Achieving High Performance in the Post and Parcel Industry Accenture Research and Insights 2015 Contents
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Achieving High Performance in the Post and Parcel Industry Accenture Research and Insights 2015 Contents Foreword 3 Executive summary 4 State of the industry 5 High performer highlights 8 Defend the core business 8 Invest in the parcels opportunity 10 Diversify selectively 12 Being digital 14 Strategic priorities 18 On the horizon 20 Research methodology 22 2 Foreword The last mile is under attack. In a Traditional players be warned: strategies seismic market shift, we have moved are being upended. Historically, density from integrators and postal companies has been king as post and parcel players competing for market share, to extensive worked to fill their vast networks and experimentation and significant venture grow volumes. Now, flexibility matters— capital for last-mile delivery start-ups. perhaps far more than network size. Non- Ironically, these start-ups are powered traditional players can scale their networks by the same technology that is fueling up and down rapidly to suit market the parcels eCommerce boom—better conditions, shedding excess capacity when smartphones connected by faster they no longer need it and drawing on networks and driven by lower cost cloud extra capacity to meet high demand. Such platforms. Digital is at their core, which agile competitors can cherry pick where means these players can respond in a and when they serve, riding the waves of way that is inherently nimble, consumer- volatility that business-to-consumer parcel centric and flexible—aspects that volumes dictate. Brody Buhler traditional players struggle to maintain. Global Managing Director Digital is the powerhouse. Our analysis While these resultant new business Accenture Post and Parcel models are experimental, they can have shows high performers in the post and a dramatic impact in a world of big bang parcel industry are taking advantage of disruption. “Wait and see” is simply not digital technologies, such as mobility an option. and analytics, to accelerate the pace of change, enable new competition, inspire This situation is fed by fast-changing new consumer expectations and, perhaps retail models focused on speed. Retailers most importantly, drive growth in parcel such as Google and Amazon1 are building volumes. Now, more than ever, it is nearby fulfillment centers. Traditional important to not only embrace digital brick-and-mortar businesses have entered but to be digital. Yet as our new digital the fray, recognizing that their stores performance index and 2015 research are effective local fulfillment centers. In shows, being digital is no easy task for this way, a network is far less important post and parcel organizations. than effective last mile delivery and retailers are readily embracing the I am excited by the opportunities of these speed and features provided by these changing times. With the right digital new models. Large retailer Macy’s, for investments and bold moves, our research example, has partnered with Deliv to offer shows post and parcel organizations can fast, local deliveries from their stores.2 compete effectively in the marketplace. This demand for speed is also creating These early successes offer evidence shorter, bigger peak periods, where the that it is possible for post and parcel capacity of existing networks is simply organizations to not only navigate the overwhelmed for short, but important digital transformation necessary for time frames. With retailers adapting long-term survival, but also to thrive in their shipping models and eCommerce the new eCommerce-driven marketplace. creating significant changes to customer I look forward to discussing these findings expectations and demands, it is small with you in the coming months. wonder parcel delivery is under threat. Brody Buhler 3 Executive summary In last year’s postal report we identified Being digital On the horizon that high performers maintain three strategic priorities: defending the core Digital is clearly a game changer, Internet of Things (IoT) business, growing the parcels opportunity, whatever the industry. Successful digital The IoT has the potential to create and diversifying selectively across their investments so far are primarily focused new sources of revenue―not only by retail, logistics and delivery networks. on managing costs and improving embedding digital technologies within the They execute these priorities within the productivity. Now, the focus needs to organization, but also by extending into a context of being a digital organization.3 In turn toward investments that generate broader digital ecosystem of customers, 2015, our top five performers—Singapore revenue. We created the Accenture partners and connected products. Post Post, bpost, Posten Norge, UPS and Poste post and parcel digital performance and parcel organizations could use the Italiane—are employing these successful index to evaluate companies according IoT to create new data-driven businesses strategies to place them ahead of the rest. to their current digital