will be worth watching out for, however, are collaborations between the big players and smaller, local postal providers.”

Production and fuel costs are likely to rise, but providers will be unable to pass all of the extra costs onto customers, who will be looking for rebates and discounts.

The Kearney report suggested e-commerce and B2C shipping within Europe could suffer going forward, as more of the larger e-commerce companies achieve growth targets and set up local warehouses to cut transport costs.