Adding Value to

Parcel Delivery
September 29, 2015
Research Approach

A comprehensive analysis of CEP (Courier, Express & Parcel) industry

Assesses historic performance, identifies future trends and determines shareholder value drivers

Includes B2B and B2C segments, domestic versus international shipping as well as overnight
and non-day, and time definite products segments under 150 pounds or 70 kilograms

Examines current and new players in this market, including global integrators, postal organizations,
regional players, shared economy and crowdsourcing actors, as well as retailers moving downstream

Sources include: public information, paid and proprietary primary and secondary research, internal
and external subject matter expert interviews and extensive market and financial analysis

Copyright 2015 Accenture. All Rights Reserved. 2

Market Definition
Definition of CEP (Courier, Express and Parcel)

Time sensitivity: Usually consignments

Same day & delivered by a specified day and even
in-night Air/Road express Air charter
by a specified time

Time certain
Priority Express
Express freight Size of consignment: Maximum weight
Next day usually considered to be about 31.5kg
(70lbs); Few exceptions.
Deferred and
Day certain Other Express Freight Forwarder

Day Groupage
uncertain Postal FTL
LTL Mostly Door to Door

Document Parcel Freight LTL, FTL

Space represented by pure express players

>1kg 31.5kg 1000kg such as UPS, FedEx and TNT Express; as
well as express and parcel arms of postal
Source: TNT, Accenture Research companies such as Geo Post (La Poste)
Scope of Market = Courier, Express and Parcels and Purolator (Canada Post)

Copyright 2015 Accenture. All Rights Reserved. 3

Parcel DeliveryKey Findings Summary

Power shifting to the consumer

Internet driving growth, transforming the supply chain

B2C outgrowing and cannibalizing B2B

The world is flat: rise of the micro multi-national

Parcel
Delivery Growing demand and increased volatility

Product mix means lower yields per package

Investments to grow capacity, yet declining ROIC

Costs are rising faster than revenue

High fixed cost means less flexibility when it is key

Last mile is where the battle is taking place

Sharing economy set to disrupt the last mile further

New technology will change the game

Home delivery becomes the new premium

Most delivery organization know what to do, but need to do it better, faster, cheaper

Copyright 2015 Accenture. All Rights Reserved. 4

Digitally enabled consumers driving most of the eCommerce demand
see bargaining power shifting toward them
Rise of the digital consumer

Consumers with:
Empowers: So they seek:

Greater choice
Advent of:

Faster reviews
Lower prices
Data
Low switching costs Greater convenience

Seamless experience
Devices

Retailers and Deliverers with: in

More competition Buying Paying

Social networks
Receiving Returning
Easier aggregation of
services

Better visibility in
supply chain
Presents: So they provide:

We have crossed barriers in choice, transparency, and service expectations

Source: Accenture analysis

Copyright 2015 Accenture. All Rights Reserved. 5
The parcel delivery value chain has expanded in scope.
Roles at each stage have evolved toward a stronger service orientation.
Evolution of parcel delivery value chain

PastDeliver PresentDigital, Transparent, Fast and Flexible Delivery

Pick up
Less visibility into
demand for services
Limited influence on
demand
Warehousing
Low C2C and B2C
Less transparency
Easier timelines

Limited competition
Transportation
Recipients with low
bargaining power
Low service
expectations

Delivery

Need to develop new resources and capabilities to deliver on service expectations at each step of the value chain

Source: Accenture analysis

Copyright 2015 Accenture. All Rights Reserved. 6
The last mile, which holds key to the consumer experience, has
witnessed an emergence of multiple delivery models
Last mile delivery models

A) Postal mail-run

Warehouses

B) Courier delivery 2
D) Lifestyle/ Lifestyle/Crowd-shippers delivery to homes similar to courier
Crowd-shippers

C) Courier delivery to lockers

Crowd-shippers delivery to lockers

Retail stores Parcel lockers/
Access points

Consumer convenience and cost reduction have been primary objectives guiding the change

Source: Accenture analysis

Copyright 2015 Accenture. All Rights Reserved. 7
The challenge of increasing service needs is exacerbated by the
growing delivery demand calling for scale up of infrastructure
Courier-Express-Parcel (CEP) market size and growth
USD billion, %, 2008-2020F
Routes
Global market size
USD billion Faster growth (~5.4%, 2013-2017) than
International domestic primarily due to growing cross-
border eCommerce
+5% 343.1
Continues to be >75% of overall market
+4%
Domestic with ~5.0% growth (2013-2017)
237.9
194.8 Customer segments
Slower than B2C with close to GDP growth
B2B but significant share and higher margin
contribution

Close to eCommerce growth rates and

2008 2013 2020F B2C growing in significance

Emerging segment from growth in auction

C2C sites and the circular economy
Geographies

Market APAC N. America W. Europe Europe Rest Middle East S. America Africa
2013 share 32% 33% 23% 5.7% 3.5% 2.5% 1.5%

