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Key Trends: The Path to Value Accenture Post and Parcel Industry Research 2018

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This research piece examines Post and Parcel trends, looking at the current climate and its implications as well as the way forward.

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Key Trends: The Path to Value Accenture Post and Parcel Industry Research 2018

  1. 1. THE PATH TO VALUE KEY TRENDS: Accenture Post and Parcel Industry Research 2018
  2. 2. Copyright © 2018 Accenture All rights reserved. | ACCENTURE POST AND PARCEL RESEARCH 2006 2009 2010 2011 2012 2013 2014 2015 2016 THE UNFOLDING STORY IN 2018 2 A DECADE OF RESEARCH 2017
  3. 3. EXECUTIVE SUMMARY: WHERE ARE WE NOW?
  4. 4. Copyright © 2018 Accenture All rights reserved. | EXECUTIVE SUMMARY POST AND PARCEL TRENDS STORY IMPLICATIONS What does this mean for the industry? • Profits are challenged • Lower return on investment • Value creation questions • Skills and capacity driven M&A DEMAND SHIFTS What’s the impact on the status quo? • Rise in local delivery • Changing recipient preferences • New competition • Increased platform power VALUE CREATION Where next? • Drive profitable growth • Explore new operating models • Build an ecosystem • Rotate to the NEW MARKET CONTEXT What’s happening today? • Shifting business economics • Continued eCommerce growth • Scale up of cross-border commerce • Expanding digital impact
  5. 5. MARKET CONTEXT DEMAND SHIFTS IMPLICATIONS VALUE CREATION MARKET CONTEXT: WHAT’S HAPPENING TODAY?
  6. 6. Copyright © 2018 Accenture All rights reserved. | 6 SHIFTING BUSINESS ECONOMICS PARCELS HAVE BEEN THE MAIN DRIVER OF GROWTH 6 Median revenue growth for parcels is 2.9% versus minus 4.7% for mail Financial ServicesMail 5% -10% -20% 0% Parcels and Logistics 15% -5% 165% 20% 10% -15% -40% Logistics Segment Revenue Growth FY 2016 RevenueGrowth Mail Median -4.7% Parcels Median 2.9% FS Median -5.5% Logistics Median 0.2% Source: AnnualReports, Accenture Analysis Segment
  7. 7. Copyright © 2018 Accenture All rights reserved. | 7 SHIFTING BUSINESS ECONOMICS BUT, THE BOTTOM LINE IS DRIVEN BY HIGH-MARGIN MAIL Median EBIT margin for parcels is 4.7%, less than one-half of mail at 9.6% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% Mail Financial ServicesLogisticsParcels and Logistics Segment EBITMargin Mail Median 9.6% Parcels Median 4.7% FS Median 12.4% Logistics Median 3.3% Source: AnnualReports, Accenture Analysis Segment EBIT Margin FY 2016
  8. 8. Copyright © 2018 Accenture All rights reserved. | Regional retail eCommercemarket share versus growth (US$BN) 0% 5% 10% 15% 20% 25% 30% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% eCommerce market share 2016 Middle East North Africa (MENA) Latin America North America Europe China APAC (excluding China) eCommercegrowth 2016to2021estimated 22% 46% 18% 2% 1% 11% % MARKET SHARE 14% % GROWTH 9% 26% 11% 18% 21% 8 CONTINUED ECOMMERCE GROWTH BUT WITH WIDE REGIONAL VARIATIONS Source: eMarketer, Accenture analysis Overall growth in B2C eCommerce = 21%
  9. 9. Copyright © 2018 Accenture All rights reserved. | 9 CONTINUED ECOMMERCE GROWTH CHINA LARGELY DRIVEN BY B2C ONLINE RETAIL 42,8% 47,0% 50,7% 54,1% 57,0% 59,5% 22,2% 20,7% 19,4% 18,3% 17,6% 16,9% 35,0% 32,3% 29,9% 27,5% 25,5% 23,6% 2018 20202019201720162015 Other ChinaUS Retail Ecommerce Sales Share [2015-2020E, % of Total] By 2020, ~60% of retail ecommerce share will be driven by Chinese market and have a value of $1.5 trillion US 94 130 160 194 230 265 297164 223 264 304 344 384 419 440 111 183 287 377 468 558 641 718 345 69 2013 2020E +22,8% 2016E 2018E2017E 1006 1455 2019E 1325 1172 500 20152014 841 681 B2C Online Retail OtherC2C Online Retail Chinese Online Retail per segment (in USD bn) [FY 2013 – FY 2020E] Source: eMarketer, Accenture analysis
