Ti predicts balanced growth in Express market

Following on from a strong 2017, Ti expects the global express and small parcels market to grow by 8.6% in real terms in 2018. Like last year, growth is balanced across both segments, with the domestic and international markets growing by 8.7% and 8.1% respectively.

These growth rates don’t quite match up to 2017 levels. Overall market growth of 9.7% was indicative of the resurgence of the global economy. A strong operating environment meant robust B2B volumes added to the high growth rates associated with B2C e-commerce.

What stands out about 2017 however, and what has carried on through to 2018, is the burgeoning growth in the international express market. The market expanded by 8.6% in real terms in 2017, an acceleration in growth of 3.2 percentage points when compared against the previous year. Domestic express grew by 9.9% in the year.

The small difference between domestic and international express growth in 2017 and 2018 goes against the grain somewhat. It is not uncommon in Europe, where the market is interconnected and the key players have spent decades building up regional delivery networks. But on a global level it is unusual and in 2017 and 2018 in some regions, international growth is stronger than domestic.

The characteristics of the international market usually inhibit such high growth rates. Obviously there is a higher cost and delivery time connected with international parcels. Trust of international retailers is also a problem for many consumers. At present the international market is currently proportionally more popular for high value products, with consumers more likely to pay a €10 shipping fee for a €200 product rather than a €20 product. However, with growing middle classes and a society arguably becoming more impatient, consumers are beginning to demand other products sooner and are willing to pay more for them. They are even starting to pay for more premium express products, more readily associated with the B2B market which is expected to drive growth in the long run. UPS stated in their annual report that it had seen a “continued shift” towards its premium Worldwide Express and Transborder Express services, while DHL’s time definite international (TDI) package volumes grew at a healthy 9.9% in the year, outstripping time definite domestic (TDD) growth of 6.2%.

Over the next five years, Ti expects the express and small parcels to grow at a real compound annual growth rate (CAGR) of 8.2%, with the domestic market growing at 8.6% and the international market growing at 6.2%. The widening gap suggests 2017 and 2018 were a unique years, caused largely by the uptick in global demand. However, the gap is still narrower than it has been in previous years. 2017 and 2018 may have been relative outliers for international growth, but they do show the potential for the market to explode when conditions are right.

Source: Transport Intelligence, October 16, 2018

Author: Andy Ralls


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