Postal organizations turn to M&A activity to remain competitive
LONDON; Jan. 31, 2017 – Billions of dollars in venture-capital funding have poured into the post and parcel industry in the last two years, driven by the continued popularity of e-commerce and increased competitiveness in hyper-local, start-up delivery models, according to a new report from Accenture (NYSE: ACN).
The report, The New Delivery Reality: Achieving High Performance in the Post and Parcel Industry, shows that venture- capital funding of supply chain and logistics start-ups, integral to delivery services, has increased more than 10-fold in the last three years, from US$266 million in 2013 to US$2.78 billion in 2016.
The number of deals and the size of funding for those deals also increased, according to the report. In 2013, there were 52 deals supporting supply chain and logistics, totaling about US$266 million, or roughly US$5.1 million per deal. Two years later, the average deal cost was valued at US$6.4 million. But, by the first quarter of 2016, US$1.75 billion was spent on just 36 deals, an average of US$49.7 million per deal, the study shows.
Groups outside of traditional delivery services and postal organizations are seeing growth opportunities as retailers compete to reach consumers no longer impressed with free delivery service. According to the report, consumers who combine online purchasing with delivery find high appeal in receiving an item the same day it is purchased.
This change in consumer behavior is causing tensions for traditional global delivery models, calling into question the use and importance of a robust, national delivery network, said Brody Buhler, who leads Accenture’s global post and parcel practice.
“Think the way Amazon thinks of e-commerce or Uber thinks about transportation. Both disrupted the status quo by directly responding to consumer needs and interests. Uber will pick you up at the location of your choice at the time you request,” Buhler said. “Consumers ordering online want the ability to have that same hyper-local delivery. Instead of waiting for the letter carrier to drop it off in five days, they’re beginning to turn to smart, agile start-ups with delivery areas often limited to less than 50 miles that focus on speed and convenience.”
In 2016, there were 58 Amazon Prime Now hubs in the U.S. stocking high-velocity items for same-day delivery. Amazon plans to open Prime Now hubs in Germany, Spain and Italy. Start-up Onibag built a next-day network across 70 cities in five U.S. states, despite not owning any vehicles or distribution centers. It crowdsources first- and last-mile services, using excess capacity on a national bus system and ride-sharing to transport packages.
Onibag isn’t alone, the report shows. Uber, for example, is experimenting with UberRUSH, an on-demand delivery network of trackable contract couriers. Shyp will pick up packages using its own employees and connect the package to the U.S. Postal Service, FedEx, UPS, OnTrac or other regional carriers – automatically figuring out the best carrier to use for each, individual delivery. Instacart offers last-mile delivery from a grocer, crowdsourcing to match orders with independent users who enroll in the platform as shoppers or drivers.
PiggyBaggy in Finland and 123Feng.com in China are just two of the many new entrants in the on-demand, shared transport delivery business outside the U.S. In Scotland, Menzies uses an integrated IT solution that allows it to deliver parcels from other carriers. Ninja Collect gives consumers in southeast Asia the option of picking up their purchases in a brick-and-mortar store or having them delivered to a secure parcel locker throughout the region. KombiBUS serves a low-populated area in northeast Germany, using an existing bus infrastructure to combine the transport of goods, post and passengers. KombiBUS also has influenced regional development. Farmers who supply dairy products, cheeses and other local farm products use the new transport system to expand their sales area to Berlin.
Traditional post and parcel organizations are increasing investments as well, focused on products and services to keep up with the demand being generated by e-commerce. Industry capital expenditure has grown over 40 percent from 2013 to 2015 as post and parcel organizations make significant investments in increased capacity, new capabilities and diversification to keep up with e-commerce-driven change and demand, according to the report. Capital expenditure as a percentage of postal revenue averaged about 3.7 percent globally in 2013 and increased to 5.1 percent in 2015.
The report also found that merger and acquisition activity in the post and parcel industry also is high. The industry has been active in M&A but nearly one-third of postal organizations account for 80 percent of all deals during the last five years, led by: La Poste in France (35 acquisitions); Post Nord in Denmark (22); SingPost in Singapore (15); DP DHL in Germany (14); Austrian Post (13); and Posten Norgen in Norway (12).
Almost all national postal organizations are investing in additional capacity to accommodate e-commerce growth, especially for peak periods, and a new M&A trend has emerged, the report shows. Acquisitions today – unlike during the last 15 years – are smaller, more specialized and focus on logistics and transportation; parcels and express; technical and software; and financial services. In 2015, about 60 percent of all M&A activity was conducted outside the postal organization’s domestic country as companies try to tap into cross-border deliveries and increase customer footprint.
“Our research shows we’re going to see an exponential growth in global e-commerce over the next three years, with the bulk of it being delivered the next day or the same day to consumers who aren’t willing to pay a premium price for that service,” Buhler said. “Delivery organizations need to make decisions today to be competitive and viable in that future.”
The New Delivery Reality report marks the 10th anniversary of the first High Performing Post and Parcels report, issued in 2006, recognizing a decade of continuous, in-depth research of the trends and topics affecting the post, parcel and delivery industry. Findings are based on a comprehensive analysis of 31 post and parcel organizations across five continents, which together represent about 90 percent of the world’s mail volume.
Accenture conducted an in-depth analysis of 30 post and parcel organizations around the world for this year’s study, using publicly available information, content published by postal organizations and Accenture’s industry knowledge. Organizations analyzed are An Post (Ireland), Australia Post, Austrian Post Group, bpost (Belgium), Canada Post Corp., Ceska Posta (Czech Republic), Correios Brasileiros (Brazil), Correios de Portugal, Correos y Telégrafos (Spain), Deutsche Post DHL (Germany), FedEx (United States), Groupe La Poste (France), Gruppo Poste Italiane (Italy), India Post, Itella (Finland), Japan Post, Magyar Posta (Hungary), New Zealand Post, Post Office Limited (United Kingdom), Posten Norge (Norway),Posti Group (Finland), PostNL (The Netherlands), PostNord (Sweden and Denmark), Royal Mail Group (United Kingdom), Singapore Post, South African Post Office, Swiss Post (Switzerland), TNT N.V. (the Netherlands), U.S. Postal Service, UPS (U.S.) and Yamato (Japan).
Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions – underpinned by the world’s largest delivery network – Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With more than 394,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com
+1 703 947 2590
+1 703 963 4212 (mobile)
Join us on LinkedIn / Follow us on Twitter