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Cross Border: The Disruptive Frontier

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Five actions that can help postal organizations win in the cross border delivery race.

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Cross Border: The Disruptive Frontier

  1. 1. CROSSBORDER THEDISRUPTIVE FRONTIER Accenture Post and Parcel Industry Research 2019
  2. 2. Copyright © 2019 Accenture. All rights reserved. 2 Cross-border growth is 2x the rate of domestic eCommerce, but the ability to control market share is declining. New technology-driven start-ups, pricing and innovative supply chains are stealing a march on postal players’ competitive edge. Customers expect cross-border delivery to match domestic services: fast, free, trackable, and easy returns. To compete, new business models and capabilities are required. Five actions can help postal organizations win in the cross-border delivery race. THE CROSS-BORDER STORY
  3. 3. GROWTH GAINS MOMENTUM Copyright © 2019 Accenture. All rights reserved. CROSS-BORDER ECOMMERCE IS THE NEW NORMAL Cross border is growing at 2X the rate of domestic eCommerce29% CAGR Cross border represents 20% of global eCommerce 75% of UK online shoppers buy from overseas retailers and marketplaces of Dutch eCommerce consumers buy from abroad of German eCommerce consumers buy from abroad of Irish consumers buy from abroad; the highest number of international online shoppers in the world of Nordic eCommerce consumers buy from abroad 63% 62% 84%83% 3
  4. 4. SMALL SHIPMENTS RULE Copyright © 2019 Accenture. All rights reserved. 4 CROSS BORDER IS MAINLY LIGHTWEIGHT ITEMS Don’t know 0.2 - 0.5 kg > 5.0 kg 0.6 - 1.0 kg < 0.2 kg 1.1 - 2.0 kg 2.1 - 5.0 kg Weight of most recent cross-border purchase [Kg; % of respondents] Source: “Cross Border e-Commerce Shopper Survey 2017”, IPC; Accenture analysis 72% of cross-border purchases weigh 1kg or less Decline in package weight per shipment between 2015 and 2017, a likely result of the impact of eCommerce growth. This decline contrasts with a rapid increase in air express trends. Source: Accenture analysis 20% 31% 21% 12% 7% 4% 6% 12%
  5. 5. POSTAL PLAYERS DOMINATE Copyright © 2019 Accenture. All rights reserved. 5 Postal organizations make MOST CROSS-BORDER DELIVERIES ARE ON POSTAL NETWORKS *Source: “Cross Border e-Commerce Shopper Survey 2017”, IPC; Global Express and Small Parcels Report 2017, Transport Intelligence; Accenture analysis 70%Posts 16%Others 14%Don’t know 70%of cross-border deliveries* Delivery provider for most recent cross-border eCommerce order [% of respondents]
  6. 6. Copyright © 2019 Accenture. All rights reserved. 6 China is a front runner and is expected to continue to lead cross-border growth Source: Accenture analysis China outbound express is mainly on the rise China to United States China to Canada China to Australia China to European Union 9%-19% -2%-6% Range of Decline Range of Increase CHINA DRIVES CROSS- BORDER GROWTH CHINA SENDS TO THE WORLD China’s anticipated cross-border share in 2021 China’s anticipated B2C eCommerce transaction value in 2020 US$1,525B 41%
  7. 7. Destination post subsidizing delivery cost at behest of volume 3 lb (~1.36 kg) 2 lb (~0.91 kg) 0.5 lb (~0.23 kg) 1 lb (~0.45 kg) 4 lb (~1.81 kg) 4.4 lb (~2.0 kg) 20 15 10 5 0 Copyright © 2019 Accenture. All rights reserved. 7Source: Accenture analysis Destination post subsidizing delivery cost at behest of volume 3 lb (~1.36 kg) 2 lb (~0.91 kg) 0.5 lb (~0.23 kg) 1 lb (~0.45 kg) 4 lb (~1.81 kg) 4.4 lb (~2.0 kg) Estimated Cost for Postal Delivery Comparison – China to US vs Within US [USD] Estimated Cost for Postal Delivery Comparison – China to France vs Within France [USD] The fees charged for international post are much lower in transitional countries, like China. Delivery costs from China (up to a certain weight) are cheaper compared with in-country delivery costs. SUBSIDIZED DELIVERY DISTORTS THE MARKET LOW CHINA-TO-DEVELOPING COUNTRY RATES 20 15 10 5 0 China to US – China Post Registration (Shenzhen) New York to Miami – USPS Retail Ground Miami to Miami – USPS Retail Ground Within Metropolitan France – La Poste China to France – China Post Registration (Shenzhen)
