Parcel delivery, an ever-changing market
Over the past few decades, the world of transportation has changed significantly, including the parcel delivery industry. The number of parcels shipped around the world is constantly increasing. In France, it grew from 602 million in 2004 to 900 million in 2016 and exceeded 1.3 billion parcels shipped in 2020 (source Xerfi).
Given these impressive volumes, the parcel delivery industry has taken action to meet new transportation needs, especially express delivery. The wide range of services offered by parcel delivery companies is leading more and more industries to choose this type of transport for the delivery of their goods.
The majority of shipments handled by parcel delivery services come from the manufacturing industry, which makes traditional parcel delivery services dependent on the volume of industrial production, and in particular from the automotive industry. The deindustrialization of Europe has affected the demand for parcel delivery services. Conventional parcel delivery services are slowly being overtaken by express parcel delivery services, which are increasingly in demand by wholesale and retail companies. To supply their distribution outlets, merchants use the services of parcel delivery companies and express carriers.
The surge in e-commerce sales
Driven by the rise of personal computers, smartphones and the widespread access to Internet, e-commerce sales have experienced a strong growth since the beginning of the 2000s. The year 2020 is a turning point for retailers: according to Fevad (Federation of e-commerce and mail order) from 2014 to 2020, online sales have grown by almost 100% in 7 years. Online product sales have increased by 32% (1), significantly increasing the number of packages to be handled by parcel delivery companies who were unprepared. Express delivery companies have greatly benefited from this increase in online sales, which represent 30% of their business.
The market standard set by Amazon and the rise of B2C sales have made customers (including B2B customers) more demanding about their deliveries. The perceived value of transportation has deteriorated, putting pressure on prices. At the same time, consumers are asking for better service quality (shorter and shorter delivery times, real time tracking, eco-friendly delivery) but few are willing to pay more.
The parcel delivery industry is therefore facing major challenges with the growth of e-commerce sales.
The growth of parcel delivery networks
In order to face the strong competition and the high demands of customers, parcel delivery companies are gradually transforming their networks, modernizing some existing agencies or opening new ones in strategic areas. For several years, the trend was to close agencies, but recently, the market is experiencing a revival. Many players are focusing on improving the productivity of their current network, mainly by expanding the surface area of their buildings, increasing their sorting capacity. But also by acquiring new equipment to automate their operations. The processing of parcels can thus be carried out more quickly and more accurately, also improving the working conditions of employees.
Beyond the national network, parcel delivery companies are encouraged to grow their international reach (especially in Europe) through partnerships, acquisitions/mergers or internal expansion policies. Some parcel delivery players such as FedEx, UPS and DHL have a multimodal network thanks to their air fleet which allows them to transport more packages internationally.
A wide range of services
In a competitive and rather standardized market, parcel delivery players find it difficult to stand out from each other. Therefore, they will develop strategies to diversify their offer, especially by providing industry-specific expertise. Parcel delivery companies specialize in one or more industries requiring unique logistics, such as pharmaceuticals, automotive, fresh and frozen food, etc.
Delivery services are also a way to differentiate themselves for customers who are increasingly demanding in terms of speed, flexibility and tracking, mainly by providing:
- Different delivery methods: at home, at pick-up points, in a locker, store pick-up, in a post office, etc.
- Extended delivery times to lower delivery failure rates: office delivery, evening delivery, appointment delivery, weekend delivery…
- Delivery tracking: customers are able to track the progress of their package in real time and be notified by email or SMS.
In practice, sectorization represents a limit for the implementation of a route optimization solution. Implementing a solution that does not take into account this operating system would inevitably lead to major organizational impacts: rethinking warehouse management, redesigning how transport partners work together, etc.
There is currently no sectorization solution adapted to the last mile with large quantities. Parcel delivery service providers are still struggling when they have to change the way their territorial division has been structured over the years. Kardinal took on the challenge of finding a solution to this complex problem without disrupting how depots are organized.
New delivery methods
The success of delivery in pick-up points
In order to provide their customers with different delivery options, the major parcel delivery companies rely on a network of pick-up points, either their own (La Poste Group with Pickup Services, UPS with UPS Access Point) or in partnership (DHL and TNT Express with Relais Colis, GLS with Mondial Relais). The La Poste group boasts a dense network where 95% of the French population is less than 15 minutes away from one of its 8,500 Pickup points.
Delivery in pick-up points is becoming increasingly popular, with more than 64% of French online shoppers using it in 2020 according to the Fevad/Médiamétrie survey (2). Home delivery is still the first delivery method used by buyers (86.2%) despite the risk of delivery failure.
The rise of C2C sales
Delivery to a pick-up point is widely used for peer-to-peer transactions. In recent years, C2C marketplaces have witnessed steady growth: Airbnb, eBay, Leboncoin, Vinted, Videdressing… these online sales platforms are very popular with younger generations before attracting all ages. The Lithuanian platform famous for selling second-hand clothes, Vinted, is the 3rd largest fashion e-commerce website in France (3) with nearly 16 million users in 2021. The sharing economy is on the rise as it meets the challenges of a more sustainable and environmentally friendly consumer society.
This market is therefore a great opportunity for express parcel delivery players, many of whom offer their services for C2C deliveries: Mondial Relay, DHL and Relais Colis with DHL Click & Bring, La Poste with Colissimo, Chronopost with Shop2Shop, UPS with UPS Access Point.
The rise of green fleets
With global warming, consumers are becoming increasingly aware of the need to protect the planet. The transport industry is no stranger to these environmental issues, backed by public authorities. As a source of pollution, cities are introducing new measures to encourage greener logistics. Low-emission zones (LEZ), parking spaces reserved for electric vehicles and mandatory reporting of vehicle emissions are among the regulations that encourage carriers to adapt their vehicle fleets. Electric trucks or vans, bicycles, three-wheelers… “clean” modes of transport are increasingly used for urban deliveries.
Some carriers choose to use a service provider with green vehicles, such as Dachser, which outsourced its last-mile deliveries to the Triporteurs de l’Ouest in several cities in Brittany, France (Rennes, Saint-Malo and Nantes) in 2017. Using bicycles fitted with trailers, deliveries are pollution-free and noiseless. Bicycles can also easily avoid traffic jams thanks to dedicated bike lanes. In fact, according to a study by the University of Westminster, electric cargo bikes deliver 60% faster than trucks in city centers (4).
Many carriers prefer to invest directly in green fleets, such as Chronopost, which has more than 650 low-emission vehicles (electric, NGV and cargo bikes) in France. These vehicles allow the express delivery company to make 100% “carbon-free” deliveries in 17 French cities, including Paris. Plans for increased electric mobility are being implemented by the majority of the market’s major players, including:
- DHL Express France aims to make 70% of its first and last mile deliveries with zero-emission solutions by 2025.
- DPD has committed to roll out a zero-emission fleet in 225 European cities by 2025.
- FedEx is committed to making all its activities carbon neutral by 2040.
Using green vehicles allows companies to stand out from competitors and to convey a positive image to consumers and public authorities. It also allows companies to stay ahead of tomorrow’s regulations, as cities become ever more eco-friendly.
The parcel delivery industry is changing to meet the new consumer habits of the general public. Driven by e-commerce sales, the parcel delivery industry is now facing different challenges: the expansion of national and international parcel delivery networks, the increased range of services offered (extended time slots, live parcel tracking, etc.), especially in terms of the delivery methods. Environmental issues are now at the heart of consumers’ concerns and are pushing carriers to create greener fleets, especially in urban areas.