  10. 10. Copyright © 2018 Accenture All rights reserved. | Increase in GLOBAL CROSS-BORDER eCommerce CAGR 1 (Double DOMESTIC eCommerceCAGR) 47% United States 63% United Kingdom 57% Germany 73% Nordics 29% Cross-border Shoppers by Country 10 SCALE UP OF CROSS-BORDER COMMERCE THERE IS A GLOBAL GROWTH OPPORTUNITY 1 CAGR for the period 2016-2021 in USD for global cross-border eCommerce Source: BI Intelligence Estimates 2017, Postnord Survey, Accenture Analysis Discerning consumers put choice over geography …
  11. 11. Copyright © 2018 Accenture All rights reserved. | …But when it comes to satisfaction, consumers rank cross-border lower How satisfied are you with the parcel delivery service experience from your provider? Top cross-border shopping concerns 35% 33% 30% 29% 29% Concern Item won’t be delivered Delivery Costs Fee/duties/taxes Item won’t be as described Slow Delivery Cost and delivery uncertainty worry global consumers 11 SCALE UP OF CROSS-BORDER COMMERCE SCALE UP OF CROSS-BORDER COMMERCE 12 8 17 23 71 58 11 Domestic Cross-Border Unsatisfied/Not at all Satisfied Neutral Satisfied/Very Satisfied N/A Source: BI Intelligence Estimates 2017; PayPal 2016; Accenture Global Consumer Survey 2017, Accenture analysis
  12. 12. Copyright © 2018 Accenture All rights reserved. | ARTIFICIAL INTELLIGENCE (AI) Self-learning capabilities that rapidly improve to solve complex problems or deliver “intelligent” interfaces ROBOTICS Using automation to support or substitute human effort in repetitive tasks to improve productivity and reduce costs AUTONOMOUS VEHICLES Using self-driving vehicles, parcel carriers and drones to create new delivery models DATA ANALYTICS Applying analytical tools and techniques to large data sets to optimize activity and predict behavior AUGMENTED REALITY (AR) Providing real-time information and guidance to improve productivity, reduce errors and minimize paperwork INTERNET OF THINGS (IoT) Connecting assets across warehousing, sortation, transportation and delivery to create visibility and control 12 EXPANDING DIGITAL IMPACT TECHNOLOGIES THAT MATTER
  13. 13. Copyright © 2018 Accenture All rights reserved. | 13 EXPANDING DIGITAL IMPACT PARTIAL DIGITIZATION CAN GENERATE $440 MN ANNUALLY IN VALUE FOR A $4.8 BN (USD) COMPANY Go Digital Value($)(1) Inv. 1. Data Driven Sales& Marketing 25 – 55 M 2. SeamlessDelivery Experience 15 – 45 H 3. Ubiquitous Customer Service 5 – 10 M 4. Hybrid Marketing Services 0 – 5 H Be Digital – Core Value($) Inv. 1. Smart Collection 25 – 115 H 2. Smart Induction 5 - 45 M 3. Digital Processing 80 – 110 H 4. Connected Vehicles 20 – 40 M 5. Routing Algorithms 5 – 10 H 6. Autonomous Deliveries 0.5 – 1 H 7. Connected Lockers 45 – 65 H 8. Collaboration Platforms 10 – 20 M 8. Augmented Workforce 5 – 20 M Be Digital – Non-Core Value($) Inv. 9. Robotic Process Automation 10 – 30 M 10. Closed Loop 15 – 50 M 11. Workforce Analytics 0.5 – 5 L 12. Finance Analytics 0.5 – 5 L Creating new sources of value tofund new business model Total $ 45 – 115 mn Total $ 195 – 425 mn Total $ 25 – 90 mn Investments Needed: H – High M – Medium L- Low Base mail and parcel revenue: $4.8 bn in 2022 NOTE: Value indicates impact on the EBITDA due to the respective initiative Source: Accenture analysis
  14. 14. Copyright © 2018 Accenture All rights reserved. | 14 EXPANDING DIGITAL IMPACT PARTIAL DIGITIZATION CAN GENERATE $440 MN ANNUALLY IN VALUE FOR A $4.8 BN (USD) COMPANY Digitalisusing data toimprove the customer experience or drive operational efficiencies NOTE: Value indicates impact on the EBITDA due to the respective initiative Source: Accenture analysis Externalfocus Internalfocus Be Digital Go Digital 2. Partial Digitization New Business Models Disrupt (Sub-) Market(s) 1. Business as usual 3. Digital Business GO DIGITAL = $45-115 MN Data-driven sales and marketing, Seamless recipient experience, Customer service and Cross-channel visibility BE DIGITAL – OPS = $195M-425 MN Smart collection and induction, digital processing, connected vehicles, routing algorithms, autonomous deliveries, connected retail, collaboration platforms and augmented workforce BE DIGITAL – NON-OPS = $25-90 MN Robotic process automation, Workforce analytics, Finance analytics and Closed loop processes
  15. 15. MARKET CONTEXT DEMAND SHIFTS IMPLICATIONS VALUE CREATION DEMAND SHIFTS: WHAT’S THE IMPACT ON THE STATUS QUO?
