CEP market facing changes
The CEP sector loves big numbers. It now generates annual revenues of USD 175 billion, according to the Global Express Association (GEA), the industry’s global trade association. The segments growth rates are large, but are also facing ever more pressures. Both the general political landscape as well as changing consumer behaviour in various industries are resulting in changes.
The courier, express and parcels sector is a winner these days. Over the last two decades its vigorous growth of up to 7% annually in global revenues and employment figures has been accompanied by regional expansion beyond North America and Europe, with the Middle East, Latin America and the Asia-Pacific region all improving. All the forecasters agree that steady augmentation will continue. However, business for the CEP industry as a whole will become rather more difficult.
Political landscape more difficult
In July the Global Express Association (GEA), the worldwide body of couriers and express service providers which is headquartered in Geneva, issued a reminder to accept the WTO agreement regarding trade facilitation. The outcome is well known.
The CEP segment, which thrives on free trade zones, customs formalities and standardised processes, is suffering a set-back as a result of this negative development. Indeed, Carlos Grau Tanner, the director general of the GEA, recently referred to more than 60 bilateral free-trade agreements which have come into force since 2008. Nevertheless, a study by the World Economic Forum points out that existing trade barriers are currently reducing global trade by an average of 14.5%, regardless of customs duty. The game-changing measure has not arrived yet.
This situation is not stopping the CEP sector’s from developing, but is keeping it down. According to the consultancy firm A.T. Kearney, there are four trends in the industry. International business is becoming ever more important in developed markets; standard e-commerce trade segments are growing considerably faster than new sales channels; the major integrators are extending their market dominance; and the CEP sector is achieving lower margins with ever greater revenues.
In simple terms, this means that the major players – that is UPS, FedEx, DHL, TNT and Aramex – will continue to dominate the major markets, but will only maintain growth thanks to international expansion. The development of new sales channels is becoming increasingly difficult, and although revenue is rising slightly in major e-commerce segments (textiles, electrical and media, for example), the margin per shipment is falling.
For example Germany
Package and express service providers in Germany can continue to be satisfied, according to studies published by Biek, the German parcels and express logistics association. Last year, the sector’s overall revenues increased by 3.4% to EUR 16.1 billion. Almost 2.7 billion parcels were shipped in Germany – 4.1% more than the previous year.
Driven by a steady improvement in e-commerce, parcel deliveries, in particular, made gains. In 2013, revenues in this sub-segment came to EUR 8.4 billion, which represents a 52% share of the overall CEP market. This dominance is set to continue. According to figures from the German e-commerce and distance selling trade body (Bundesverband E-Commerce und Versandhandel BEVH), revenue for textiles came to EUR 11.6 billion in 2013, which is more than twice as much as for electronic goods.
The boom is also creating demand for staff, with 197,000 people directly employed by companies in the parcel and express sector in Germany. Including service providers the segment provides 308,800 jobs. The parcel and express services market is therefore continuing to grow considerably faster than the overall freight transport market; since 2000, it has increased almost twice as much as the overall economy.
The fly in the ointment, however, is that alternative, primarily small and medium-sized logistics service providers, are only slowly gaining market share. In 2013, their proportion of the overall volume came to 13%.