Accenture issues “urgent call for action” as posts’ parcel market share shrinks

Postal operators are losing parcel market share to smaller, asset-light delivery firms, according to Accenture’s Andre Pharand, who revealed that the firm’s latest industry insights should act as a “urgent call to action” for posts if they want to ensure financial stability in the future.

Pharand, who is the Global Managing Director of Accenture’s dedicated Postal, Parcel & Last Mile business unit, shared the consultancy’s data on recent industry trends and future predictions during the keynote session at the Leaders in Logistics Summit in London yesterday (March 28).

He revealed that postal players around the world are losing parcel market share to smaller B2C, asset-light players that offer ease of doing business and reliability at lower costs. Among the data, it was revealed that Royal Mail Group's parcel market share, for example, has fallen from 55% in 2016 to 38% in 2020. Swiss Post, meanwhile, has seen its market share decrease from 89% in 2016 to 80% in 2020.

“Posts may have grown over the years, but they are not growing as fast as everybody else, so slowly but surely, market share is going down. But because it is decreasing slowly, it is not creating enough urgency,” he said. “However, at Accenture we believe that to ensure financial stability in the future, urgent action is needed, and posts need to undergo a total enterprise revolution to bring them in line with the new entrants in the market.”

3 action areas

This “total enterprise revolution” should cover three key areas to lower costs and drive new revenue opportunities, the experienced industry consultant recommended.

Firstly, posts should adopt zero-based operations which takes a carte blanche approach to operations and networks, with multi-wave/local delivery, automation and robotics, a complete network redesign and data and forecasting.

Secondly, a zero-based retail approach should be adopted where possible. “Unless bound by regulations, posts should no longer have corporate stores, but instead develop an omni-channel experience, form partnerships for retail and rely on local business support,” he declared.

Finally, posts should think digital first and use technology, such as applied AI, analytics and dashboards, as a competitive differentiator to meet future customer needs. This will lead to better overall customer experience and lower total operating costs.

“Radical changes”

“Posts can’t just incrementally grow themselves out of the situation they are in currently,” Pharand explained. “They need to make radical, important decisions. If nothing changes, they will be left with just doing C2C, rural and remote delivery, and that is not enough to sustain a post.”

The Accenture consultant noted that posts’ biggest competition comes from the firms that are asset-light, have excellent service and customer experience levels and are technology first. He highlighted how firms like Evri have taken market share from Royal Mail Group, and how Canada Post is seeing serious competition from Intelcom, which is now handling 500,000 parcels a day.

Other competition is coming from marketplaces, such as Amazon, which can offer extremely fast delivery; retailers, such as Walmart in the US, which has a strong dense local network; and the large logistics players such as Maersk, which has a ‘factory-to-consumer' logistics strategy.

“No silver bullet”

During his presentation at the Leaders in Logistics Summit, Pharand also revealed that there is no “silver bullet” for success in the postal industry and that diversification has had a marginal impact on revenues.

“Has diversification worked for postal players? Our research indicates that, in aggregate, not really and not the way you would expect,” he said. “Our analysis found that posts still rely as much on their core business in 2021 – collection, transportation, sortation, delivery – as they did 14 years ago. And two thirds of them are smaller than they were in 2007, if we consider inflation.”

According to Accenture, there has been a clear migration of mail to parcel revenues with the growth of e-commerce. Between 2007 and 2021, posts saw a +9% increase in the revenue share of logistics.

“Logistics revenues represent primarily activities associated with cross-border and of deliveries services in other non-core markets – think GLS for RMG and DPD for La Poste – and this shift has come essentially from non-organic growth,” Pharand explained.

Posts have also seen a +19% increase in revenue share of parcels and a -28% decrease in the revenue share of mail. Delivery (mail and parcel), meanwhile, went from representing 74% to 65% of revenues. However, there has been no real change on retail or “other” focussed revenue, which has remained stagnant at around 3-4% revenue share.

“What this means is that there is no magic bullet relying on retail (financial, government, others) services, adjacent services, or even non-core activities that have materially changed the makeup of postal revenues in the past 15 years. Many of the digital plays like digital mail have not been successful.  It takes a lot of million-dollar ideas to replace a billion-dollar revenue stream like mail and parcel delivery,” he continued.

“This does not mean that postal organizations can’t diversify – it means they need to change things radically – a complete reinvention of the enterprise. It starts off with what is the mission of a postal organization in today’s world. It also means taking risks and strong and disciplined implementation. Or is the message that postal organization just need to stay focused on what they do best and not get distracted with diversification – a bird in the hand is worth two in the bush,” Pharand concluded.