Adding Value to Parcel Delivery - September 29, 2015 - Accenture
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Adding Value to Parcel Delivery September 29, 2015
Research Approach
A comprehensive analysis of CEP (Courier, Express & Parcel) industry
Assesses historic performance, identifies future trends and determines shareholder value drivers
Includes B2B and B2C segments, domestic versus international shipping as well as overnight
and non-day, and time definite products segments under 150 pounds or 70 kilograms
Examines current and new players in this market, including global integrators, postal organizations,
regional players, shared economy and crowdsourcing actors, as well as retailers moving downstream
Sources include: public information, paid and proprietary primary and secondary research, internal
and external subject matter expert interviews and extensive market and financial analysis
Copyright © 2015 Accenture. All Rights Reserved. 2
Market Definition
Definition of CEP (Courier, Express and Parcel)
Time sensitivity: Usually consignments
Same day & delivered by a specified day and even
in-night Air/Road express Air charter
by a specified time
Time certain
Priority Express
Express freight Size of consignment: Maximum weight
Next day usually considered to be about 31.5kg
(70lbs); Few exceptions.
Deferred and
Day certain Other Express Freight Forwarder
Day Groupage
uncertain Postal FTL
LTL Mostly Door to Door
Document Parcel Freight LTL, FTL
Space represented by pure express players
>1kg 31.5kg 1000kg such as UPS, FedEx and TNT Express; as
well as express and parcel arms of postal
Source: TNT, Accenture Research companies such as Geo Post (La Poste)
Scope of Market = Courier, Express and Parcels and Purolator (Canada Post)
Copyright © 2015 Accenture. All Rights Reserved. 3
Parcel Delivery—Key Findings Summary
Power shifting to the consumer
Internet driving growth, transforming the supply chain
B2C outgrowing and cannibalizing B2B
The world is flat: rise of the micro multi-national
Parcel
Delivery Growing demand and increased volatility
Product mix means lower yields per package
Investments to grow capacity, yet declining ROIC
Costs are rising faster than revenue
High fixed cost means less flexibility when it is key
Last mile is where the battle is taking place
Sharing economy set to disrupt the last mile further
New technology will change the game
Home delivery becomes the new premium
Most delivery organization know what to do, but need to do it better, faster, cheaper
Copyright © 2015 Accenture. All Rights Reserved. 4Digitally enabled consumers driving most of the eCommerce demand
see bargaining power shifting toward them
Rise of the digital consumer
Consumers with:
Empowers: So they seek:
Greater choice
Advent of:
Faster reviews
Lower prices
Data
Low switching costs Greater convenience
Seamless experience
Devices
Retailers and Deliverers with: in
More competition Buying Paying
Social networks
Receiving Returning
Easier aggregation of
services
Better visibility in
supply chain
Presents: So they provide:
We have crossed barriers in choice, transparency, and service expectations
Source: Accenture analysis
Copyright © 2015 Accenture. All Rights Reserved. 5The parcel delivery value chain has expanded in scope.
Roles at each stage have evolved toward a stronger service orientation.
