Lewes, DE -- (SBWire) -- 01/22/2015 --UK parcels market report shows that it continues to pick up speed after the recession with both higher margins and a more positive outlook for market growth than this time last year. The market is now over £8bn in size with the main driver of parcel volumes, and service innovations, continuing to be the growth of home shopping.

Operator trends

In the last year there has been no significant further consolidation through acquisition, however the organic growth records of leading carriers reveal clear winners and losers. Operators who have gained share include the Royal Mail / Parcelforce, now competing effectively under private ownership, the GeoPost businesses – DPD and Interlink – which have made a series of B2C wins on the back of service enhancements, and APC, where feedback on service remains strong. Those who have lost market share include TNT Express, which was impacted by a large contract loss and disruption from the aborted UPS bid.

Overall industry profitability has improved but remains modest. Nevertheless, several operators are now profitable: seven have EBIT margins of at least 8%. However, the industry picture continues to be distorted by specific issues with two businesses: the turnaround which is now well underway at City Link and Yodel's challenges in integrating and turning around the former DHL Domestic business.

Inquire about this report: UK Parcels: Market Insight 2014

Related Report: European Parcel Shops: Insights from Interview Research 2014

Segmentation

The three main market segments (business-to-business, business-to-consumer and consumer/small business-consigned parcels) have continued to converge as home shopping growth has made B2C an increasingly attractive segment, making it a high priority for carriers such as DPD and UK Mail to focus on areas they can serve profitably. At the same time, consumer carriers have increasingly invested in tracking and tracing systems and sought business customers.

New niches have grown with parcel shop chains and locker networks, such as those of Collect Plus and Hermes, ByBox and InPost, being rolled out to provide click-and-collect solutions and to serve eBay sellers. Brokers, or comparison sites, such as Parcel2Go and Parcel Monkey, also continue to grow in significance. The diagram illustrates the increasing complexity of the B2C segment with a number of different routes a parcel may take, only some of which lead to a B2C delivery, while others result in a B2B shipment or, in the case of a click-and-collect delivery to store, not necessarily leading to a parcel shipment at all.

Key industry issues

An ongoing challenge for operators has been the development of a model to serve home deliveries profitably, enabling them to exploit the growth segment without damaging overall economics and service levels. Progress has been made, with alternative locations, proactive text messages, 1-hour delivery windows and now Sunday deliveries being introduced or trialled by many carriers, but challenges remain.

Customer retention has traditionally been an issue in what is a highly competitive industry with interviews suggesting that churn rates of over 20% are not unusual.

Scale economies are important in increasing route density and hence profitability. However, operators have not always been able to capture this; scale has not, in practice, resulted in higher profitability for UK parcels carriers. Factors such as compatibility of operations with market segment focus and volume of business appear to be more important in determining profitability.

For many customers, the physical goods shipped in a parcel represent a decreasing proportion of overall value relative to other aspects such as information, intellectual property and brand. This ultimately makes basic parcel delivery less valuable as a service. 3D printing illustrates the extreme case of this where the physical goods (ie the plastic 'ink' that the printer uses) is very much a commodity, with most of the value being in the 'pattern' information transferred electronically – a form of e-substitution for physical delivery.

Outlook

We expect to see continued growth in the market at an accelerating rate as home shopping continues to grow and a recovering economy strengthens the outlook for B2B parcels.

Price increases are expected to continue to be modest with volume remaining the main driver of market growth.

Inquire about this report: UK Parcels: Market Insight 2014

Related Report:
European Parcel Shops: Insights from Interview Research 2014

About Market Research Reports, Inc.
Market Research Reports, Inc. is the world's leading source for market research reports and market data. We provide you with the latest market research reports on global markets, key industries, leading companies, new products and latest industry analysis & trends.

For regular industry updates subscribe to our newsletter at:
http://www.marketresearchreports.com/subscribe-to-newsletter