Although the recent credit crunch and resulting economic uncertainty are affecting the growth potential of the European express industry, the main effects will be on the use of different modes of transport and profitability rather than on overall levels of parcel volumes. Indeed, supply chain rationalization, internationalization and business-to-consumer (B2C) e-commerce are continuing to drive industry growth.

The credit crunch has hit individual markets and companies differently, leaving those relying on the US and intercontinental routes the most exposed. In general, its effects are felt to widely varying degrees depending on companies’ exposure to the most affected verticals, country markets and trade lanes.

However, although the value of the European express and parcels market is forecast to grow at a lower rate than in previous years, it is still expected to record an average annual growth rate of 3.5% in the next five years, above GDP growth. The strong demand for international and home delivery services is still contributing to the European express industry’s development, despite rising fuel costs and the global economic slowdown dampening its potential.

Retailers’ e-commerce investments, the rising use of broadband, favorable demographics and faster websites are extending the scope of products that are available online, which in turn is stimulating demand for home deliveries even as consumers’ disposable income comes under pressure. The rationalization of supply chains and the relocation of manufacturing and distribution activities are the other main growth drivers still fueling the express and parcels market, with Eastern Europe and the Far East acting as the catalysts for this development.

The outlook for the European parcels and express market remains cautiously optimistic, while emerging markets are still recording strong growth levels. The significance of the financial services vertical to the express industry has already been diluted in recent years by lower document volumes as a result of electronic substitution. The economic crisis is likely to further restrict the importance of financial services for the express industry, negatively impacting those countries and companies which rely on it.

While it remains to be seen whether the drop in volumes in June was a one-off rather than the onset of a more structural slowdown, express companies will now, with greater urgency, have to find ways of demonstrating added value to their customers. This can be achieved by addressing the issues of specific verticals, delivering innovative solutions to tackle industry problems or by extending their reach to other parts of the transport market; for example intermodal transport solutions and the integration of freight services.

Related research: State of the Industry – Express