E-commerce and Parcel Delivery - Dr. Henrik Ballebye Okholm Ninth bi-annual Postal Economics Conference, Toulouse 1st April 2016
E-commerce and Parcel Delivery Agenda • Policy context • E-commerce development • Consumer demand • Parcel delivery • Pricing • Conclusions 2
E-commerce and Parcel Delivery Agenda • Policy context 3
E-commerce and Parcel Delivery Policy context Why political interest? ● E-commerce fits perfectly with the vision of the Internal Market ● Three challenges o Lower level of service for cross-border delivery o High prices for cross-border delivery o Small webshops pay relatively higher prices 4
E-commerce and Parcel Delivery “Cross -border parcel delivery is an important Policy context factor in e- shoppers’ An evolving policy debate and e- retailers’ decisions to buy/sell online” 2011 FTI study on cross-border parcel prices ” Why does it cost € 27 Since 2012 Promote cross-border e-commerce to send a parcel from within the EU Copenhagen to Malmö, but € 42 to send an identical parcel the Launch measures to improve price other way?” May 2015 transparency and regulatory oversight of cross-border parcel delivery. ”The big differences between prices for cross-border parcel No price regulation for now, but enhanced Dec 2015 delivery between transparency and monitoring of price data various EU Econometric study o countries just do Pressure in the media o not make sense .” 5
E-commerce and Parcel Delivery Agenda • E-commerce development 6
E-commerce and Parcel Delivery E-commerce development E-commerce landscape is highly dynamic with large cross-country differences in e-commerce 2008-2014 development 15% 7
E-commerce and Parcel Delivery E-commerce development BUT assessing the true level of cross-border transactions is a challenge Erroneous consumer perception 15% Cross- border purchase ≠ Cross -border delivery 8
E-commerce and Parcel Delivery E-commerce development What is cross-border e-commerce? 9
E-commerce and Parcel Delivery E-commerce development Large differences in the number of online buyers per country 10 Source: CIVIC
E-commerce and Parcel Delivery E-commerce development Many drivers of cross-border e-commerce Drivers Demand side factors Supply side factors • E-shopping experience Closely interlinked/ overlapping • Quality of goods and services • Possibility of branding Experience/ Trust • Consumer awareness of cross-border • Online selling experience consumer rights • Regulatory compliance Regulation • VAT differences • VAT differences • Home market size • Home market size Geographic/ Cultural • Language • Language • Home bias Technological • Broadband/internet penetration • Broadband/internet penetration • Digital skills • Digital skills development Operational • Delivery times • Delivery logistics 11
E-commerce and Parcel Delivery The European e-commerce landscape is highly dynamic , and the development of e-commerce is influenced by many factors. 12
E-commerce and Parcel Delivery Agenda • Consumer demand 13
E-commerce and Parcel Delivery Consumer demand Choice ● 1980: 1 type of salt ● 2016: 5,170 types of salt 14
E-commerce and Parcel Delivery Consumer demand Cheap, fast and convenient What is most important for you? Other 18 11 Flexibility of delivery time (e.g. Scheduled) 15 Alternative delivery destination (e.g. parcel locker) 28 Price of delivery 28 Speed of delivery (e.g. same-day) Note: Included countries are Austria, Belgium, Denmark, Finland, France, Germany, Netherlands, Norway, 15 Sweden, Switzerland, UK. Source: McKinsey & Company
E-commerce and Parcel Delivery Consumer demand Choice: Cheap, traceable, time certain Express delivery Time of delivery Next day delivery Delivery within 2-4 days Delivery at agreed time slot Evening delivery Saturday delivery Point of delivery Delivery to the home adress Delivery to work adress Delivery to post office Delivery to relay point (shop) Delivery to parcel kiosk (automated locker) Track'n'Trace Value added Electronic notification of delivery (e-mail or SMS) Insurance related to delivery Cash on delivery Free delivery Standard delivery Price Faster but more expensive delivery than standard delivery More convenient but more expensive delivery than standard… Take return parcel to a post office/collection point Returns Organise a specific pick up with the delivery operator Track'n'trace of return parcel Return product immediately at the moment of delivery 16 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
