2016's Courier Industry: Testing the Waters
Romania's courier business is pretty dynamic these days and tends to become more and more high tech as players are trying to find innovative solutions to keep up with users' need for mobility. Credit card payment on delivery through MPOS, or collection points or parcel lockers that Romanians can access at any time will soon become a common practice
Alexandra Cioboata talked to authorities and major couriers to disclose their projects for the following period.
Amid the development of electronic commerce both in Romania and in Europe, the courier segment saw significant increases in recent years, reflected in consistent turnovers. For example, estimates show that the European market for courier, parcel and express services had a value of 50 billion Euro last year. In Romania, the most recent data published by ANCOM (National Authority for Management and Regulation in Communications) show that the postal parcels segment is constantly growing, in 2014 twice as many parcels (62 million parcels) being processed as in 2013. Also, the total value of the postal services market was nearly 2.3 billion RON (more than 510 million Euro) in 2014.
According to ANCOM, both in Romania and in the EU, the deliveries of packages will continue to be the segment with the highest growth potential among the postal services market, which makes its role increasingly important in the context of economic development. Even if the business increase at industry levels was different from one company to another, even if some companies decided to merge, the market in Romania continued to advance, demonstrating that the courier sector has not yet reached maturity. Experts estimate that the courier market as a whole reached 350 million in 2015 and it will continue to grow by 10 to 15 per cent.
Romania's market growth goes hand in hand with the increase of the range of services provided, and also with the implementation of innovative solutions for clients. Romanians are increasingly interested in online purchases and retailers in partnership with courier companies are looking for solutions to keep up with users' need for mobility. Thus, providers are looking for the implementation of delivery methods that are as flexible as possible, from couriers travelling on bicycle in large urban areas, to the inauguration of collection points in easily accessible areas or installation of parcel lockers that Romanians can access at any time.
In turn, the online platforms for sale-purchase ads are having increasingly more users and transactions in this segment are also mediated by couriers. Moreover, as the demand for speed among clients increases from one year to the next, retailers started to list ‘same day' among the delivery options. According to experts, ten per cent of those who receive the same day delivery option for a certain fee opt for it. Currently, same-day courier delivery represents seven to ten per cent of the global market, while in Romania it is around four per cent, compared to two per cent two to three years ago. However, the sector is expected to keep growing.
All these developments are a sign that processing of packages will continue to rise, which will be reflected in the second half of this year in the courier market value increases.
"Both traditional mail and new courier services providers operate in a rapidly changing world and must continually innovate and evolve according to the needs of consumers," Marius Catalin Marinescu, president of ANCOM, tells The Diplomat – Bucharest. "In terms of couriers, amid fast growth of electronic commerce and parcel delivery, the global postal industry pays a particular attention to innovative digital delivery solutions. For example, in Europe, the collection points installed in retailers' spaces and the parcel lockers services (recently, the services for secure electronic parcel lockers have developed exponentially) have escalated as an alternative to home delivery. Germany is a success story regarding the usage of parcel lockers, used by Deutsche Post DHL since 2002, with over five million registered users today. Amazon, Google, Wal-Mart and Alibaba launched or will launch delivery services using drones. In addition, most operators offer mobile apps for tracking parcels."
Marinescu went on to say that digital developments cannot be ignored by couriers and those who will not keep up with the latest digital technology, those who will not be present in the online environment where customers spend most of their time and those who will not offer solutions according to the clients' mobility needs, will certainly lose. Digital innovations such as credit card payment on delivery through mobile POS (MPOS) or equipment integration for barcode technology will soon become the rule and not the exception, he says. "Players who want to stay competitive will have to not only keep up with the latest innovations, but to themselves be an innovative growth engine," adds Marinescu.
ANCOM analysis of the dynamics of the number of active suppliers in the market in recent years shows that during 2012 - 2014 the postal services market has stabilized itself in terms of both number of authorized providers and number of active suppliers, fluctuations being under five per cent. In 2014, there were 371 authorised providers (a 3.13 per cent decrease to 2013) and 237 active suppliers (a drop of 0.42 per cent). Each year, however, ANCOM has had both new authorized providers and providers who waived their right to supply postal services, the market remaining dynamic.
"Although developments were relatively steady and the market has become increasingly more mature, we cannot say that we have reached a saturated market as there is still room for growth and investments," says Marinescu. "Moreover, in the last two to three years we have witnessed mergers and acquisitions, but also quite spectacular growth of turnovers of suppliers, in some cases even 50 per cent from one year to another. Thus, the Romanian market continues to offer investment opportunities for international suppliers."
