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Latest research carried out by Apex Insight into the C2X parcels segment reveals faster that growth in demand has been faster than in our previous study on the area in 2013.
Consumers and small businesses wishing to send occasional parcels have traditionally been served by the Royal Mail with customers taking their parcel to their local Post Office and queuing up to send it. Historically, parcels carriers did not target smaller customers as this type of volume did not fit their business models, which rely on consolidation of pick-ups and/or deliveries to obtain superior economics. However, volume growth means that consumers, and small businesses such as eBay sellers, represent an increasingly important segment which has consequently become more attractive, both to traditional B2B carriers and new entrants to the market.
Two established trends drive the growth in opportunity for the Royal Mail’s C2X competitors: market volume growth and loss of share by the Royal Mail.
Market growth comes from two main sources. The rise of home shopping, which has led to significant growth in the volumes of items being returned by consumers, and marketplaces, such as eBay and Amazon. These have have become increasingly important shopping destinations. Their many small sellers need a way to dispatch the items they sell but, like consumers, may not have the scale to operate accounts with established parcels carriers.
The Royal Mail, as a private sector business, has increased its focus on profitability. This has led to increases to its prices with particular impact on certain size and weight bands. As a result, in many cases, it has become significantly more expensive than some of the newer C2X alternatives.
While the Royal Mail it has been successful in growing volumes from business customers such as home shopping retailers, it has inevitably lost some of its historically dominant C2X segment share.
Some established carriers, such as UKMail, TNT, Interlink and DHL have introduced specific services for consumers. At the same time, businesses with models specifically focusing on the needs of this segment have emerged with many having achieved impressive growth rates. The models can be categorised as networks and brokers.
Networks have collection and delivery points, which are either lockers or manned locations such as convenience stores. Examples include Collect+, myHermes ParcelShop, UPS’s Access Point network, which use the systems of its recent acquisition, Kiala, and the InPost and ByBox locker networks.
Brokers operate consumer-facing websites which offer services from a range of mainstream parcels carriers, typically at rates which would not be accessible to the consumer. Examples include Parcel2Go, Interparcel and Parcel Monkey.
Apex Insight’s C2X parcels report finds that satisfaction levels vary between the individual networks and brokers with lost parcels being the most frequent cause for complaint but price being the biggest driver of actual switching.
Prospects for further C2X parcels segment growth are good. Certainly few people doubt that home shopping will continue to grow and eBay UK has performed strongly in its latest year suggesting that marketplace shopping is still far from mature.
The Royal Mail’s strategy is an area of greater uncertainty for its competitors. 2013 price increases harmed its volumes but more recent changes were designed to improve its position. Amongst the other players, it is not yet clear which business models or which companies will emerge as the winners. The market presents opportunities and threats for the various different models but the opportunities provided by volume growth mean that any eventual shakeout is likely to be delayed.
About Apex Insight
Apex Insight is an independent provider of research and consulting services covering business and financial services markets in the UK and Europe. It publishes insightful market reports and carries out commercial due diligence and other bespoke consulting exercises to support managers, investors and advisers in making better business decisions.