  8. 8. As postal organizations move away from the customer, this creates risk from more middlemen As consolidators expand, Posts have a smaller role in the value chain, and no role sometimes. ContractedNote: Transaction scenario rates based on 2016 published rates for PMI and FedEx for 2.2lb package from New York to London. Consolidator rates from The Colography Group, February 2016; Source: Accenture Analysis. Acceptance Line Haul Processing Customs Int’l Trans Customs Post $48 $25 $8 Shipping Value Chain Leg 1 Leg 2 Leg 3 Last Mile Consolidator→ Post Revenue PostConsolidator $0 $48 $20 Customer Cost $16 $34 IndustryModels Consolidator→ → → Traditional Disruptive Freight Freight Mail Mail Alt. Delivery/Post Post Post Alt. Delivery/Post 8 SHIFTING POSITION INVALUE CHAIN POSTS ARE MOVING TO COMMODITIZED ROLES USPS Shipper/Retailer FEDEX AMAZON UPS
  9. 9. Copyright © 2019 Accenture. All rights reserved. 9 WHAT’S HAPPENING— AND WHY? THE STORY SO FAR
  10. 10. Copyright © 2019 Accenture. All rights reserved. 10 PREFERENCES AREEVOLVING CUSTOMER EXPECTATIONS FOR CROSS BORDER AND DOMESTIC DELIVERY ARE MORE ALIGNED Overall Expectations [% of respondents] Source: “Cross Border e-Commerce Shopper Survey 2017”, IPC; eCommerce logistics In the United States, April 2018, Armstrong & Associates; Accenture analysis Clear information about delivery charges before purchase 1.1 - 2.0 kg 70% 57% 57% 54% 51% Simple and reliable returns process Free returns Free delivery on purchases over particular value Landed cost calculator at check-out
  11. 11. 11 Most problematic pain points in cross-border eCommerce(1) Biggest game-changer for cross-border eCommerce(1) Note: (1) According to Retail Professionals Worldwide, August 2017; Source: “Key Business Drivers and Opportunities in Cross-border Ecommerce 2017”, Payvision, October 2017; http://www.supplychainbrain.com/content/logisticstransportation/reverse-logistics/single-article-page/article/target-stores-relies-on-genco-to-manage-its-returns-program/; Global eCommerce Logistics 2018, Transport Intelligence; Accenture analysis 43% 39% 32% 28% 25% 23% 22% 16% Logistics and delivery Data protection Ease of integration Compliance with local regulations Cross-border payments /multicurrency ROI 23% 12% 12% 9% 9% 7% 6% 4% m-Commerce Rise in alternative payment methods Internet of things 50% of retailers offering international delivery Online marketplaces continuing to dominate Easier entry to emerging markets Greater knowledge of how to do business internationally China’s "One Belt One Road" scheme Profitability is challenging cross-border eCommerce retailers—they must compete with domestic retailers on speed and delivery prices RETAILER EXPECTATIONS RISE RETAILERS ARE DEMANDING MORE Offering exchange and returns Pricing/costs of products & services
  12. 12. Copyright © 2019 Accenture. All rights reserved. 12 Offers a single end-to-end solution for pick-up, packing, labelling, shipping, and tracking. It claims it can cut shipping costs by up to 60%. On average, overall sales have increased by 40%. Offers cross-border fulfillment and logistics solutions that enable merchants to start selling fast, specifically from China to Malaysia. It reduces returns, enables exchanges and delivers 40% faster and up to 50% cheaper. New asset-lite entrants are serving customers with what they want, when and how they want it One-stop, full-service cross-border eCommerce logistics handling more than 26M cross-border mail and parcel items per year to more than 220 destinations worldwide. B2C EUROPE ALLSOMEEASYSHIP ENTRANTS OFFER NEW ECOSYSTEMS OF SERVICE START-UPS SIMPLIFY WITH TARGETED INNOVATION
  13. 13. Copyright © 2019 Accenture. All rights reserved. 13 Same day delivery by local carrier to Singapore Example: A Singapore-based business orders an item from the United States using a domestic address in a United States warehouse. Local delivery at the start and end of the item’s international journey reduces cost. Free domestic shipping to United States warehouse Item is repackaged and shipped internationally Order placed online in Singapore COST-EFFECTIVE DELIVERY MODELS DOMESTIC ADDRESS MEANS NEW DELIVERY OPTIONS Where is it working? Terminal 49 is converting cross- border transactions to domestic delivery in its role as a digital freight forwarding service. It helps small- and medium-sized companies to transport their products globally across borders with less friction, at a lower price point, and with greater control.