2020 share 38% 30% 19% 5.3% 4.1% 2.5% 1.9%

2013-20 CAGR 15% 9% 5% 8% 7% 5% 10%

Fixed cost heavy model: The growth has significant investment implications to meet demand

Source: Accenture research, Transport Intelligence

Copyright 2015 Accenture. All Rights Reserved. 8
 eCommerce is driving growth in domestic and international markets
Courier-Express-Parcel (CEP) market size and growth
USD billion, %, 2010-2013 and 2013-2017F
Domestic vs. international growthHistorical and Future1 Drivers of growth

20%
131.9 70% Of worldwide spending by millennials by 20202
International (2010-2013 & 2014-2017 CAGR)

75.4

346.0
15% 55% Urban population out of total by 20173

10%
237.9
109.4
49% Smartphone penetration in mobile phones by 20174

81.6
77.4
46% Internet penetration in population by 20175
5%
67.4
Europe N. America 27% International eCommerce out of total by 20176
APAC Global
0%
0% 5% 10% 15% 20% 12% Middle class growth rate in APAC 2009-20207
Domestic growth (2010-2013 and 2013-2017 CAGR)

Fixed cost heavy model: The growth has significant investment implications to meet demand
Notes:
Size of the bubble represents market size. Previous point2013, Leading point2017F. Total market expected to move from US$ 237.9 billion to US$346.0 billion.
Source: 1 Transport Intelligence, 2 https://badgeville.com, 3 World Urbanization Prospects UN Report, 4,5 www.digitalbuzzblog.com, 6 eMarketer, 7 Ernst & Young
Copyright 2015 Accenture. All Rights Reserved. 9
 B2C will continue to grow in significance across geographies,
driving growth and presenting challenges
CEP market size and growthB2B vs. B2C
USD billion, %, 2013-2020F
B2B vs. B2C growth1 Drivers of growth

15%
Asia Pacific 55% Urban population out of total by 20173

49% Smartphone penetration in mobile phones by 20174

B2Cl (2013-2020 CAGR)

10% Global

46% Internet penetration in population by 20175

North America
5% Western Europe 12% Middle class growth rate in APAC 2009-20207

Challenges:

0% Volatility Last mile Yields Returns

0% 5% 10% 15%
B2B (2013-2020 CAGR)

B2C focused delivery networks call for different focus areas vs. B2B
Notes:
1 Size of the bubble represents total market size in 2020. Total market expected to move from US$237.9 billion to US$343.1 billion.
Source: Accenture research, Transport Intelligence, Accenture analysis
Copyright 2015 Accenture. All Rights Reserved. 10
Although B2C is expected to grow in share, B2B will remain a
sizeable opportunity
CEP market shareB2B vs. B2C
USD billion, %, 2013-2020F

Price Product Scope for

Segment Size Growth Density Profitability
sensitivity dominance differentiation

B2C Lower Higher Lower Higher Deferred Lower High

B2B Higher Lower Higher Lower Express Higher High
Firms need to find optimal balance in portfolios and investment focus in both B2B and B2C

Source: Accenture research, Accenture analysis

Copyright 2015 Accenture. All Rights Reserved. 11
Although B2C is driving growth; it is also exposing delivery
companies to more volatility in demand
B2C implicationsVolatility Dec 2013: UPS admits it was Dec 2014: UPS slammed by a
unprepared for the late surge different holiday season mess-up
in online holiday shopping1 adding too much extra firepower1

FedEx average and maximum daily shipping UPS average and maximum daily shipping
volume (million)2 volume (million)2
25 35

20 30

15 25

10 20

5 15

0 10
2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014
Maximum shipments in a day Average shipments in a day Maximum shipments in a day Average shipments in a day

UK Cyber Monday20143 China Singles Day20134

39% More parcels than previous Monday 166 Shipments across China
million
More cross-border shipments than Greater than average daily shipping
86% previous year 10x volume

Agility in value chain would be important to contain costs without compromising service standards

Source: 1 News reports; 2 Financial reports and News reports; 3 Metapack; 4 Financial Times
Copyright 2015 Accenture. All Rights Reserved. 12
Investments are being made by delivery firms and retailers to expand
capacity and modernize network in the parcel delivery business
Capital expenditure on parcels
2014
Major investment storiesParcel delivery Major investment storiesRetailers

DPD
DPD has invested 10.2 million in six depots to Ali Baba is investing US$1.5 bn
expand its capacity to handle B2C parcels Ali
Baba over three to five years to
expand the logistics network in
China (2014)
DHL investing EUR 750 million to modernize and
DHL expand its parcel networkbuilding Germanys largest
parcel processing center in Hessen (2013)
Ali Babas Institutional investors are co-
co- investing US$3 billion over the
Investors same period along with Ali Baba.
FedEx Ground investing US$1.2 billion this year in 70
Fedex expansion projects in addition to the US$2.5 billion
spent over the past five years to add capacity (2014)