Evolution of parcel delivery value chain
Past—Deliver Present—Digital, Transparent, Fast and Flexible Delivery
Pick up
• Less visibility into
demand for services
• Limited influence on
demand
Warehousing
• Low C2C and B2C
• Less transparency
• Easier timelines
• Limited competition
Transportation
• Recipients with low
bargaining power
• Low service
expectations
Delivery
Need to develop new resources and capabilities to deliver on service expectations at each step of the value chain
Source: Accenture analysis
Copyright © 2015 Accenture. All Rights Reserved. 6The last mile, which holds key to the consumer experience, has
witnessed an emergence of multiple delivery models
Last mile delivery models
A) Postal mail-run
Warehouses
B) Courier delivery 2
D) Lifestyle/ Lifestyle/Crowd-shippers’ delivery to homes similar to courier
Crowd-shippers
C) Courier delivery to lockers
Crowd-shippers delivery to lockers
Retail stores Parcel lockers/
Access points
Consumer convenience and cost reduction have been primary objectives guiding the change
Source: Accenture analysis
Copyright © 2015 Accenture. All Rights Reserved. 7The challenge of increasing service needs is exacerbated by the
growing delivery demand calling for scale up of infrastructure
Courier-Express-Parcel (CEP) market size and growth
USD billion, %, 2008-2020F
Routes
Global market size
USD billion Faster growth (~5.4%, 2013-2017) than
International domestic primarily due to growing cross-
border eCommerce
+5% 343.1
Continues to be >75% of overall market
+4%
Domestic with ~5.0% growth (2013-2017)
237.9
194.8 Customer segments
Slower than B2C with close to GDP growth
B2B but significant share and higher margin
contribution
Close to eCommerce growth rates and
2008 2013 2020F B2C growing in significance
Emerging segment from growth in auction
C2C sites and the circular economy
Geographies
Market APAC N. America W. Europe Europe Rest Middle East S. America Africa
2013 share 32% 33% 23% 5.7% 3.5% 2.5% 1.5%
2020 share 38% 30% 19% 5.3% 4.1% 2.5% 1.9%
2013-20 CAGR 15% 9% 5% 8% 7% 5% 10%
Fixed cost heavy model: The growth has significant investment implications to meet demand
Source: Accenture research, Transport Intelligence
Copyright © 2015 Accenture. All Rights Reserved. 8eCommerce is driving growth in domestic and international markets
Courier-Express-Parcel (CEP) market size and growth
USD billion, %, 2010-2013 and 2013-2017F
Domestic vs. international growth—Historical and Future1 Drivers of growth
20%
131.9 70% Of worldwide spending by millennials by 20202
International (2010-2013 & 2014-2017 CAGR)
75.4
346.0
15% 55% Urban population out of total by 20173
10%
237.9
109.4
49% Smartphone penetration in mobile phones by 20174
81.6
77.4
46% Internet penetration in population by 20175
5%
67.4
Europe N. America 27% International eCommerce out of total by 20176
APAC Global
0%
0% 5% 10% 15% 20% 12% Middle class growth rate in APAC 2009-20207
Domestic growth (2010-2013 and 2013-2017 CAGR)
Fixed cost heavy model: The growth has significant investment implications to meet demand
Notes:
Size of the bubble represents market size. Previous point—2013, Leading point—2017F. Total market expected to move from US$ 237.9 billion to US$346.0 billion.
Source: 1 Transport Intelligence, 2 https://badgeville.com, 3 “World Urbanization Prospects” UN Report, 4,5 www.digitalbuzzblog.com, 6 eMarketer, 7 Ernst & Young
Copyright © 2015 Accenture. All Rights Reserved. 9B2C will continue to grow in significance across geographies,
driving growth and presenting challenges
CEP market size and growth—B2B vs. B2C
USD billion, %, 2013-2020F
B2B vs. B2C growth1 Drivers of growth
15%
Asia Pacific 55% Urban population out of total by 20173
49% Smartphone penetration in mobile phones by 20174
B2Cl (2013-2020 CAGR)
10% Global
46% Internet penetration in population by 20175
North America
5% Western Europe 12% Middle class growth rate in APAC 2009-20207
Challenges:
0% Volatility Last mile Yields Returns
0% 5% 10% 15%
B2B (2013-2020 CAGR)
B2C focused delivery networks call for different focus areas vs. B2B
Notes:
1 Size of the bubble represents total market size in 2020. Total market expected to move from US$237.9 billion to US$343.1 billion.
