News / Last-mile parcel carriers struggle while global express market is set for growth

© Jakkapant Turasen

The global express parcel market is set to see steady growth over the next four years, according to Transport Intelligence (Ti), but last-mile parcel carriers could struggle with profitability in “mature markets”. 

An industry source told The Loadstar UK parcel delivery company Yodel has been struggling to make profit after risky M&A decisions.  

In February, Yodel was saved from last-minute collapse by being acquired by tech company Shift, which also bought UK express company Tuffnells out of administration in June last year. 

The source said: “This always felt like a massive over-reach. How can a loss-making ‘tech’ company with a £10m ($12.9m) turnover buy a loss-making £100m-revenue business [Tuffnells] and then, just six months later, go out and buy a loss-making £500m-revenue business [Yodel] and somehow expect to turn them into a ‘logistics powerhouse’?

“Until recently, the Tuffnells volume (usually larger ‘uglier’ items) was being collected and delivered via the Yodel network, which isn’t designed to handle Tuffnells-type traffic. Meanwhile the rescued Tuffnells network was quietly closed down. 

“The fanfare and hype over Shift and its growth was vastly overstated; combine this with the heady approach of the private equity funding sector, which surrounds logistics at the moment, and it’s a recipe for disaster,” added the source. 

Transport Intelligence (Ti) explained: “The last-mile sector often struggles with profitability. Yet last-mile logistics is attractive to investors because it offers the prospect of accessing the potential for growth of internet-based retailing.” 

Last month, Yodel published its FY2022 results, which show “an eye-watering loss” of £130m, following a profit in 2021 of £24m, likely boosted by Covid volumes. 

The source said: “It’s been widely understood in the industry that the new combined group is losing around £1.5m a week and has started seeking additional funding – at their current burn rate, they will be out of cash in a matter of weeks.”  

Ti added: “Both Royal Mail and Yodel have experienced variable profitability over a number of years, yet across the world last-mile has the potential for growth. The UK is a competitive and mature market, but most economies offer more potential for gaining share of the overall retail sector. This will lead to continued acquisition activity.”

Meanwhile, UK-based express parcel company Evri, which holds around 20% of the UK last-mile market in terms of revenue, is up for sale – and “there does not appear to be a shortage of potential buyers”, according to Ti.  

Chinese internet retailers JD.com and Alibaba are said to have “expressed serious interest in Evri”.   

In today’s Express Market Sizing Analysis, Ti forecasts the global express parcel market to reach some €566bn ($619bn) this year, growing 9.2%. By 2028, this is expected to reach around €737m. 

“The market will continue to be driven by e-commerce growth,” Ti said.

UPS, Fedex and DHL are the largest parcel carriers by revenue. Last year, the Asia Pacific region led the global parcels market, with a value of some €200bn, closely followed by North America, at €192bn.  

“These two regions account for over 75% of the global market value, highlighting their dominance in the industry,” said Ti. 

Europe ranked third, with a market value of €102bn. However, Europe also showed the second-lowest growth rate, at 2.9% CAGR [compound annual growth rate], “suggesting a more mature, and potentially saturated, market”.  

Other regions, such as Middle East & North Africa, South America, Sub-Saharan Africa and Russia, Caucasus and Central Asia, have “considerably smaller” market shares.