This report reviews the UK parcels market encompassing the business-to-business, business-to-consumer and consumer / small business consigned segments. Having been refined, extended and improved over the last 18 years, it is the leading survey of the UK parcels market, used by many carriers, and other parties with interests in the industry.
It quantifies the market size, historical growth rates, segmentation patterns and levels of industry profitability while reviewing key factors behind these figures. The market size estimate is derived from the publisher's bottom-up model of the revenues of all of the operators in the market with adjustments made to add and remove non-parcels activity, as appropriate. This model has been regularly updated and refined since it was first developed in 2004 with the publisher's forecast approach fine tuned in the light of experience.
The report provides historical market size figures in value and volume terms from 2017-2022. The forecast (also in value and volume) runs from 2023-2027.
We also carry out an in-depth analysis of the relevant drivers of industry growth in particular the macroeconomic environment, retail sales and home shopping setting out historical trends and available forecasts.
The competitive landscape section compares the operating models, strategies and performance of all the national parcels networks. It also evaluates new entrants to the market, such as brokers, parcel shop and locker networks and cross-border B2C specialists.
The report is intended for parcels carriers themselves, users of their services, partners, investors, banks, analysts, consultants and other parties with interests in the sector.
The report is based on:
- Financial analysis of the accounts of companies in the industry
- Discussions with the publisher's network of senior-level contacts in the market
- In-depth analysis of the macroeconomic environment and relevant market drivers
- Extensive desk research
- Our own experience of advising both carriers and investors in the parcels industry
Information from these sources has been synthesised and presented clearly and concisely with extensive use of charts and tables to illuminate points and support conclusions.
Table of Contents
Introduction
- About this report
- Summary
- About the Publisher
Parcels market
- The parcels market includes next day or deferred delivery of parcels from around 0.75-40kg in weight
- Key features of the market include high operational gearing, low capital intensity, scale economies arising from consolidation and low customer retention
- B2B, B2C and C2X segments have converged but retain distinct characteristics
- Franchised models are receding but other forms of outsourcing are widespread
- The last mile for home delivery remains both a challenge and an area of innovation
- Parcel shop and locker networks
Market size, growth and segmentation
- Non-parcel activities of the main networks have been excluded and parcels activities of other operators have been included
- The market was growing strongly prior to COVID
- Figures from Ofcom and others support our views of market size and growth
- The B2B, B2C and C2X segments are impacted by different drivers hence have grown at different rates
- Volume trends
- Price trends
- The C2X segment
- The market is often segmented by speed of delivery, type of item and international/domestic delivery
- Consumers are increasingly opting for premium delivery services, although this changed temporarily during lockdown
- Same day services provided by third party carriers have not, so far, become widespread
- Domestic deliveries account for the majority of the market
- Larger/heavier items are not compatible with highly automated parcels sortation processes
- Market drivers
- The main drivers of the parcels market are online shopping and the overall level of economic activity
- Sales of second hand items are important for the C2X segment
- Pricing is largely driven by competition
- UK GDP has fallen sharply in 2020 as a result of COVID-19
- B2B parcels has broadly tracked movements in real GDP
- Total retail sales have continued to grow, year on year
- Of the range of routes via which an online purchase can reach a consumer some, but not all, require a parcel delivery
- Online retailing has grown considerably over the last decade, peaking during the pandemic.