capabilities and identify the gaps required to make digital and unprecedented improvements in the customer experience. High performer highlights “business as usual.” Drones Defending the core business Strategic priorities As we have seen in the media, Despite its steady decline, mail is still Our research shows there are three over the past 18 months there has the largest revenue generator for most critical areas on which post and parcel been a significant increase in drone post and parcel operators and a critical organizations should focus to deliver experimentation, with rapid progress source of cash for future investment. high performance. First, they need to in applications for autonomous drones High performers continue to defend seek out monetization of the digital (unmanned aerial vehicles) in logistic their core business to deliver strong opportunity, going beyond productivity operations. Irrespective of autonomous mail profitability. They invest in product and cost cutting to profitable digital drone delivery becoming a reality, innovation to add value and slow mail solutions that drive topline growth. drone applications are becoming more volume declines. Second, they need to implement mainstream—and could play a key strategies that address new retailer role in other solutions post and parcel Investing in the parcels opportunity and consumer demands while achieving companies will need, such as monitoring High performers show they can grow some of the same nimble scalability delivery conditions. parcel revenues through capturing market as the new market entrants to win the share and smart pricing. They continue battle for the last mile. Finally, they to exploit parcel revenues by rigorously must recognize that eCommerce-driven, focusing on improving the profitability cross-border transactions present both of B2C deliveries, while at the same time an opportunity and a challenge, reducing stimulating the growth of higher margin transaction complexities and investing B2B deliveries. to deliver an international strategy that addresses market entry, product LOGISTICS Diversifying selectively features and competitive position. High performers are growing their DELIVERY logistics business; eight out of the top DIVERSIFY SELECTIVELY 10 post and parcel organizations choose RETAIL logistics as a core diversification strategy. They also adopt a commercial mind-set GROW THE PARCELS OPPORTUNITY and business-oriented culture which tends to be catalyzed by privitization; 60 percent of high performers are DEFEND THE CORE BUSINESS privatized, versus only 10 percent of the bottom 10 performers. BE A DIGITAL ORGANIZATION The four dimensions of a post and parcel high performer 4 State of the industry Now in its ninth year, the Accenture in-depth analysis of the post and parcel industry explores the market’s latest trends and opportunities. The following factors are influencing the Figure 2. Mail revenue versus mail volume growth: 2012 to 2014 post and parcel industry: Mail revenue CAGR 2012-2014 Bubble size indicates 2014 revenues in US$ Mail volume decline is reaching 12 Growing revenue Growing revenue a plateau India Post 10 declining volume and volume From 2013 to 2014 mail volumes declined 8 by a mere 1.6 percent and have declined SingPost globally at a compound annual growth rate 6 Austrian Post of negative 2.6 percent since 2010 (Figure 1). 4 All countries are experiencing a decline in 2 transaction mail while direct marketing mail CTT CPC USPS is more stable and growing in some regions. 0 Posten Norge Indeed, postal organizations have effectively Posti RMG -2 DPDHL maintained or grown mail revenues, Poste Italiane Australia Post primarily through price increases (Figure 2). -4 NZ Post There are interesting regional differences; SwissPost -6 PostNL some operators such as DPDHL or Swiss Post La Poste Declining revenue -8 Post Nord saw minimal to no declines, while other Declining revenue and volume growing volume countries, such as Italy and the Netherlands -10 with Poste Italiane and PostNL respectively, -12-11 -10-9-8-7-6-5-4-3-2-10 12345 lost mail volumes at troubling rates. Some postal operators have launched regional Mail volume CAGR 2012-2014 cross-border mailing products, adding Note: CAGR: Compound Annual Growth Rate volume from other countries to help create Source: Annual reports; Accenture analysis successful, sustainable mail businesses. New entrants are only threatening the traditional players’ market share in countries that have historically lower mail service quality. As a result, competitive erosion appears to largely be within each organization’s control. Figure 1. Evolution of mail volume (in aggregate) Annual mail volume, in millions, and year-on-year mail volume growth/decline, in percentage Compound Annual Growth Rate (2005-2010) Compound Annual Growth Rate (2010-2014) -4% -2.6% 400,000 -2.5% 1.6% -3.8% -9.6% -5.5% 350,000 362,243 353,235 359,040 -2.2% -4.7% 345,520 -1.8% -1.6% 300,000 312,519 295,270 288,734 275,142 250,000 270,101 265,707 200,000 150,000 100,000 50,000 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 0 Note: 1. Sample size 19 postal organizations included; 2.