Dec 11, 2006|
Global express industry: An overview
Introduction: The core business of express industry is to provide door-to-door transportation of next day or time-definite shipments. Time definite shipments generally involve a transit time of 2-3 days. Besides, time-bound transportation services, express companies also provide a number of value-added services, which include tracking facility, payment collection, insurance facility and proof of delivery. A broad range of industries use express services but the largest users are manufacturing, pharmaceuticals, financial services and high-tech industries.
Development of express industry: The express industry originated in the US in the late 1960s and flourished following the deregulation of the air cargo in the US in the late 1970s. The express companies met the increasing need of companies for time definite and guaranteed delivery of their shipments, which could not be met by either postal services or freight forwarders. In 1980s, the express industry moved beyond the US to become a global business. The types of goods transported by express companies are of high value/low-weight. This is due to the fact that express companies frequently use air as a mode of transportation and hence moving bulk shipments or low value goods is not feasible. It is estimated that goods transported by air account for 3% by weight of all goods traded globally but about 40% by value.
How does the industry operate: The express industry simplifies and speeds up the process of transporting goods. It organizes collection, usually at the end of the business day, allows the consignor to access information on progress of shipments from pick-up to delivery and provides proof of delivery. In case of international shipments, express companies handle custom clearance as well as the payment of duties and taxes. To meet the requirements of customer, the express industry relies on overnight transport to use the 'dead time' from when a company hands over the shipment late in the working day to the reciepent early the following day. Express transportation is achieved by using a variety of transportation modes; trucks, vans, trains, passenger aircraft, freight aircraft as well as on-foot delivery. Though express companies prefer surface transport, air transportation is used in cases, where the transit time makes it impossible for goods to be delivered by surface transport.
Source: Oxford Economic Forecasting
Industry size and structure: The global express industry was estimated at US$ 149 bn in 2005. The express industry has been one of the fastest growing industries in the world with a growth rate of around 8%, more than twice the growth witnessed in the global economy. Although the US express industry (US$ 65 bn) is the largest market, the fastest growing market is the Asia-Pacific region (US$ 34 bn), which has experienced an average growth of 15-20% in the past few years. The express industry is largely a regional play with very different market positions in each continent. Though DHL, FedEx, TNT and UPS are the four leading players of the industry, their market share varies considerably across markets (refer chart below).
The US express market is the most mature market, dominated by UPS and FedEx, followed by DHL and US Postal Service (USPS). The Germany represents the largest share of the Europe's express and parcel market, followed by the UK, which has been growing at a faster pace than Germany and France. Though the Central and Eastern region account for a small share of revenues in Europe, it is the fastest growing market within it and poised to grow at double-digit rates in the near future. In the Asia-Pacific region, Japan is the largest and most developed express market. This explains why the Asia-Pacific market is dominated by Japanese companies including Yamato Transport, Sagawa and Nittsu. The combined market share of the four global players in this region is lowest at 14%. China (US$ 3.5 bn) and India (US$ 1.6 bn) are the fastest growing markets in Asia-Pacific region. As per an estimate, China will become the sixth-largest express industry by 2010, if its express industry continues to grow at an average 20% per year.
Future prospects: While the market for express services is relatively mature in developed economies (the US and EU), there is considerable expansion in emerging economies, particularly in Asia and Latin America. The global express industry is expected to grow at an average rate of 8%, aided by a double digit growth (15-20%) in the developing economies. The prospect of the global express industry is primarily dependent upon the growth in World GDP and the World Trade. With the World GDP and World Trade expected to grow by 40% and 90% respectively during 2004-2013, the express industry is likely to remain one of the fastest growing sectors.
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