The global postal service industry continues to play a vital role in facilitating information and goods flow between people, businesses and organizations around the world. Despite the ongoing structural disruption caused by the rapid digital development, the global postal industry is expected to remain its steady growth through 2020 with more diversified business models to open more market opportunities.
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The global postal service industry refers to the business activities of the Post Office and its partners operating to provide mail (or small parcel) collecting, transporting, and delivering services in national or international scales. Postal and mailing service allows the collection, pick-up, and delivery operations to be done with limited labor costs and minimal equipment. Sorting and transportation activities, where necessary, are generally mechanized. The restriction to small parcels distinguishes these establishments from those in the transportation industries. These establishments may also provide express delivery services using the infrastructure established for provision of basic mail services.
Over the recent years, the global postal service industry has been suffering disruptions from internet and digital industries. The traditional core business of mail delivery is in decline as communications move online. Meanwhile, the industry also faces fierce competition in the rapidly growing e-commerce parcel market. As a result, postal and mailing businesses are shifting from state-owned monopolies to commercial companies with diversified portfolios.
Despite the industry challenges, the global postal and mailing service industry is still growing with a steady pace. According to the latest industry report from International Post Corporation, the global postal service industry revenue reached US$ 446.5 billion in 2018, up by $15.3 billion from 2017 results.
Parcels remained the engine of growth, contributing almost half of the aggregate increase in revenue. Mail revenue was also up, albeit by a smaller margin: while posts delivered fewer letters worldwide, volume declines were in part offset by growth in small e-commerce packets; meanwhile letter rate rises helped cover the significant costs of operating nationwide, one-price-goes-anywhere postal services. And as other areas like financial services and logistics have grown in importance, non-mail business segments now account for two thirds of industry revenue on aggregate.
The industry is currently is moderately fragmented. The demand for postal and mailing services depends on transaction volume and corporate spending on direct marketing. The profitability of individual companies depends on the efficiency of their operations. Large companies have advantages in widespread infrastructure and diversity of services. Small companies compete by specializing.
Government-owned postal agencies typically have a monopoly on mail delivery but face heavy competition from private package delivery companies. The competing entities can form partnerships to capitalize on each other’s strengths; for instance major express delivery companies Federal Express (FedEx) and United Parcel Service (UPS) contract certain residential deliveries to the US Postal Service (USPS), while the USPS contracts air transportation out to FedEx and UPS. In countries where mail delivery has undergone privatization, former postal monopolies are better able to compete in ancillary fields such as logistics and freight services.
Currently, some of the top postal service companies around the world include the US Postal Service (USPS), Deutsche Post DHL (Germany), La Poste (France), and Japan Post. While some of the largest postal and mailing markets are China, the US, the UK, France, Germany, and Italy. High-growth markets include Canada, India, Portugal, and Singapore.
As the largest postal service market in the world, China’s postal service industry registered steady growth in 2019 driven by the country’s express delivery sector, according to the State Post Bureau (SPB). The postal industry in China saw business revenue rise 22 percent year on year to reach 964.25 billion yuan (about $140 billion) in 2019.The SPB predicted that the business revenue of the country’s postal services would rise 15 percent year on year in 2020. The country has remained the world’s largest express delivery market for six consecutive years, with some 20,000 express delivery enterprises and more than 3 million employees.
The US postal service industry is one of the world’s largest, handles over 47 % of the world’s mail delivery service, making it one of the country’s largest retail network. Despite its size, the industry has historically suffered revenue losses. Over the past five years, internet services such as online banking and e-mail have increasingly replaced traditional mail. In addition, since USPS is highly regulated, it is subject to government-mandated expenses, which have dramatically raised costs for the industry.
Postal service industry in the EU plays a key role for citizens and businesses in the single market. According to the EU Commission, the postal sector (which includes express services) employs about 1.8 million people providing an important source of employment in the EU. The aim of the postal services directive is to ensure that affordable, high quality and efficient postal services are available throughout the EU.
The UK is one of the largest postal service markets in the EU, The United Kingdom postal and courier industry currently generates over 20 billion British pounds in turnover every year, which translated into greater contributions towards the national economy. Consumers within the highest ten percentile of gross income decile groups spent the most on mail and parcel delivery services in the UK, at 1.30 British pounds of weekly household expenditure.
Swiss Post has been ranked in the Integrated Index for Postal Development (2IPD) by the Universal Post Union as one of the world’s best postal service providers in terms of reliability, relevance, reach, and resiliency. It has attained ratings of 100 in the account of a substantial volume per capita along with a diversified portfolio throughout all postal sectors.