ANCOM received nearly 170 complaints from users in H1
Courier services quality continues to be the main weakness of suppliers, or at least this is what complaints from consumers are showing, says Marius Catalin Marinescu, president of ANCOM. For example, in 2015, ANCOM received 462 complaints from users regarding postal services (all services categories), and this year, between January to June 2016, users have submitted 169 such complaints. The main issues claimed by postal services users are aimed at missing the delivery deadline and the damage/loss of postal items (for all categories). In the first half of this year, 46 per cent of complaints on postal services aimed at missing the deadline, while 24 per cent stressed the damage/loss of postal items.
"ANCOM imposes to postal services providers a number of obligations designed to support the end user, such as obligations to inform users when contracting a postal service, for example relating to geographical areas in which the postal items will be delivered, to inform about the quality conditions that must be met by the postal service (i.e. delivery times, deadline for return of the payment), and also about the complaint resolution procedure," says Marinescu. "Failure to comply with those information obligations automatically attracts sanctions from ANCOM, which the Authority will apply with maximum objectivity, as before."
In 2015, ANCOM conducted 1,321 control actions in total on the postal services market, following which it issued six notices and imposed 124 warnings and 23 fines, totalling 65,500 RON, the most common irregularities concerning the failure to comply with the obligations imposed by the general authorization regime. Out of the control actions conducted in 2015 by ANCOM on the postal market, 601 targeted Posta Romana (Romanian Post National Company, CNPR) as the supplier designated for universal service, and by these controls a notification, 48 warnings and nine fines were applied, the cumulative value being 28,000 RON.
The biggest fine on the postal services market, amounting to 10,000 RON, was imposed in 2015 to Posta Romana, because between July and December 2014 it had not measured and reported, as it was required, the quality parameters as provided by the law on postal services, specifically the delivery times for the domestic postal items of priority mail weighing up to two kilograms.
The largest fines imposed by ANCOM in 2015 on the area of postal services outside the scope of universal service targeted providers such as Posta Atlassib Curier Rapid (9,000 RON fine for unprinted mailing with the date of filing), Nemo (5,000 RON fine for failure to comply with the general authorization regime) and CNPR (5,000 RON fine for failure to comply with the general authorization regime).
However, in the coming years, experts note that the courier market will be more consolidated and will focus more on the quality of services they provide. This year, according to Marinescu, ANCOM foresees the formulation of the regulatory strategy in the postal sector for the 2017-2020 period, through which it will propose major strategic lines for the sector regulation to ensure, among other things, a more balanced relationship between benefits of users and providers′ obligations.
Next, The Diplomat – Bucharest talks to the leaders of the both local and international courier industry to stress both their business growth and pilot projects for this year.
FAN Plans to surpass 100 million Euro
In the last five to six years, the predicted average business growth of the Romanian-based express courier services leader FAN Courier was of 15 per cent, but the real growth year on year registered almost 20 per cent. However, for 2016, FAN Courier has budgeted again an increase of 15 per cent in terms of turnover to 102 million Euro, according to Roxana Magopet, the marketing and PR manager of the company. FAN Courier closed the last year with a turnover of nearly 88 million Euro. The first three months of the year have confirmed that the estimated growth rate for 2016 is realistic, registering a 15 percent increase, she says.
"For FAN Courier, 2016 has begun in force from the first month and the results after the first three months of activity have already confirmed that this year witnesses a maximum effervescence," Magopet tells The Diplomat – Bucharest. "Typically, in the past years, the first month of the year, January and some of February, was a period with normal activity, allowing us to closely analyse the work of the previous year, the successful actions and those where we still have work to do. This year, amid movements that occurred in the market, even since the first month of the year we had an overload of activity, which we were able to manage successfully, we say, if we take a look at the results of the first quarter."
In terms of number of employees, the company constantly increases on average by ten per cent annually as a result of investments it makes. Currently, it has about 4,750 employees and collaborators nationwide and it finds itself within a personnel recruiting campaign for key areas such as Cluj, Brasov, Timisoara, Bucharest and others. FAN Courier has invested in recent years in average five to seven million Euro. In 2015, due to the start of the regional hub project in Brasov and fleet expansion, total investment exceeded 12 million Euro. This year, investments are planned according to the announced average margin, but, if necessary, this ceiling will be supplemented, says Magopet.
"The investment lines are directed towards strengthening the assets – the Brasov hub, opening new delivery/receipt shipments centres and modernization of offices, strengthening the fleet, IT and personnel," she says. "[In the future,] we want to achieve our business objectives, to remain in the delivery times engaged in the relationship with our customers and partners and, not least, to develop services for them that can lighten their business development."
The total number of expeditions carried in 2015 was around 26.5 million, given that an expedition can include either an envelope or one or more parcels. For this year, the company expects to surpass 33 million, namely twice the number of expeditions carried throughout 2012 and 25 per cent more than in 2015. According to Magopet, currently, the daily average is of 130,000 expeditions, while in the peaks of activity during the discount periods like Black Friday, the company registers more than 200,000 expeditions, processed and shipped daily. The fleet currently counts over 2,900 vehicles, the investment in the fleet from early 2016 to early June surpassing six million Euro.