- Certain categories of online purchase do not lead to a parcel movement
- The UK is a worldwide leader in internet shopping
- International sales by UK e-retailers have slowed since Brexit
- Average internet shopping transaction values have varied from year to year
- Rates of returns - which are not captured by e-commerce statistics - are (slowly) rising
- Forecasts
- Our market forecast considers the three main segments (B2B, B2C and C2X) separately
- The UK is expected to experience a fall in GDP
- Our forecast is based on the B2B parcels segment maintaining its recent historical relationship with GDP growth
- We expect to see growth in retail sales at a slower rate
- Growth in international internet retail sales is expected to continue to be faster than domestic sales
- Forecasts for growth of click-and-collect mean that home delivery may not increase further
- Market value forecast to 2023
- Market volume and price forecasts to 2023
Competitive landscape
- UK parcels operators can be divided into several categories
- During the pandemic, B2C specialists gained share while the integrators fell back
- There have been several long-term share movements over the last decade
- The UK parcels market is now on the border between ‘moderately concentrated’ and ‘competitive market’
- The fastest growing companies have been the newer players, followed by DPD (and DPD Local), and Evri
- Features of carrier business models underpin both segment focus and profitability
- Tuffnells, Evri and Amazon Logistics have business models which reflect the requirements of their respective niches
- Robotics
- Industry margins have increased
- significantly over the last decade
- The overall industry picture masks a wide variation in profitability
- The two most profitable major networks have also been amongst the fastest-growing
- Yodel and Tuffnells have become profitable in their most recent year
Appendix
List of Figures and Tables
1. Royal Mail parcel operations
2. Yodel depot
3. DPD consumer app
4. Royal Mail electric van
5. UPS electric van
6. Parcel shop
7. Amazon locker
8. Percentage of parcel shop customers buying something else by network
9. UK parcel shop and locker networks/‘000 outlets
10. Evri self-employed courier delivery
11. DHL cargo bikes
12. DPD all-electric urban depot
13. Zedify cargo bike depot
14. Yodel cargo bike in Oxford
15. Paack courier platform
16. DHL in-boot delivery
17. Amazon drone delivery
18. Robots and driverless vehicles
19. UK parcels market size and growth 2012-18
20. Market segmentation
21. Parcels market - historical volumes by segment
22. Parcels market: alternative volume views/m parcels
23. Parcels market - historical average revenue per parcel
24. C2X parcels: volume by sub-segment/m parcels
25. UK GDP in current prices (money GDP), inflation (GDP deflator) and real GDP
26. B2B parcels market and real GDP growth
27. UK retail sales
28. B2C parcel channels
29. UK online retail spending: value as % of all retailing
30. UK online retail spending: % growth
31. Internet sales resulting/not resulting in a parcel delivery
32. Internet retail as % of total retail by country
33. Average spend per online shopper by country
34. UK e-retailers: domestic and international transaction value
35. Implied number of B2C transactions
36. Internet shopping returns rate by category of item
37. Implied number of UK home shopping movements
38. Nominal UK GDP, inflation (CPI) and real GDP: historical and forecast
39. B2B parcels market and real GDP - historical and forecast
40. UK retail sales/% annual change
41. Internet retail sales: value and as % of all retailing/£bn, %
42. Internet retail sales which typically do/do not result in a parcel delivery - historical and forecast
43. UK e-retailers: domestic and international transaction value (£bn) - historical and forecast
44. Implied number of B2C transactions/millions per year - historical and forecast
45. Implied number of UK home shopping movements/millions per year - historical and forecast
46. UK parcels market size and growth: historical and forecast/£m - historical and forecast
47. UK parcels market size and growth: historical and forecast/m parcels - historical and forecast
48. Leading UK parcels networks - latest revenue
49. Carrier size and growth
50. UK parcels market share trends
51. UK parcels market competitiveness: Herfindahl-Hirschman index
52. Long-term revenue growth by carrier
53. Operating models and segment focus
54. % of top UK online retailers which use each carrier
55. Hikrobot robots
56. Geek+ robots
57. Amazon Pegasus robots
58. Soly Robots
59. EBIT margins - overall sector and by carrier
60. EBIT margin by carrier
Companies Mentioned (Partial List)
A selection of companies mentioned in this report includes, but is not limited to:
- Amazon
- APC
- Collect Plus
- DHL
- DPD
- DX
- Evri
- FedEx
- Geek+
- Hikrobot
- Paack
- Parcel2Go
- Parcelforce
- ParcelShop
- Royal Mail
- Soly
- TNT Express
- Tuffnells
- UK Mail
- UPS
- WN Direct
- Yodel
- Zedify