Australia Post doubling capacity at Sydney and

Aus
Post Melbourne parcel facilities as a part of its AUD 2
billion investment in the Australia Post Network
(2012) Amazon has spent US$13.9
Amazon billion since 2010 on
UPS plans to invest US$2 billion over the next five warehousing and fulfilment to
years to develop its international infrastructure in support its business including 13
UPS Europe, Asia and the Americas, (4.5% to 5% of annual parcel depots in the United
revenue) targeting growth markets and Kingdom.
improvements in the profitability of eCommerce
deliveries. (2014)

Firms are scaling up to meet future demand and becoming more fixed cost heavy

Source: News reports, Accenture analysis.

Copyright 2015 Accenture. All Rights Reserved. 13
Many firms have pursued the inorganic route to build scale and
acquire new capabilities to widen the scope of their business
Mergers and acquisitions Trend is continuing in 2015 with
the FedEx 4.4bn bid for TNT

Number of deals by year1 Number of deals by business (Last five years)

2009-2014 2009-2014
45
42
Logistics and Transportation 89

34 Parcels and Express 38

Marketing and Sales 17

22
20 IT Services and Software 14

14 Financial Services 9

Mail 6

Real Estate 6

2009 2010 2011 2012 2013 2014

Acquisition strategy would be key in acquiring the right assets and maximizing effectiveness and efficiency
Notes:
1 Firms included are DPDHL, Austrian Post, Canadian Post, La Poste, PostNord, SingPost, Australia Post, UPS, Fedex, Bpost, Swiss Post and Itella.
Source: Financial reports, Accenture analysis
Copyright 2015 Accenture. All Rights Reserved. 14
Sharing economy start-ups are witnessing an upsurge in venture
capital interest across industries
Total funding in sharing economy start-ups
958

357
283
60 96 116

2009 2010 2011 2012 2013 2014

Top funded companies Top investors

Stay 800
Airbnb($776.4M), Wimdu($90.0M) Sequioa, TPG Growth

Transport 645 Lyft ($333M), RelayRides($53.2M), Trinity Ventures, Shasta Ventures,

Boatbound($5.3M) Google Ventures, August Capital
Personal Goods 273 Chegg ($252M; IPO at $1.1B).
N/A
Bag Borrow or Steal($20.0M)
Private Spaces 51 LiquidSpace($26.2M), Shasta Ventures, Roth Capital Partners,
PivotDesk($6.7M), Storefront($8.9M) Lucas Venture Group, Spark Capital
Business Equipment 16
Getable($3.2M), Yard Club($1.6M) N/A

Food 11
EatWith ($9.2M), Suppershare GreyLock

Logistics 4
Friendshippr($1.2M), WeDeliver($0.8M) N/A

Storage 0
Roost($160k), StowThat($50k) N/A

Source: Sharing Economy Landscape 2015, Tracxn research

Copyright 2015 Accenture. All Rights Reserved. 15
New entrants are drawn to a growing but underserved industry and
are enabled by technology
List of promising start-ups by business segment

Transportation Systems Crowd Shipping Containers

Futuristic shipping models Flexi-cost last mile shipping Container packing innovation

PiggyBee, Friendshippr, Roadie Staxxon, Holland Container

Matternet, Google drones, Barnacle, Nimber, Zipments For You, Innovations
Amazon drones Bringrs, UberCARGO

Freight Rates Local Delivery 3PL and Other Services

Transparent shipping costs Low-cost urban delivery models Enabling shippers

Swapbox, Boxc, Postmates,

Freightos, Tanspoteca,
DoorDash, Zipments, Deliv, Sidecar, Shipwire, Cloud Fulfillment, Scurri,
iContainers, Freight Filter,
Uber, ParcelBright, Parcel Metapack, 71lbs, Axida
Xeneta, Shippo, ShipHawk,

End-to-end Shipping Storage Trucking

Uber of shipping in C2C space
Shipster, Shyp, Shipbob,
Schlep, MinFragt.dk
Crowd-sourcing storage space enabling Tracking and management
flexi-delivery
Cargomatic, TruckTrack, KeepTruckin,
Youtruckme.com, Keychain Logistics,
Lockitron, MakeSpace, Boxbee, Cubbyhole,
uShip
Parcel Pending, ShareMyStorage, Roost

Last Mile

Creating new challenges and opportunities for legacy companies

Source: www.jonathanwichmann.com
Copyright 2015 Accenture. All Rights Reserved. 16
The new entrants in last mile are mostly asset-light and utilize the
power of crowdsourcing to achieve outcomes at lower costs
Start-upsLast mile

Storage solutions mostly based

on crowdsourcing spaces. Offer
temporary storage for later Local
Crowd delivery and collection.
Shipping Deliveries
Present opportunities to
manage flexible deliveries while
minimizing travel costs.