Nemo plans three-million Euro investments this year
Courier services provider Nemo Express ended 2015 with a turnover of 24.6 million Euro, and 12 per cent of this amount, namely around three million Euro, will be reinvested in infrastructure, according to Dan Serbanescu, general manager of the company. Punctually speaking, in the second half of the year, Nemo Express will inaugurate its new online platform, a CRM able to offer to customers the most advanced online tools in the field, he says. Moreover, the courier has an ongoing project to develop its Customer Support department to streamline delivery times. In addition, an important part of the amount will be allocated to the development and modernization of its fleet and last but not least, until the end of the year, Nemo Express will inaugurate the new headquarters of the company, a new building with three allocated storage facilities in the same location that is now the headquarters.
"The courier segment is one of the growth engines of the economy," Serbanescu tells The Diplomat – Bucharest. "A segment of the Romanian industry with turnover growing by 25-30 per cent every year can only contribute significantly to GDP growth. In my opinion, the courier service is one of the most accurate barometers for a country′s economy. That′s because it gives a clear picture of courier cargo volumes traded, and their progression. Depending on it you can say if the economy is performing or not. 2016 volumes have already risen by more than 30 per cent which has forced us to develop much more than we originally planned logistics capability, with all necessary: transport capacity, routing, storage, loading / unloading and human resources. We worked at full capacity and we managed to stay on schedule."
The storage capacity of the company is sized to cover the storage and routing throughout Romania. Each national agency is guaranteed a minimum amount of storage depending on the area. Outside the headquarters, Nemo Express has developed six hubs (Magurele, Cluj-Napoca, Brasov, Iasi, Timisoara and Sibiu) and 82 national agencies (deposits). The Nemo Express fleet was also resized for the current traffic of goods necessary. Quantitatively speaking, the Nemo Express fleet can transport up to 450 tonnes daily on urban and interurban routes. For the future, the company plans to increase the range of services and to devote more attention to the e-commerce area.
"In this regard, we propose new services that will streamline activity for online stores," says Serbanescu. "First, we think to provide to our customers a solution for warehousing which is viable, convenient and useful for online shops with medium or small turnovers. For now, everything is in the project area. And also we are thinking to check a network of pick-up type, but for the beginning we will start two or three experimental locations. If that will be a success, then we develop the whole system."
Nemo Express has 460 employees under legal contract, but it also has 88 subcontractors in the whole country which have at least 1,000 employees, all of them working for its brand. Nemo Express was established in 2002 as a consequence of the economic context, as a result of existing market needs logistics and courier time.
DPD plans to equip more than 100 couriers with MPOS in H2
One of the main challenges in the courier industry is represented by the payment on delivery, where more than 90 per cent of Romanians pay cash. To reduce the cash management and increase the delivery time, DPD (Dynamic Parcel Distribution) Romania, together with MasterCard and UniCredit, will launch a project in the second half of this year that will allow clients to pay by credit card on delivery. Thus, the company will equip the couriers in Bucharest, and afterwards, throughout the country, with Mobile POS (MPOS) devices.
"This is an ongoing project," Lucian Aldescu, CEO of courier service provider DPD Romania, tells The Diplomat – Bucharest. "We are very close to delivering it. At first, more than 100 couriers in Bucharest will have MPOS and afterwards we will implement the system across the country. I think this is the right path towards normality. We have to try to take over as little cash as possible, because it is not easy to manage."
The business of DPD is balanced, B2C and B2B representing around 50 per cent each of the portfolio. Aldescu confesses that the B2C segment, which has seen a fulminant growth in the last four to five years, requires permanent innovative solutions. DPD has developed in the past the 24-hour message through which the client is announced that a courier will deliver its parcel, but this year it plans to focus on the implementation of the ‘one-hour predict' solution, whereby the customer will know the time the package will be delivered.
"We have done the first predict simulations in Bucharest last week [early June] for a range of two hours, saying for instance that between two and four o'clock the parcel will be delivered," says the CEO. "The target is to reach one-hour predict. Besides Bucharest, we will try to launch this project in other big cities across the country as well, starting July this year."
Last year, DPD Romania increased its revenues by 23 per cent compared to 2014, reaching 20.5 million Euro, while its volumes have risen by 33 per cent in the same period of time. This year, the company saw the same growth pattern in the first half, namely more than 20 per cent in terms of sales and more than 30 per cent in terms of volumes. According to Aldescu, this discrepancy between the figures indicate that the pressure on prices is still high. "When you register a discrepancy between sales and volumes, it means that the prices are still low," he says. "If they would be equal, it would have meant that the prices are fair. However, by the end of the year we will see the same growth figures."
