Main developments in the postal sector 2017-2021
The postal and delivery sector generated around EUR 110 billion in revenue in 2021 (0,8 per cent of total GDP) and employed around 1.5 million people (0.7 per cent of total employment in EU-27) across the EU-27 Member States.
Two opposing dynamics in the letter and parcel delivery markets are continuing to cause fundamental challenges for postal market stakeholders:
Declining letter mail volumes continue to pressure postal operators to push price increases of universal services and introduce cost reductions, for example, by closing post offices and reducing the frequency of delivery.
Increasing parcel volumes, mainly driven by a further boost in the e-commerce sector during the covid-19 pandemic, has increased the attractiveness of the delivery sector for new operators. Especially the area of last-mile delivery has been in focus, where more parcels are now delivered to parcel lockers, other pick-up and drop-off (PUDO) locations and the doorstep of consumers by non-universal service providers.
As a result of these developments, policymakers also face challenges as they aim to ensure a financially and environmentally sustainable Universal Service Obligation while preserving a basic, affordable service level for all users. Along with the evolution of technology, business models and trends within the postal sector, policymakers face important trade-offs when adapting current regulations to ensure that user needs are covered accordingly.
This study presents, describes, and assesses the most important evolutions in the letter and parcel delivery markets in the 27 Member States of the European Union, in the United Kingdom, and in the EFTA countries of Iceland, Liechtenstein, Norway, and Switzerland in 2017-2021 taking into consideration the impact of the covid-19 pandemic and other relevant external events on the postal sector. It also outlines the most significant evolutions of the regulatory framework in the Member States.
The report is structured around seven chapters, providing insights on:
Important postal developments 2017-2021
Developments in the universal service and consumer protection
The competitive landscape in the European postal sector
Employment in the postal sector
Environmental impacts of the postal services logistics value chain
The impact of the covid-19 pandemic on the postal sector
Cost structure, retail prices and rebates of parcel delivery
Significant postal developments 2017-2021
The substitution of letter mail for electronic alternatives continues to drive letter mail volumes down. In the 2017 to 2021 time period, letter mail volumes declined by on average 6.1 percent per year, compared to 4.3 percent per year 2013 to 2017.
In an industry heavily characterised by large economies of scale, this development causes the cost per item delivered to increase substantially. To cope with such cost increases, many European universal service providers (USPs) have increased prices and forced further cost reductions throughout their businesses to ensure the financial sustainability of their letter delivery business.
The situation looks very different for parcel delivery. An increase in e-commerce, accentuated by the covid-19 pandemic, has further boosted competition in the courier, express and parcel (CEP) market. Between 2017 and 2021, domestic parcel volumes increased by 14.6 percent annually, up from an annual increase of 6.4 percent in 2013-2017.
As a result, new players have entered the market at different levels of the parcel delivery value chain and we observe new business models being developed to compete with traditional postal operators, specifically in relation to last-mile delivery.
Developments in the universal service
The growing importance of parcel deliveries and the declining importance of letter mail for consumers as well as for businesses across Europe raises a question of whether there is a need to revise the postal USO – both at the EU level and in individual Member States. Between 2017 and 2021, Member States such as Belgium, Denmark, Finland, Norway and Sweden have adjusted their minimum USO requirements, particularly in terms of delivery frequency and delivery speed, to accommodate the changing dynamics in the postal sector. Some countries (e.g., Ireland and Sweden) have also made changes in postal sector price regulation.
Adjustments to the USO can have significant financial benefits as they may remove part of the so-called net cost of the USO. They need, however, to be carefully weighed against their impact on users and the benefits derived from the current USO specification.
Environmental impact
Booming e-commerce volumes have increased the environmental footprint of the EU postal sector between 2017 and 2021. Whereas CO2 emissions from domestic letter mail and parcel deliveries in the EU were relatively constant between 2013 and 2016, from 2017 total emissions increased by an average of 12 per cent annually. This shift is not only a result of more parcels being delivered. It is also due to the fact that the Co2 impact per parcel started to increase in 2018 after having declined consistently for several years.