Crowdshipping enabling asset- Localized, urban delivery models

light, low fixed-cost models to offering delivery solutions at
solve the last mile delivery. lower prices than legacy
players and enabling offline
Potential partners for parcel retailers to add delivery
delivery companies that do not Storage services.
wish to grow investments in last
mile. They are competitors and
potential partners.

Operationally flexible models generate cost advantage for new entrants but scalability remains to be evaluated

Source: www.jonathanwichmann.com, Accenture analysis

Copyright 2015 Accenture. All Rights Reserved. 17
Parcel Delivery Conclusions 9 Value Drivers
Power shifting to consumers
1 To deliver on
To support market
strategies Focus on consumers wish-list
Increase the
4 Efficiency 3
Recipients
and
Productivity

Go Beyond
Traditional

Variablize
Costs

Underserved
& Growing Grow
International
Disaggregate
the Value
Chain

Brand and
Segment

Mergers and
6 5
Acquisitions
To build sustainable Deploy To succeed in executing
operating model Strategic market strategies
Pricing
2
Consumers Wishlist
Copyright 2015 Accenture. All Rights Reserved. 18
Executive Takeaway
Parcel Value Drivers (1 of 2)

Rationale/Why? Description Benefit/Value Description

Rise of digital Relationship Better customer UPS MyChoice
consumer w/recipient experience Australia Post
Focus on Mobile lifestyle Two-way Market share retention La Poste
the recipient Competition for last communication Lower cost to serve
mile New products/services Incremental revenue
Auto-replenishment Monetize preferences
Transportation a Value added services Additional revenue UPS SCS
commodity eLogistics and Customer stickiness SingPost
Go beyond Growth of eCommerce warehousing Long-term contracts FedEx/Genco
traditional Supply chain Returns management Diversification of risk
disruption Delivery options
Declining yields
Rise of micro Cross-border Revenue growth FedEx (Brazil, Mexico,
multinational partnerships Higher yield per TNT)
Grow international Lower barriers to X- E2E visibility package Austrian Post (EEC)
border Customs integration Higher margins Japan Post / Toll
Access to Internet Global trade tools Diversification of risk Priority
Growing middle class
Segment growth Segmentation Greater market share UPS SCS
Rise of delivery Vertical specialization Lower price sensitivity Austrian Post and
Brand and options Brand positioning Higher revenue Fiebra brands
segment Expansion of services Product portfolio Higher margin La Poste
Blurring of player lines management

Declining yield per Subscriptions services Higher margins Amazon Prime

package
Deploy strategic Poor pricing practices
pricing Costs to revenue
increasing
New products/services
Analytics Incremental cost FedEx and UPS
Competitive pricing coverage pricing (residential and
Surge/cost-based Greater revenue fuel surcharges
pricing Greater market share Uber peak pricing
Airline pricing

Copyright 2015 Accenture. All Rights Reserved. 19

Executive Takeaway
Parcel Value Drivers (2 of 2)

Rationale/Why? Description Benefit/Value Description

The firms need Big data Higher margin Purolator
to build capabilities Analytics Greater supply bPost
Increase efficiency to succeed Technology chain agility FedEx Express
and productivity at implementing Leading practices Cost avoidance
market strategies Greater
revenue/share
Growing peaks Outsourcing Lower/avoided Innovapost
and valleys Lease vs own CAPEX Lasership
Variabilize Declining asset Labor strategies Cash generation Deliv
costs utilization Asset divestment Higher margins
High downside if Speed to market
revenue declines
Declining asset Value creation Higher ROA SingPost Books
utilization Capacity expansion Faster speed GXG @ USPS
Disaggregate Shared economy Asset utilization to market Uber Last Mile
the value chain growth Build ecosystem Higher revenue
Last mile competition Higher margin

Stagnant B2B growth Market assessment Revenue growth Austrian Post

Declining package Target identification Speed to market DHL
Mergers and yield Post-merger New capabilities FedEx
acquisitions Excess capacity integration or geos Sing Post
Need for Synergies realization Cost synergies
specialization

Copyright 2015 Accenture. All Rights Reserved. 20

Contact Details
For more information, please contact:

Tim Bateman Brody Buhler Andre Pharand

Global Parcel Lead Global Managing Director Global Post & Parcel Management
Post & Parcel Lead Consulting Lead

tim.bateman@accenture.com robert.b.buhler@accenture.com andre.pharand@accenture.com

+44 7774 299 350 +1 703 405 1253 +1 917 755 5551

Copyright 2015 Accenture. All Rights Reserved. 21

Copyright 2015 Accenture. All Rights Reserved. 22