DPD announced last year the investment of 2.5 million Euro, an amount which will be used for the developing and equipping of two locations this year: the central hub in Sibiu, which will have a surface of around 4,200 sqm, and the one in Bucharest, with an area of 4,800 sqm. Furthermore, the company plans also to increase its operational capacity in another three locations by this autumn. "We need to prepare ourselves for Q4, marked by holidays and Black Friday," says Aldescu. "We will increase the handling personnel and we will expand by 500-1,000 sqm in three locations by 1 September, namely in Cluj, Timisoara and Bacau."
Counting around 600 couriers, DPD has invested more than four million Euro so far this year, including all the aforementioned projects. The company has 80 collection points and wants to reach 300 next year. In terms of other objectives, for the coming years, DPD intends to implement a locker system on the local market, which is now tested in Bulgaria. DPD Romania has been active on the local market since 2008, when GeoPost, the express division of La Poste, acquired the majority stake of Pegasus Courier. As of 2011, Pegasus became 100 per cent DPD Romania.
Sameday Courier saw more than 25 per cent growth in H1
Sameday Courier is one of the most important niche companies on the Romanian express courier market with same-day delivery, whether it is local, national or international. Last year, the company announced a double digit growth in terms of revenues, reaching 8.6 million RON (around two million Euro), a 25 per cent rise compared to previous year. In the first half of this year, however, the growth maintained its pace and its managing director, Lucian Baltaru, expects to see an even higher performance in the second half of 2016.
"In the first six months of this year, we managed to increase the business by 25 to 30 per cent," Baltaru tells The Diplomat – Bucharest. "I think we will register even better results in the second half of the year. Last year, H2 was not that great, but this time there are positive signals – coming from the market – which encourage us to expect a growth record."
Sameday will launch a project in July that will allow clients to pay by credit card on delivery, the same project DPD Romania is involved in, in partnership with MasterCard and UniCredit. The company will start to equip around 50 couriers from Bucharest with MPOS and in the future, if it will be successful the project will be aimed at the rest of the country.
"We are permanently thinking to develop new services and we try to come up with innovative solutions," says Baltaru. "We are very happy to launch such projects, along with DPD, because we will be trendsetters. We don't like the cash we manage. Hopefully, we will have a high rate of acceptance in terms of credit card payment on delivery, diminishing the risks. The couriers have started to carry large amounts of money and this becomes dangerous. We will try to promote it as much as possible. For now, we will start with 50 couriers, but in the future we will count on 500 employees and collaborators across the country."
In 2014, the company launched ‘Lokko', a delivery application based on crowdsourcing. Through ‘Lokko', clients can call a courier 24 hours a day, seven days a week, within a controlled environment. Some options of the application include the choice of package pickup and delivery schedule, multiple payment options (SMS, card or cash), real-time monitoring throughout the courier′s delivery route, direct contact of the courier by the sender as well as by the consignee, real-time receipt confirmation (with original signature and photo), proximity alerts and the possibility to rate the selected courier. However, this year, Sameday slowed down the growth pace of the number of orders within the platform because it wants to add new features to the application.
"During peak periods, we have reached 5,000-6,000 orders per month through ‘Lokko', but now the figure was reduced to half," says Baltaru. "We expect to come out with the latest version that will fill the gaps of the application and allow us to grow even more."
Sameday has around 500 couriers, including collaborators, out of which 150-200 are in Bucharest. For this year, the company plans to hire up to 50 people for qualified jobs and between 100-200 people for unqualified jobs across the country. "We want to prepare ourselves for the 2017 growth, which we estimate to be high," says Baltaru.
In terms of other objectives, Baltaru confesses that the company wants to penetrate other segments of services. "We intend to implement some logistics services, from storage and fulfilment to other related services, as e-commerce requires such support," he says. "Currently, we have an operating space of 1,500-2,000 sqm, but we can expand it rapidly."
Sameday is planning to launch also a network of 60 collection points across the country in early 2017, out of which 15-20 will be in Bucharest, the project being currently under implementation. "We will have our own spaces that will work as pick-up points," says the managing director. "Clients/recipients can pick up the packages from here, but they also can send parcels in the country as at the post office. They will become more visible when online retailers will list them among the delivery options. So far, we opened three in Bucharest and we plan to keep opening. However, for now, we are just testing the waters."
Sameday invests up to 300,000 Euro per year in sorting operational capabilities, in technology and people. The share of the same day business in the company's portfolio is currently more than 50 per cent, given the fact that in 2007, when Sameday became operational, it was five per cent. The main clients come from e-commerce, health clinics and automotive. The company delivers more than one million packages per year, the courier segment representing 80 per cent of the business. The rest is represented by postal services. Bucharest represents up to 65 per cent of the business, while the national and international delivery make up the rest.