UPU News : Growing parcels market an opportunity for the Post, according to latest UPU research

31.05.2019 - The UPU’s latest “Postal economic outlook” takes an unprecedented look at competition within the postal sector. It shows that designated operators hold a declining share of the market for postal services, including in the fastest-growing segment – parcels. The UPU’s resident economist, Mauro Boffa, explains.

Over the past 10 years, many designated operators have successfully replaced the share of revenues lost in the letters segment by expanding their activities in parcels, which made up on average 24.9 percent of global postal revenues in 2017 compared to 14.8 percent in 2007. However, these operators have not yet managed to grow total revenues at the same pace as economic growth – a phenomenon known as “postal decoupling”.

The UPU’s projections show that while many designated operators still hold a strong position in the letter-post segment, with an average market share of 72.8 percent, their situation in the global parcels market is much weaker, with only 37.8 percent. Non-designated operators hold most of the market share in this segment, a share that is even higher in regions where the market has been widely liberalized, such as Latin America.

With continued double-digit growth in global e-commerce sales, parcels have become the fastest growing segment in the sector and a ripe opportunity for designated operators to drive revenues if they quicken the pace of innovation.

“Unlike the letters market, the parcels market is not yet saturated,” explains Boffa. “E-commerce is still taking shares from traditional retail, and new consumer needs are driving this expansion,” he says.

Regaining speed

Investments made in the parcels segment seem to be paying off for designated operators, according to UPU figures comparing growth in 2017 with the ten-year trend. In 2017, the growth rate for international parcels expanded to an impressive 29.7 percent compared to the compound growth rate of 13.3 percent between 2007 and 2017.

Online retailers are looking for inexpensive and innovative delivery providers. Designated operators have the advantage of their established worldwide network and, in many countries, their mandate to provide a reasonably priced public service. On the other hand, designated operators have struggled to quickly implement the variety of services today’s customers expect, such as anytime, anywhere delivery and simplified return policies.

“We see that designated operators are starting to think more about partnerships with the other sector players to keep up with changing demands,” says Boffa.

Buyers’ market

Fierce competition in the market is a boon for postal customers, who now have many options available to them.

“The customer is the one that gains in all of this – the market is very pro-consumer right now,” says Boffa.

He adds that this provides motivation for operators, both public and private, to continue improving their services for increasingly demanding consumers, and these investments in innovation are likely to pay off.

“Because the market is still growing, designated operators can be sure that they will get their investments in parcel service innovations back,” he affirms