Tuesday, October 26, 2021
Home3PL/4PLCOVID spurs 9.8% growth in domestic express & parcels market in H1

COVID spurs 9.8% growth in domestic express & parcels market in H1

The COVID-19 pandemic has accelerated the shift towards e-commerce, benefiting the domestic express and parcels sector with strong growth in the first half, according to Transport Intelligence (Ti) research.

Ti data show that the global domestic express and parcels market grew by 9.8% year-on-year in the first half of the year as lockdowns and restrictions on the use of retail stores led to a surge in volumes for parcel service providers.

The pandemic has made e-commerce not just a “nice-to-have” addition to a traditional bricks-and-mortar strategy but “an almost business-critical requirement across swathes of the retail sector,” said the transport and logistics intelligence service provider.

“Growing consistently strongly over the last decade, e-commerce has now reached a critical point. It has arrived at the stage at which even with bricks-and-mortar stores closed down, it can keep the retail sector motoring, albeit perhaps only in second or third gear,” said Ti in a new analysis.

“The domestic express and parcels sector has been crucial in enabling e-commerce to provide this lifeline throughout the course of the COVID-19 pandemic so far.”

The growth in domestic express and parcels has even been strong enough to offset the decline in B2B parcels as entire industries shut down, employees were sent home and the global economy collapsed.

But there are stark regional and country-level differences. In China, the domestic express and parcels market’s growth has been relatively modest by its own historic standards. This as online sales of physical goods grew just 5.9% year-on-year in the first quarter of 2020 before accelerating strongly into the second quarter as Chinese consumers used e-commerce to make purchases amid continuing restrictions on everyday life.

Meanwhile, India’s measures aimed at slowing COVID led to highly restrictive measures implemented on the e-commerce sector. Combined with a fall in B2B growth due to the economic downturn, this led to negative H1 growth in the domestic express and parcels market.

Conversely, growth of the domestic express and parcels market in the US was very strong as e-commerce reached around 25% of total retail sales during the height of the pandemic. At UPS, B2C were up an astonishing 65.2% in Q2. At both UPS and FedEx, B2C increased to around 70% of total volumes at this time. B2B parcels appear to have slid heavily, although both companies said they were beginning to see year-on-year growth in this segment mid-second quarter.

However, across Europe, the economic downturn has been particularly severe by global standards. This has led to greater harm in the B2B segment of the market, dragging overall market growth rates lower.

Looking ahead, global e-commerce growth in the second half of the year is likely to slow somewhat, said Ti.

“e-commerce penetration is expected to remain elevated relative to long-run trends, but year-on-year growth in e-commerce sales will not come close to the rates seen whilst the tightest lockdowns orders were in force.”

Conversely, a bounce back for the economy should see B2B parcels pick up again. Said Ti: “The recovery in this higher-margin element of the market will be good news to those that have struggled to cope with the costs of B2C deliveries, or those without that delivery capability.”

However, the results from H1 show an efficient B2C operation is an ever-more vital element of a parcel provider’s strategy, Ti concluded.

Photo: Negative Space


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