  14. 14. Build-your-own supply chain Copyright © 2019 Accenture. All rights reserved. 14 Investment in JD.com by Google to develop retail solutions in Southeast Asia, the United States and Europe. $550M Build-your-own shipping and logistics capabilities Amazon is investing in building its own network to reduce cost and dependency on postal organizations and integrators. It wants to drive down costs and maximize asset utilization. Alibaba Group Holding Ltd has signed an agreement with the Belgium government to launch an eCommerce trade hub, which will include investments in logistics infrastructure.Sources: https://www.reuters.com/article/us-alibaba-logistics/alibaba-signs-agreement-with-belgium-for-e-commerce-trade-hub- idUSKBN1O410T https://www.reuters.com/article/us-alibaba-cainiao-investment/alibaba-takes-control-of-logistics-business-pledges-15-billion- to-expand-network-idUSKCN1C10C2 https://ir.jd.com/node/7876/pdf $15B Alibaba’s committed investment in China logistics over 5 years. PLATFORMS SEIZE POWER A DO-IT-YOURSELF MENTALITY IS EMERGING
  15. 15. Copyright © 2019 Accenture. All rights reserved. 15 WHERE NEXT? DISRUPT TO DELIVER
  16. 16. RELIABILITY IS KEY Copyright © 2019 Accenture. All rights reserved. POSTAL PLAYERS MUST COMPETE MORE EFFECTIVELY Increasing volumes—cross border deliveries are growing exponentially and cannot be ignored. Technology has come of age—technology is now an essential enabler, not a “nice to have.” Leading in the new—alternatives exist for those post and parcel players that want to reinvent their business models. How can your postal organization get the most from the cross-border opportunity?
  17. 17. Copyright © 2019 Accenture. All rights reserved. 17 MEETING CONSUMER DEMAND ADAPTING TO THE COMPETITIVE LANDSCAPE EMBRACING NEW TECHNOLOGIES Customers want end-to-end tracking, fast, low cost/free deliveries and control. Traditional, democratic practices are slow, inflexible and disassociated from commercial outcomes— inappropriate for a dynamic digital world. Real-time customs risk assessments and fast-track packages need to take advantage of the latest technologies. CAPABILITIES NEED UPDATING PREMIUMSERVICESCANONLYBEACHIEVEDTHROUGH…
  18. 18. Copyright © 2019 Accenture. All rights reserved. • Enable new business models outside of the UPU, e.g., Extraterritorial Office of Exchange (ETOEs), third-party delivery agents • Evaluate a framework to enable delivery duty paid (DDP) • Improve commercial clearance for high-value goods • Employ Advanced Electronic Data (AED) to seamlessly, quickly move goods through destination countries • Introduce smarter, more integrated returns FIVEACTIONSFORTHEFUTURE NEW PRODUCT PORTFOLIOS CROSS-BORDER SUCCESS SERVICES+ =
  19. 19. FOR MORE INFORMATION /in/brodybuhler BRODY BUHLER Global Managing Director, Accenture Post & Parcel Industry @brodybuhler robert.b.buhler@accenture.com www.accenture.com/postal /in/andre-pharand ANDRE PHARAND Senior Executive – Global Consulting Lead – Postal & Parcel Industry @andre_pharand andre.pharand@accenture.com ABOUT ACCENTURE Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions—underpinned by the world’s largest delivery network—Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With 477,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com. Copyright © 2019 Accenture. All rights reserved. Accenture and its logo are trademarks of Accenture.

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