We conclude that despite significant efforts and investments in green solutions undertaken by industry players, growing parcel delivery volumes will continue to create challenges for postal operators to reduce their environmental footprint. Hence, a true green transition of the postal and delivery sector depends on the broad involvement of all players driving the change in this industry.
SOURCES
Figure 1: CE Survey of NRAs. Copenhagen Economics (2018) Main Developments in the Postal Sector 2013-2016. European Commission, DG GROW Postal Statistics Database.
Figure 2: EC Growth postal database; CE Survey of NRAs; Copenhagen Economics (2018) Main Developments in the Postal Sector 2013-2016. Data for the UK for 2016-2020 was gathered from Ofcom’s yearly financial reports on the postal market.
Figure 3: Copenhagen Economics estimation based on national market volume data and emission estimates from IPC.
In brief
Letter volumes across the Member States fell 6.1 per cent between 2017 and 2021 while domestic parcel volumes grew 14.6 per cent a year, and the two trends together are reshaping postal economics, pricing, and regulation.
-6.1%Decline in letter mail volumes across Member States from 2017 to 2021, steeper than the 4.3 per cent fall recorded from 2013 to 2016.
+14.6% a yearAnnual growth in domestic parcel volumes from 2017 to 2021, against 6.4 per cent a year from 2013 to 2016.
+33% Rise in the average price of a domestic priority 20g letter, from EUR 0.83 in 2017 to EUR 1.10 in 2021. Five countries left prices unchanged; 26 raised them, with the average driven substantially by Greece at 164 per cent, Estonia at 131 per cent, and Belgium at 103 per cent.
+12%Growth in CO2 emissions from domestic letter and parcel delivery since 2017, having been roughly constant from 2013 to 2016. Delivering one parcel produced more than ten times the CO2 of one letter in 2021, on IPC estimates.
EUR 110 bn.Revenue generated by the postal and delivery sector in 2021, 0.8 per cent of total GDP and 21 per cent above 2017, employing around 1.5 million people across the EU-27.
Prepared for the European Commission, Directorate-General for Internal Market, Industry, Entrepreneurship, and SMEs. Written by Mindaugas Cerpickis (project manager), Anna Möller Boivie, Stephanie Tizik, Stephanie Spahn, Martha Lahann, Neil Gallagher, Julia Wahl, Dr Bruno Basalisco, and Dr Henrik Ballebye Okholm. Manuscript completed November 2022. Reference period 2017 to 2021. EU-27, the United Kingdom, and the EFTA states of Iceland, Liechtenstein, Norway, and Switzerland.
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Related links
On 29 September 2022, the final results of the study were presented at The European Commission in Brussels. The presentation from this event can be downloaded here.
On 12 December 2022, the study was presented to The Postal Service Directive Committee. The presentation from this event can be downloaded here.
Download the country annexes here.
About this analysis
Copenhagen Economics assessed the most important developments in the letter and parcel delivery markets across the 27 EU Member States, the United Kingdom, and four EFTA countries over 2017 to 2021, taking account of the COVID-19 pandemic and other external events, and set out the significant changes to national regulatory frameworks over the same period. The study covers volumes, prices, quality of service, competition, employment, environmental footprint, universal service financing, and the regulatory reforms affecting cross-border parcel delivery, VAT, and UPU terminal dues. It draws on a Copenhagen Economics survey of national regulatory authorities, the European Commission’s DG GROW postal statistics database, Eurostat, the preceding 2013 to 2016 edition of this study, and interviews including trade union representatives.
The study acknowledges limitations in full data availability, in particular the confidential nature of delivery costs and bulk parcel commercial pricing, which it describes as an intrinsic obstacle to research. Some findings rest on initial estimates available at the time of drafting, including those on post-Brexit parcel flows. Employment figures may understate the sector, since subcontracted workers are not always assigned to postal activities in national statistics. The legal notice states that the document reflects the views only of the authors, and that the European Commission is not liable for any consequence stemming from reuse.