  16. 16. Copyright © 2018 Accenture All rights reserved. | 16 RISE IN LOCAL DELIVERY THREE DRIVERS OF GROWTH GROCERY Start-ups and new consumers are driving growth $961 MN Funding for meal or grocery delivery startups in 2016 LOCAL RETAIL INVENTORIES New consumers are changing fulfilment habits 34% Of retailers see the role of physical retail stores as click-and-collect or returns to stock facilities 26.7% Projected increase in on- demand food delivery by 2020 FOOD Technology is changing the way food is consumed Source: CBInsights, Uberfication – Global Sharing Economy Primer – BAML 2017, eMarketer.com , Accenture analysis.
  17. 17. Copyright © 2018 Accenture All rights reserved. | 17 INVENTORY IS GETTING CLOSER AMAZON’S CHANGING FULFILMENT LANDSCAPE 2005 2017 6 Facilities Source: MWPVL.com, amazon.com, 1995 1 Facility 787 Facilities Including 458 Whole Foods
  18. 18. Copyright © 2018 Accenture All rights reserved. | Recipients Want: • Immediacy/Speed • Lower costs • Flexibility in times and scale • Transparency Expectations are being driven by superior and captive experiences offered by Amazon and Alibaba in retail and delivery. 75% Online shoppers willing to pay premium for expedited shipping 86% Consumers consider the delivery to be part of the eCommerce purchase 79% Online shoppers that rate free shipping on returns as important 47% Consumers that made a purchase from an online retailer in 2017, up from 43% in 2016 18 CHANGING RECIPIENT PREFERENCES EXPECTATIONS ARE EVOLVING New benchmarks are being set for delivery services
  19. 19. Copyright © 2018 Accenture All rights reserved. | 19 CHANGING RECIPIENT PREFERENCES GEN Z DEMANDS MORE SPEED BUT WILLING TO PAY 41% 37% 36% 24% 20% 15% 24% 19% 13% 21% 16% 11% 21% 16% 11% 49% 51% 51% 53% 56% 62% 50% 53% 58% 35% 39% 40% 31% 35% 31% 10% 12% 12% 23% 24% 23% 26% 27% 30% 43% 45% 49% 48% 49% 58% Older Millennial Younger Millennial Gen Z Older Millennial Younger Millennial Gen Z Older Millennial Younger Millennial Gen Z Older Millennial Younger Millennial Gen Z Older Millennial Younger Millennial Gen Z 0 Below $5 Above $5 Half DaySame DayNext Day 2 hour 1 hour Delivery Fee Q. Thinking about the last time you needed a producturgently, what is the most you would be willing to pay to receive that item in each of the following timeframes? Source: Accenture GlobalConsumer Shopping Survey 2017, Accenture analysis.
  20. 20. Copyright © 2018 Accenture All rights reserved. | 20 CHANGING RECIPIENT PREFERENCES RETURNS BECOMING MUCH MORE IMPORTANT 22% 44% 27% 7% 28% 45% 22% 5% 30% 45% 21% 4% I would not shop that retailer I would be unlikely to shop that retailer I would likely shop with that retailer I would still shop with that retailer Impact associated with Bad Return Policy Old Millennial (28-37) Young Millennials (21-27) Gen Z (18-20) Q. When you find that a retailer has an inconvenient and/or costly return policy, how does that impact how you shop with that retailer? Source: Accenture GlobalConsumer Shopping Survey 2017, Accenture analysis.
  21. 21. Copyright © 2018 Accenture All rights reserved. | • Alibaba is creating an end-to-end ecosystem in collaboration with private companies and incentivizing competition • Amazon is taking control of line-haul and sortation activities and moving last mile to regional players • New startups across the delivery supply chain are providing time- bound and on-demand delivery Total return to shareholders – 3 years(1) [06/2012 to 06/2017] 0.5 1.0 1.5 2.0 2.5 3.0 3.5 Jul 2015 Jul 2017Jan 2016 Jan 2017Jul 2016Jul 2014 Jan 2015 US Retail Average 1.15 Europe Retail Average 1.47 Amazon 2.98 (1) US retail average is the average of TRS of the top firms by marketcapitalization 21 NEW COMPETITION PLATFORMS AND STARTUPS ARE CHANGING THE GAME Source: Bloomberg, BofAML, Accenture Analysis
  22. 22. Copyright © 2018 Accenture All rights reserved. | 22 NEW COMPETITION SIGNIFICANT INCREASE IN M&A FOR ON-DEMAND COMPANIES Quarterly number of M&A exits [Q3 2012 to Q2 2017, US$MN] 15 10 11 1010 9 6 77 6 1 6 3 111 4 5 7 14 11 19 15 8 15 8 13 11 13 10 12 5 17 8 5 4 2017 Q22013 Q4 2014 Q1 2015 Q2 2016 Q32016 Q12014 Q42014 Q3 2015 Q3 2015 Q4 2016 Q2 2016 Q42014 Q2 2017 Q12015 Q12013 Q22013 Q1 2013 Q3 On-demand companies On-demand M&A exits have overtaken supply chain and logistics, averaging 3.0 for first two years and 8.6 for the next two years Supply chain and logistics technology Source: CB Insights, Accenture analysis.