E-commerce and Parcel Delivery Consumer demand Control ● Consumers want to be able to decide o Who, where when and how ● But 40% of all consumers did not have access to important delivery services with their latest online purchase ● Largest gap o Return options (55-65%) o Flexible delivery point (~50%) o Information (45-50%) 17
E-commerce and Parcel Delivery Consumer demand Dynamic e-commerce spills over into the delivery sector E-retailer diversity Predictable delivery Industry specific solutions SME offers Track & trace E-commerce value Alternative chain delivery locations Interactive delivery Parcel lockers/ PUDOs Real-time tracking 18
E-commerce and Parcel Delivery Consumer demand User-driven innovations Innovation in various aspects E-shopper Delivery aspect Market response Examples demands New tracking DPD predict More predictable features for better interactive delivery Time and speed parcel delivery predicting parcel service delivery times GLS Flexdelivery 25% of consumers Roll-out of prefer delivery to Parcel lockers and Delivery point alternative points to alternative parcel shops home delivery delivery locations Track and trace Development of Value added features and electronic DHL real-time real-time tracking and return options notifications are eTracking and mobile returns important 19
E-commerce and Parcel Delivery Consumer demand Innovation promoting convenience Cooperation between e-retailer Mat.se, Volvo and PostNord Four Steps 1. Order food and grocery online 2. PostNord locates the car, wherever it is (in Gothenburg) 3. Digical key gives PostNord access to the car trunk 4. IFoodbag system secures cooling and freezing 24hours 20
E-commerce and Parcel Delivery Consumers want choice and control. The dynamic nature of the e-commerce sector has a positive spillover into the delivery sector. 21
E-commerce and Parcel Delivery Agenda • Parcel delivery 22
E-commerce and Parcel Delivery Parcel delivery Delivery decisions by e-retailers play a pivotal role in consumers’ delivery choices and prices E-retailer Delivery operator Consumer 1. Choice of delivery method Variety of delivery options • Direct cooperation • Direct injection • Consolidator • Self supply • Size of the e-retailer Products sold • • Stage of development of the e-retailer • Complexity vs. customer needs 23
E-commerce and Parcel Delivery Parcel delivery E-retailers of all sizes are well-aware of alternative delivery operators for cross-border delivery bpost DHL parcel Relais colis DHL Amazon NRA awareness E-retailer awareness 5 8 LaPoste DPD Ebay Local couriers Posta Slovenije Hermes GLS Bring Uber UPS Fedex DB Schenker Colis privé 24
E-commerce and Parcel Delivery Parcel delivery Who are the main players? Global National postal operators Regional 25
E-commerce and Parcel Delivery Parcel delivery Direct injection E-shoppers buys product Product shipped from warehouse Product transported cross-border Parcel injected in postal network as domestic parcel Parcel delivered to e-shopper 26
E-commerce and Parcel Delivery E-retailers have ample choice in delivery operators, delivery modes and delivery routes 27
E-commerce and Parcel Delivery Agenda • Pricing 28
E-commerce and Parcel Delivery DG Growth: “You’re shopping online. You’ve found the perfect gift. You're at the checkout, and then… Delivery charges are how much? Forget it!” 29
E-commerce and Parcel Delivery Pricing Delivery decisions by e-retailers play a pivotal role in consumers’ delivery choices and prices E-retailer Delivery operator Consumer 1. Choice of delivery 2. Choice of pricing method Variety of delivery options Many pricing options • Direct cooperation • Free delivery • Consolidator • Pass-through • Direct injection • Mark up • Self supply • Size of the e-retailer Commercial decision Products sold • based on cost & demand • Stage of development of factors the e-retailer • Complexity vs. 30 customer needs
E-commerce and Parcel Delivery Pricing Mystery shopping experiment design How much does the price charged by the delivery operator to the e-retailer for delivery influence the price charged by the e-retailer towards the e-shopper? 20 trade flows • • Low/high weight goods Small/large e-retailers • Comparable delivery prices • 31
E-commerce and Parcel Delivery Pricing Low correlation between prices charged by e-retailers and the public list prices correlation coefficient 0.45 E-retailer 50 price, € 45 40 35 30 25 20 15 10 5 Public list 0 price, € 0 10 20 30 40 50
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