Source: Accenture research, Transport Intelligence, Accenture analysis
Copyright © 2015 Accenture. All Rights Reserved. 10Although B2C is expected to grow in share, B2B will remain a
sizeable opportunity
CEP market share—B2B vs. B2C
USD billion, %, 2013-2020F
Price Product Scope for
Segment Size Growth Density Profitability
sensitivity dominance differentiation
B2C Lower Higher Lower Higher Deferred Lower High
B2B Higher Lower Higher Lower Express Higher High
Firms need to find optimal balance in portfolios and investment focus in both B2B and B2C
Source: Accenture research, Accenture analysis
Copyright © 2015 Accenture. All Rights Reserved. 11Although B2C is driving growth; it is also exposing delivery
companies to more volatility in demand
B2C implications—Volatility Dec 2013: “UPS admits it was Dec 2014: “UPS slammed by a
unprepared for the late surge different holiday season mess-up
in online holiday shopping”1 …adding too much extra firepower”1
FedEx average and maximum daily shipping UPS average and maximum daily shipping
volume (million)2 volume (million)2
25 35
20 30
15 25
10 20
5 15
0 10
2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014
Maximum shipments in a day Average shipments in a day Maximum shipments in a day Average shipments in a day
UK Cyber Monday—20143 China Singles Day—20134
39% More parcels than previous Monday 166 Shipments across China
million
More cross-border shipments than Greater than average daily shipping
86% previous year 10x volume
Agility in value chain would be important to contain costs without compromising service standards
Source: 1 News reports; 2 Financial reports and News reports; 3 Metapack; 4 Financial Times
Copyright © 2015 Accenture. All Rights Reserved. 12Investments are being made by delivery firms and retailers to expand
capacity and modernize network in the parcel delivery business
Capital expenditure on parcels
2014
Major investment stories—Parcel delivery Major investment stories—Retailers
DPD
DPD has invested £10.2 million in six depots to Ali Baba is investing US$1.5 bn
expand its capacity to handle B2C parcels Ali
Baba over three to five years to
expand the logistics network in
China (2014)
DHL investing EUR 750 million to modernize and
DHL expand its parcel network…building Germany’s largest
parcel processing center in Hessen (2013)
Ali Baba’s Institutional investors are co-
co- investing US$3 billion over the
Investors same period along with Ali Baba.
FedEx Ground investing US$1.2 billion this year in 70
Fedex expansion projects in addition to the US$2.5 billion
spent over the past five years to add capacity (2014)
Australia Post doubling capacity at Sydney and
Aus
Post Melbourne parcel facilities as a part of its AUD 2
billion investment in the Australia Post Network
(2012) Amazon has spent US$13.9
Amazon billion since 2010 on
UPS plans to invest US$2 billion over the next five warehousing and fulfilment to
years to develop its international infrastructure in support its business including 13
UPS Europe, Asia and the Americas, (4.5% to 5% of annual parcel depots in the United
revenue) …targeting growth markets and Kingdom.
improvements in the profitability of eCommerce
deliveries. (2014)
Firms are scaling up to meet future demand and becoming more fixed cost heavy
Source: News reports, Accenture analysis.
Copyright © 2015 Accenture. All Rights Reserved. 13Many firms have pursued the inorganic route to build scale and
acquire new capabilities to widen the scope of their business
Mergers and acquisitions Trend is continuing in 2015 with
the FedEx €4.4bn bid for TNT
Number of deals by year1 Number of deals by business (Last five years)
2009-2014 2009-2014
45
42
Logistics and Transportation 89
34 Parcels and Express 38
Marketing and Sales 17
22
20 IT Services and Software 14
14 Financial Services 9
Mail 6
Real Estate 6
2009 2010 2011 2012 2013 2014
Acquisition strategy would be key in acquiring the right assets and maximizing effectiveness and efficiency
Notes:
1 Firms included are DPDHL, Austrian Post, Canadian Post, La Poste, PostNord, SingPost, Australia Post, UPS, Fedex, Bpost, Swiss Post and Itella.
