Parcels market back on track for growth

Düsseldorf (ots) - A.T. Kearney study investigated the market for
courier, express and parcel (CEP) services - Total volume of
shipments back to pre-crisis level - e-commerce major growth engine -
Standard services continue to grow

Internet trade has put the European market for courier, express
and parcel (CEP) services back on track for growth. 2010 saw the
volume of shipments rise by 6 percent compared with the year before
to 5 billion and revenues grow by 4 percent in the same period to
around E42 billion. As such, the market has more or less returned to
pre- crisis levels. Over the coming two years, shipment volumes will
increase to 5.7 billion, but strong demand for cheaper standard
services will continue to put CEP providers under pressure. This is
one of the conclusions from the latest study conducted by the
management consultancy firm A.T. Kearney into trends in the European
CEP market. The growth rates in the industry demonstrate once again
that it is living up to its reputation as a harbinger of performance
in the economy as a whole.

"Business is picking up again for Europe's CEP providers," says
Ferdinand Salehi, partner at A.T. Kearney and Head of the firm's
Transportation, Travel & Infrastructure Practice. "At domestic market
level, B2C and e-commerce shipments in particular were the engines
behind the growth experienced in 2010, but this business was also on
the rise internationally. This, however, shows that internet trade is
still for the most part limited to within domestic borders and
consumers are making little use of the ability to purchase goods
anywhere in Europe."

Business-to-consumer (B2C) business has been growing faster than
business-to-business (B2B) trade in almost all of the domestic
markets studied, except Russia, where B2B outpaces B2C. This is
primarily driven by the (still) low level of internet and smartphone
penetration. Indeed, 43 percent of Europe's domestic shipment volumes
are currently businesses sending to consumers. Internationally,
however, B2C still plays a minor role with roughly 10 percent of
shipments going to private households, but it is growing at a rate of
12 percent annually.

Volumes increasing again

While shipment volumes in 2010 (5 billion) returned to and even
slightly surpassed the 2008 level (4.8 billion), this was not the
case for revenues. Even if revenues have risen 4 percent compared
with 2009, this figure is still currently 5 percent lower than three
years ago. This means that revenue per shipment (RpS) had declined.
The main reasons for this weaker performance of overall revenues are
difficult customer renegotiations and a preponderance of lightweight
B2C shipments. What's more, standard services in Europe offer a
comparatively high-quality product.

"We do, however, see the European CEP industry returning to its
2008 revenue levels by early 2012 at the latest. And we also expect
the volume of shipments to grow by 4 percent annually between now and
2013," Salehi forecasts, "with Germany, the UK, Poland and Russia
being the key growth regions."

Standard continues to grow

In Germany, France and the United Kingdom, standard shipping
continues to grow in importance compared with express business, in
the domestic markets. For instance, in Germany it currently holds a
96 percent market share. Ireland, the Netherlands, Poland and Sweden
are the only countries in which the international express segment is
growing faster than the standard segment. Standard is experiencing
growth on intercontinental routes and in areas focused on reducing
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", explains Lars Ryssel, manager and consultant at A.T.
Kearney, and co-author of the study. "Nevertheless, pricing still
remains a challenge, because customers complain about standardized
prices. In the domestic market in particular, the only difference is
often that the providers of express deliveries guarantee a precise
delivery date. In fact, 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," Ryssel says.

International growth and domestic consolidation

What's more, the study reveals that the European CEP market last
year grew more strongly at international level than domestically.
Very little difference was found in growth patterns between intra-
and intercontinental destinations. Key intercontinental growth routes
continue to be Europe to China and Hong Kong, and Europe to the
United States.

"In addition, we expect consolidation to continue, especially in
the domestic markets," Ryssel continues. "Niche players in the B2C
business are broadening their product offerings to include B2B, while
international network players are doing exactly the opposite by
targeting B2C. We expect to see no further organic consolidation in
the international express segment, because the market is already
highly concentrated and the top six networks already control 90
percent of the market. What will be worth watching out for, however,
are collaborations between the big players and smaller, local postal
providers."

Rising production costs (in line haul, pick-up, and delivery) and
fuel surcharges in the next three years will lead to slight price
increases of up to 3 percent and force up revenue per shipment.
However, CEP providers will not be able to pass all of these
additional costs on to their customers.

Importance and volume of document shipping declining at domestic
level

"According to the results of our study, and in the light of ever
increasing usage of email, the volume of document shipments is
stagnating in Europe. Only emerging markets such as Turkey and Russia
report growth in documents - both places where a rush of new
businesses requires document services," says Ryssel.

While the weight per shipment (WpS) has declined at the domestic
level due to growth in more lightweight B2C and e-commerce shipments,
it has increased in the international segment.

"After a few shaky years, the European courier, express and parcel
industry is once again back on track for growth. At least that's what
the solid growth figures are indicating. Nevertheless, if the people
in charge are to steer their companies to success over the coming
years, they will have to prepare for the challenges they will be
faced with in the future - continuous market changes, evolving
customer needs, and macroeconomic uncertainty," Salehi concludes.
"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."

About the study

To determine the status of the CEP industry in Europe, the study
looked at 13 different countries: Belgium, France, Germany, Ireland,
Italy, the Netherlands, Poland, Russia, Spain, Sweden, Switzerland,
Turkey, and the United Kingdom. The analysis focused on the express
and standard network business, with express including the fastest
possible services with guaranteed delivery times and standard
comprising exact-date deliveries. The upper weight limit of
deliveries covered by the study was 2,500 kilograms.

About A.T. Kearney

A.T. Kearney is a global management consulting firm that uses
strategic insight, tailored solutions and a collaborative working
style to help clients achieve sustainable results. Since 1926, we
have been trusted advisors on CEO-agenda issues to the world's
leading corporations across all major industries. A.T. Kearney's
offices are located in major business centers in 38 countries. For
more information, please visit www.atkearney.de or www.atkearney.com.

Media contact
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A.T. Kearney GmbH
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80333 Munich, Germany
Phone: +49 (0)89 51568273
e-mail: stefanie.hauck@atkearney.com