9 April 2008 | Published by Datamonitor

London - Europe’s EUR11 billion business-to-consumer (B2C)* parcels market is emerging as a high growth opportunity for many businesses that of late had been focusing on their business-to-business (B2B) service. This is according to a report just published by independent market analysis firm Datamonitor. Titled “The Future of B2C – Analysis of business-to-consumer parcels distribution”, the report finds Europe’s B2C sector has been growing at a faster pace than the B2B segment due to global trends of eCommerce, rising Internet penetration and new supply models.

Demand for home deliveries one of the main growth drivers

Demand for home deliveries has become one of the main growth drivers in the express and parcels market over recent years and continues to transform markets and competitive dynamics in many countries around the world.

On a global scale, the majority of value in the market is generated by larger and more developed economies such as the USA, Japan, Germany, UK and France. However these markets are starting to saturate and the companies involved in the B2C sectors have not always been able to turn it into sustainable businesses. There is also significant growth potential in global emerging markets such as Eastern Europe and large untapped markets in Spain and Italy for example.

“Trends within eCommerce, internet penetration, new supply chain models, social demographics, innovations and new service providers are creating a dynamic environment in which parcel and express companies will have to adapt their strategies in order to gain competitive advantage,” says Erik van Baaren, Express Analyst at Datamonitor and author of the report.

Datamonitor expects Europe’s B2C parcels sector to reach a value of EUR15 billion by 2012 constituting an average annual increase of over 6%.

B2C emerging as a high growth opportunity

In most European countries the B2C parcels market is still dominated by the respective countries’ incumbent post offices that can benefit from their extensive retail outlet network as well as their experience and local knowledge with regards to reaching private customers. However, the B2C market has now emerged as a high growth opportunity for many businesses that of late had been focusing on their B2B service.

The post offices’ market share in Europe has been eroded considerably especially in more mature markets such as the UK and Germany. In other countries, for example in Scandinavia the national postal operators are still very dominant in the B2C market, reflecting their overall grip of the express and parcels markets in their countries. However, also there, they are under increasing pressure from private firms who can differentiate themselves in a number of ways: by either offering a higher level of service, exploiting niche areas (e.g. international B2C for certain types of customers), redesigning supply chains or by providing alternative methods of collection and delivery.

Opportunities in International, Consumer-to-Consumer (C2C) and new innovations shape the future B2C parcels market

“There are many dynamics affecting the European B2C market arising as a result of a number of trends”, says van Baaren. “Generally the international segment is showing strong growth partly driven by consumers and partly by mail order companies and other retailers who are re-organising their supply chains and are choosing to use regional warehouses and fulfillment centres to supply wider geographic markets.”

The C2C parcels sector is growing at a higher rate than traditional B2C. Furthermore it is also seeing new innovations such as Pick-Up & Delivery Points (PUDO) which offer customers alternative points to collect or drop off their parcels. Another example lies in the use of tracking and communication technologies to interact with the retailer to advise them of potential delays as well as with the final recipient to arrange their deliveries and reduce the amount of failed deliveries.

Challenges ahead

Reducing first time delivery failure presents one of the major challenges to the B2C industry as it has an impact on the profitability of the parcel delivery services and indirectly consumer satisfaction with B2C delivery services.

Despite the often astronomic rise of eCommerce the B2C parcels industry is not following the same order of growth pattern due to a relative decline in traditional mail order, digitisation of certain products (music, DVDs) and logistical trends such as order consolidation that are all limiting the volumes of parcels.

Other hurdles that have to be overcome include limitations to cross-border trade and other regulatory obstacles as well as the need for development of reliable payment solutions in less developed economies.

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