The Post NL is another best performed postal service provider, achieving a 2IPD score of 93.7 and gaining 83 in all sub-indices. The speed of delivery and volumes it produced with international partners makes it among the most reliable and reachable posts worldwide.
Japan Post has long been one of the top postal service companies in the world. Japan’s postal service still outperforms its regional peers (China, Thailand, Singapore) when it comes to the quality of service. Their services, specifically their financial services are high in demand.
With its DHL International arm, Deutsche Post delivers about 59 million posts every day in Germany. It is by far Europe’s largest postal service company. The German parcel market was worth over €10.8 billion in the year 2017, while Deutsche Post DHL accounted for about 45.4 % of the market share in that year.
The La Poste is among the few public services in the country that receives high compliments from the general public mainly because of the quality service they provide. La Poste has a great number of post office counters spread throughout most villages within the country. France is among the countries with the highest range of post-boxes in the world.
They have an exceptional reach with 183 productive country locations at export. In the past years, Poland has also documented a boost in letter-mail traffic, therefore improving its resilience in the global postal service index.
The Singapore Post is one of the best postal services in Asian, mainly due to its balanced performance throughout the four aspects of postal growth. Its biggest strength is based on a smart mix of exceptional reliability and service coverage.
USPS is one of the world’s largest postal service providers with outstanding performance in resilience. In a progressively more digital era, USPS continues to be part of the top servicing postal services in the world. Their primary function is to deliver secure, reliable and affordable services in mail and packages. The USPS delivers to over 157 million addresses in the U.S. and its territories.
Royal Mail is a postal and delivery service in the UK. It has major operations in Europe. The company was originally established in 1513 and went through privatization after it sold stocks to the public. In 2015, the government sold its 30% stock in 2015 that officially privatized postal service in the UK. The Royal Mail customer satisfaction score for 2017-2018 is a whopping 88%.
The Austrian Post’s major business includes the delivery and transport of letters, parcels, direct mail items, and print media. The network of Austrian Post is among the biggest in the country, providing high-quality postal services in addition to banking and telecommunications throughout Austria.
According the latest findings by International Post Corporation (IPC), the volumes of small parcels (weighing 2-30kg) delivered by the global postal service grew by 9.1% on average in 2018, while their aggregate volumes have almost doubled since 2008. However, volume growth still lags behind that of the e-commerce market, which quadrupled in size over the same period, offering posts opportunities for further development. Driven by growth for lightweight e-commerce packets, as well as rate increases, posts saw aggregate mail revenue grow by almost $2 billion in 2018, despite accelerating volume decline. Mail volumes were down 5.9% on average in 2018, following a 5.0% average drop in 2017.
As mail delivery volumes continue to fall, postal service businesses are seeing increasing value in diversification: close to two thirds have seen mail revenue shares fall since 2013, reported by IPC. Non-mail services accounted for 67.5% of industry revenue in 2018, with some postal service companies generating as little as 10% of revenue from mail. Alongside parcels, financial services were a key driver for industry growth in 2018. In pursuit of new revenue opportunities, postal industry has acquired controlling stakes in almost 300 companies since 2008, with more than half of new subsidiaries operating in the parcels and logistics sectors. Moreover, just under a third of acquisitions were made in nearby or neighbouring markets, as posts continued to seek international growth, particularly in sectors that support e-commerce.
With e-commerce growth continuing apace, global postal service providers, e-retailers and start-ups are looking to gain a bigger share in the B2C delivery market. Many postal companies have launched targeted efficiency initiatives to streamline and modernise their delivery and retail networks. the industry’s parcels volume has almost doubled since 2008, rising much faster than economic growth. Therefore, the growth in e-commerce parcels delivery poses a huge demand in the global postal service industry
Postal and mailing businesses face challenging times with increasing competitive pressures and the need to manage costs aggressively. Therefore, the industry has been seen increasingly investing in automation, digital infrastructure and diversified business portfolios. Capital expenditure as a share of total revenue increased in 2018 as posts looked to automate mail sorting, expand e-commerce capacity and improve IT infrastructure. Acquisitions have also helped posts seek international growth.
Opportunities are opening up from the growth in parcels generated by rising volumes of online retail and eCommerce. Market liberalization is extending new possibilities for diversification. Careful strategy selection can help leverage the potential value of their existing retail, logistics and delivery assets. And digital technologies are the game changer that can position post and parcel organizations for revenue growth.
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