Source: Financial reports, Accenture analysis
Copyright © 2015 Accenture. All Rights Reserved. 14Sharing economy start-ups are witnessing an upsurge in venture
capital interest across industries
Total funding in sharing economy start-ups
958
357
283
60 96 116
2009 2010 2011 2012 2013 2014
Top funded companies Top investors
Stay 800
Airbnb($776.4M), Wimdu($90.0M) Sequioa, TPG Growth
Transport 645 Lyft ($333M), RelayRides($53.2M), Trinity Ventures, Shasta Ventures,
Boatbound($5.3M) Google Ventures, August Capital
Personal Goods 273 Chegg ($252M; IPO at $1.1B).
N/A
Bag Borrow or Steal($20.0M)
Private Spaces 51 LiquidSpace($26.2M), Shasta Ventures, Roth Capital Partners,
PivotDesk($6.7M), Storefront($8.9M) Lucas Venture Group, Spark Capital
Business Equipment 16
Getable($3.2M), Yard Club($1.6M) N/A
Food 11
EatWith ($9.2M), Suppershare GreyLock
Logistics 4
Friendshippr($1.2M), WeDeliver($0.8M) N/A
Storage 0
Roost($160k), StowThat($50k) N/A
Source: Sharing Economy Landscape 2015, Tracxn research
Copyright © 2015 Accenture. All Rights Reserved. 15New entrants are drawn to a growing but underserved industry and
are enabled by technology
List of promising start-ups by business segment
Transportation Systems Crowd Shipping Containers
Futuristic shipping models Flexi-cost last mile shipping Container packing innovation
PiggyBee, Friendshippr, Roadie Staxxon, Holland Container
Matternet, Google drones, Barnacle, Nimber, Zipments For You, Innovations
Amazon drones Bringrs, UberCARGO
Freight Rates Local Delivery 3PL and Other Services
Transparent shipping costs Low-cost urban delivery models Enabling shippers
Swapbox, Boxc, Postmates,
Freightos, Tanspoteca,
DoorDash, Zipments, Deliv, Sidecar, Shipwire, Cloud Fulfillment, Scurri,
iContainers, Freight Filter,
Uber, ParcelBright, Parcel Metapack, 71lbs, Axida
Xeneta, Shippo, ShipHawk,
End-to-end Shipping Storage Trucking
Uber of shipping in C2C space Crowd-sourcing storage space enabling Tracking and management
flexi-delivery
Cargomatic, TruckTrack, KeepTruckin,
Shipster, Shyp, Shipbob, Youtruckme.com, Keychain Logistics,
Lockitron, MakeSpace, Boxbee, Cubbyhole,
Schlep, MinFragt.dk uShip
Parcel Pending, ShareMyStorage, Roost
Last Mile
Creating new challenges and opportunities for legacy companies
Source: www.jonathanwichmann.com
Copyright © 2015 Accenture. All Rights Reserved. 16The new entrants in last mile are mostly asset-light and utilize the
power of crowdsourcing to achieve outcomes at lower costs
Start-ups—Last mile
Storage solutions mostly based
on crowdsourcing spaces. Offer
temporary storage for later Local
Crowd delivery and collection.
Shipping Deliveries
Present opportunities to
manage flexible deliveries while
minimizing travel costs.
Crowdshipping enabling asset- Localized, urban delivery models
light, low fixed-cost models to offering delivery solutions at
solve the last mile delivery. lower prices than legacy
players and enabling offline
Potential partners for parcel retailers to add delivery
delivery companies that do not Storage services.
wish to grow investments in last
mile. They are competitors and
potential partners.
