Parcel carriers should make home deliveries into a premium service and collaborate more in response to challenges such as rising cost pressures, flat B2B demand and changing B2C patterns, DPD Germany chief Karsten Schwarz urged in a frank presentation at the Leaders in Logistics Summit in Berlin last week.
On the positive side, the €645 billion European e-commerce market is expected to grow about 8% a year until 2029, driven by a continuous increase in user penetration, he told an audience of several hundred participants.
Drivers include the growth of C2C platforms, which are challenging traditional e-retailers “by eating into the B2C cake”, along with out-of-home deliveries, which could reach 25% of volumes in Germany by 2030, he said.
Another key growth factor is the current surge in direct-to-consumer (DTC) sales by Chinese e-commerce marketplaces. “We will see massive increases in DTC from China, whatever the quality (of the products) is,” he predicted.
Challenging times
But with Germany now in its third consecutive year of recession, the parcels sector is also facing diverse challenges, the DPD Germany chief made clear. In B2C, price remains the top decision-making factor for customers, while B2B demand is likely to remain “flattish” until 2029 or 20230, he predicted.
“All the growth is coming from e-commerce,” he stressed. “Our B2B customers are really suffering and some e-commerce retailers too.”
Over-capacity
Another challenge is market over-capacity which is putting price pressure on parcel carriers by enabling shippers to seek lower rates. “There is excess capacity of about 350 million parcels in Germany,” he noted. This volume is about the respective size of DPD, GLS and Hermes. “So you could say there is one player too many in the market,” he commented.
Other cost-side factors in Germany include a possible 17% rise in the minimum wage to €15/hour and rising inflation due to government spending that could add up to a 20% cost increase.
How to respond?
Against this challenging background, parcel carriers should not see everything as core business but review their business models, define their competitive differentiators and USPs, optimise their first-mile and last-mile operations, and strive for a ‘cost-quality balance’, Schwarz recommended.
From DPD’s perspective, there are three key trends: the significant shift towards OOH volumes coupled with the expansion of open locker networks, differentiation between home and OOH services, and new cooperations with other players, he explained.
Premium and deferred deliveries
On the one hand, retailers and carriers should position ‘2Door’ deliveries as a premium service. “The days of free deliveries to door are counted,” Schwarz declared. In parallel, OOH deliveries should become a deferred service for a lower price, resulting in “more granular pricing” in future.
More collaboration
At the same time, there could be “smart” cooperations between CEP players to ensure efficient, nationwide and daily parcel delivery coverage “without touching the core business”, the DPD Germany chief stressed.
One example of this is the new partnership between DPD and GLS to create a dense Germany-wide OOH network of parcel shops and lockers, he pointed out. Another area of potential cooperation would be for deliveries in remote regions with less dense populations which at present are “a nightmare for costs and sustainability”, he added.
One Europe
Finally, with more retailers selling cross-border and pan-European C2C platforms growing fast, cross-border B2C and C2C parcel volumes are increasing rapidly, Schwarz pointed out.
In response, he urged: “We should consider Europe as one country when it comes to parcel carrier networks.”
