The impact of competition on consumer prices for cross-border parcels

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The impact of competition on consumer prices for cross-border

parcels

Sonja Thiele, Alex Kalevi Dieke (WIK)

25th Conference on Postal and Delivery Economics, Barcelona 26^th May 2017

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Introduction

• European Commission policy on prices for cross-border parcels focusses on consumer prices

• Draft parcel regulation aims at increasing transparency and making markets work more effectively

• What is happening on parcel markets?

• Are cross-border parcel markets already moving into the desired direction?

• Analysis of prices in ten countries: Austria, Belgium, Czech Republic, Germany, Ireland, the Netherlands, Portugal, Spain, Sweden, and the United Kingdom.

Lower prices

E- commerce

growth

Economies of scale

New players

Economist’s expectation

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Agenda

State of e-commerce

Competition on parcel markets Price developments

Conclusions

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State of e-commerce

 Online shopping in foreign

webshops more common in small countries

 Share of consumers buying online abroad has grown strongly

 UK consumers spend most on e- commerce

 Southern European countries + CZ at the far end

 Countries with low e-commerce expenses per capita may catch up due to higher growth rates

EU-28 AT

BE

CZ

DE ES

IE

NL

PT

SE UK

0 5 10 15 20 25 30 35 40 45 50

0 10 20 30 40 50 60 70 80 90 100

Last online purchase in last 12 months from other countries (EU or outside EU) (%)

Last online purchase in last 12 months (%) 00%

05%

10%

15%

20%

25%

30%

35%

40%

0 500 1,000 1,500 2,000 2,500 3,000

UK IE SE NL AT DE BE CZ ES PT

E-commerce per capita 2015

Average annual increase of e-commerce spent per capita

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Competition on parcel markets

Competitive domestic parcel markets

USP Market share domestic

AT 50-60%

BE 10-15%

CZ 25-30%

DE 40%

ES 15-20%

IE <20%

NL 55%-60%

PT 20-30%

SE 30-50%

UK 30-35%

• Domestic parcel and express markets are competitive

• USP market shares in domestic parcel and express markets <60%

• Parcel operators with international networks active in all ten countries (eg DHL, DPD, FedEx, GLS, Hermes, UPS)

Sources:

AT: RTR; BE, CZ, IE, PT, SE: WIK estimate; DE, ES, UK: Ofcom 2016; NL: Marktscan Pakketten

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Competition on parcel markets

Parcel shop networks needed for B2C delivery

• Traditional B2B operators enter B2C markets

• Access network needed for pick up and returns

• In AT and DE, competitors‘ parcel shop networks match incumbent network

• Consumers can send parcels via parcel shop network

Parcel shop networks of competitors compared to the USP’s public postal network

0%

20%

40%

60%

80%

100%

120%

AT BE CZ DE ES IE NL PT SE UK

Operator with largest network Operator with second largest network Operator with third largest network

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Competition on parcel markets

Cross-border markets

• Competition on cross-border delivery markets lower than domestically

• No or little choice for consumers sending parcels cross-border

• Change in some countries as international B2B operators migrate in B2C markets and offer access networks for consumers in destination countries

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Competition on parcel markets

Intense competition for Austrian cross-border parcels

• Strong e-commerce relations with Germany

• International inbound parcels ~25% (RTR)

• 5 biggest operators: 78% market share cross-border

• Biggest competitive networks by

DHL (2,000 parcel shops) and DPD (1,200)

•  intensive competition for cross-border parcels

• Benefit to e-retailers and e-commerce customers but also to other parcel operators outside AT

 find delivery partner in Austria easily

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Price developments

Very different price level for cross-border parcels

Consumer prices for cross-border 2kg parcels (2017)

 Paper compares consumer prices for cross-border parcels, eg

 2kg priority parcel posted at the counter, no express product, insurance included (200 €)

 1kg letter/packet posted at the counter, no insurance

 Prices from/to all destinations

 Consumer prices for 2kg cross- border parcels range between 16.19 € (CZ) to 44 € (IE)

 Maximum price below 20€ only in AT and DE

Source: Public price lists of USPs

0 € 5 € 10 € 15 € 20 € 25 € 30 € 35 € 40 € 45 € 50 €

Min 2kg (2017) Max 2 kg (2017) Average 23.18 €

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Price developments

Price changes

• Mixed picture!

• Parcel prices (domestic and cross-border) have increased in several countries

• 1kg packets: cross-border prices increased less than domestic prices in 7 out of 10 countries

• 2kg parcels: some USPs have considerably lowered cross-border prices, eg CZ, ES, UK

Source: Public price lists 2013 and 2017

-60%

-40%

-20%

00%

20%

40%

60%

80%

Real price changes for national and international parcel services (2 kg)

National International min International max -60%

-40%

-20%

00%

20%

40%

60%

80%

Real price changes for national and int'l large letter/packet services (1 kg)

National International min International max

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Price developments

Business customer prices are lower than consumer prices

Domestic and international parcel prices compared to average revenues

per parcel (national USPs)

 Average revenues per parcel as an indicator for parcel prices paid by business customers

 Business customers pay much less than consumers

 Average revenues per parcel particularly low in CZ, DE and highest in IE

 Average revenues seem to have declined since 2013 – but data base weak

Source: Public price lists 2017, annual reports of USPs, market statistics of NRAs

Note: Data on average revenues may refer to different parcel definitions and different product mix

0,00 € 5,00 € 10,00 € 15,00 € 20,00 € 25,00 € 30,00 € 35,00 € 40,00 € 45,00 € 50,00 €

Domestic price 2 kg (2017) Min 2kg (2017) Max 2 kg (2017) Average revenues per parcel (USP 2015)

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Conclusions

A process towards lower consumer parcel prices

USP’s consumer prices for cross-border parcels have decreased in a number of

countries

Where competitors operate parcel shop networks matching the USP’s network an impact on prices seems is visible (in Austria

and Germany)

Indications that average revenues per parcel (as a proxy for business customer prices) have

decreased but more research needed

Service quality and choice for consumers have improved

Economies of scale and increased competition seem to have started a

process towards lower consumer parcel prices

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Conclusions

• Prices decreased since 2013 but not overall

• Potential reasons

1. Quality of service improved (tracking, speed, more delivery options…)

2. Investments needed to meet customer expectations

3. Competition may not be sufficient to have an impact on USP consumer prices (eg IE, PT, SE). Competitors have smaller parcel shops networks

4. Regulation and USO: USPs increase parcel prices to compensate for falling letter revenues?

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Sonja Thiele

WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH

Postfach 2000

53588 Bad Honnef Germany

Tel.: +49 2224-9225-34 s.thiele@wik.org

www.wik.org

The impact of competition on consumer prices for cross-border parcels