Operationally flexible models generate cost advantage for new entrants but scalability remains to be evaluated
Source: www.jonathanwichmann.com, Accenture analysis
Copyright © 2015 Accenture. All Rights Reserved. 17Parcel Delivery— Conclusions – 9 Value Drivers
Power shifting to consumers
1 To deliver on
To support market
strategies Focus on consumers’ wish-list
Increase the
4 Efficiency 3
Recipients
and
Productivity
Go Beyond
Traditional
Variablize
Costs
Underserved
& Growing Grow
International
Disaggregate
the Value
Chain
Brand and
Segment
Mergers and
6 5
Acquisitions
To build sustainable Deploy To succeed in executing
operating model Strategic market strategies
Pricing
2
Consumers’ Wishlist
Copyright © 2015 Accenture. All Rights Reserved. 18Executive Takeaway
Parcel Value Drivers (1 of 2)
Rationale/Why? Description Benefit/Value Description
• Rise of digital • Relationship • Better customer • UPS MyChoice
consumer w/recipient experience • Australia Post
Focus on • Mobile lifestyle • Two-way • Market share retention • La Poste
the recipient • Competition for last communication • Lower cost to serve
mile • New products/services • Incremental revenue
• Auto-replenishment • Monetize preferences
• Transportation a • Value added services • Additional revenue • UPS SCS
commodity • eLogistics and • Customer stickiness • SingPost
Go beyond • Growth of eCommerce warehousing • Long-term contracts • FedEx/Genco
traditional • Supply chain • Returns management • Diversification of risk
disruption • Delivery options
• Declining yields
• Rise of micro • Cross-border • Revenue growth • FedEx (Brazil, Mexico,
multinational partnerships • Higher yield per TNT)
Grow international • Lower barriers to X- • E2E visibility package • Austrian Post (EEC)
border • Customs integration • Higher margins • Japan Post / Toll
• Access to Internet • Global trade tools • Diversification of risk Priority
• Growing middle class
• Segment growth • Segmentation • Greater market share • UPS SCS
• Rise of delivery • Vertical specialization • Lower price sensitivity • Austrian Post and
Brand and options • Brand positioning • Higher revenue Fiebra brands
segment • Expansion of services • Product portfolio • Higher margin • La Poste
• Blurring of player lines management
• Declining yield per • Subscriptions services • Higher margins • Amazon Prime
package • Analytics • Incremental cost • FedEx and UPS
Deploy strategic • Poor pricing practices • Competitive pricing coverage pricing (residential and
pricing • Costs to revenue • Surge/cost-based • Greater revenue fuel surcharges
increasing pricing • Greater market share • Uber peak pricing
• New products/services • Airline pricing
Copyright © 2015 Accenture. All Rights Reserved. 19Executive Takeaway
Parcel Value Drivers (2 of 2)
Rationale/Why? Description Benefit/Value Description
• The firms need • Big data • Higher margin • Purolator
to build capabilities • Analytics • Greater supply • bPost
Increase efficiency to succeed • Technology chain agility • FedEx Express
and productivity at implementing • Leading practices • Cost avoidance
market strategies • Greater
revenue/share
• Growing peaks • Outsourcing • Lower/avoided • Innovapost
and valleys • Lease vs own CAPEX • Lasership
Variabilize • Declining asset • Labor strategies • Cash generation • Deliv
costs utilization • Asset divestment • Higher margins
• High downside if • Speed to market
revenue declines
• Declining asset • Value creation • Higher ROA • SingPost Books
utilization • Capacity expansion • Faster speed • GXG @ USPS
Disaggregate • Shared economy • Asset utilization to market • Uber Last Mile
the value chain growth • Build ecosystem • Higher revenue
• Last mile competition • Higher margin
• Stagnant B2B growth • Market assessment • Revenue growth • Austrian Post
• Declining package • Target identification • Speed to market • DHL
Mergers and yield • Post-merger • New capabilities • FedEx
acquisitions • Excess capacity integration or geos • Sing Post
• Need for • Synergies realization • Cost synergies
specialization
Copyright © 2015 Accenture. All Rights Reserved. 20Contact Details
For more information, please contact:
Tim Bateman Brody Buhler Andre Pharand
Global Parcel Lead Global Managing Director Global Post & Parcel Management
Post & Parcel Lead Consulting Lead
tim.bateman@accenture.com robert.b.buhler@accenture.com andre.pharand@accenture.com
+44 7774 299 350 +1 703 405 1253 +1 917 755 5551
Copyright © 2015 Accenture. All Rights Reserved. 21Copyright © 2015 Accenture. All Rights Reserved. 22
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