  23. 23. Copyright © 2018 Accenture All rights reserved. | [Q3 2012 to Q2 2017, US$MN] 796 3,461 1,849 585 1,927 750663 883 454 217315 91 251181987863 188112 90 115 94 83 77 94 81 74 50 59 42 54 232125 29 18 0 500 1,000 1,500 2,000 2,500 3,000 3,500 0 20 40 60 80 100 120 2017 Q1 2016 Q3 74 2016 Q2 2016 Q1 2017 Q2 1,706.1 45 2016 Q4 2015 Q4 2015 Q3 2015 Q2 2014 Q3 2014 Q2 2014 Q1 2015 Q1 2014 Q4 2013 Q4 Deal value Deal count 2012 Q4 2013 Q1 2013 Q2 2013 Q3 24 2012 Q3 +78% YoY Funding Growth +28% YoY Deal Growth 23 NEW COMPETITION STARTUP FUNDING AND DEALS ARE BOTH GROWING Supply chain and logistics technology - Quarterly venture capital funding and number of deals Source: CB Insights, Accenture analysis.
  24. 24. Copyright © 2018 Accenture All rights reserved. | 24 NEW COMPETITION ESPECIALLY IN THE LAST MILE 25% Supply chain and logistics startups in the last mile space $3.2 BN Last mile startups with total funding >$100 MN 26% Of total funding goes to startups in the last mile with >$100 MN Startups are scaling—with high value Note: Only startups in the “Supply chain and logistics technology” category in CBInsights w ere included Source: CB Insights, Accenture analysis
  25. 25. Copyright © 2018 Accenture All rights reserved. | Global eCommerce market versus key player gross merchandise volume (GMV) 2012 to 2017 (US$BN) 25 INCREASED PLATFORM POWER PLATFORM PLAYERS ARE CONSOLIDATING THEIR LEAD Through rapid growth Alibaba, Amazon and JD.com now control 62% of total Global eCommerce Note: TTM is the Trailing 12 months figures fromDecember 31st 2017; Amazon GMV for 2016 and 2017 has been estimated by assuming 10% of third party seller GMV translates into revenues; Other years have been taken fromNASDAQ; Alibaba GMV for TTM 2017 has been estimated assuming the same GMV/Revenue ratio as in 2016. Source: eMarketer, NASDAQ, Company Reports, Accenture analysis 1 043 1 221 1 445 1 655 1 859 2 290 2012 20142013 2015 2016 TTM 2017 +17.0% 160 178 249 362 485 547 108 136 166 226 300 400 12 71 95 199 20162012 2013 457 335 2014 2015 TTM 2017 42 21280 659 880 1,146 CAGR 76% 30% 28%
  26. 26. Copyright © 2018 Accenture All rights reserved. | INCREASED PLATFORM POWER -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 125700 25 115905 8035 1452010 7515 40 45 50 55 14030 60 65 85 95 100 105 110 120 130 135 DPDHL FedEX Amazon LaPoste RoyalMail UPS Yamato Amazon Logistics Parcel+LogisticsRevenueCAGR[FY2013–FY2016] Parcel + Logistics Revenue [FY 2016] Amazon vs Aggregators [FY 2014 – FY 2016] Source: Company Financial Statements, Accenture Analysis 26 IntegratorsPosts [Bubble Size indicates 2016 revenues] KEY PLAYERS ARE ALREADY A MAJOR THREAT IN PARCELS
  27. 27. MARKET CONTEXT DEMAND SHIFTS IMPLICATIONS VALUE CREATION IMPLICATIONS: WHAT DOES THIS MEAN FOR THE INDUSTRY?
  28. 28. Copyright © 2018 Accenture All rights reserved. | (10) (9) (8) (7) (6) (5) (4) (3) (2) (1) 0 1 2 3 4 5 6 (5,0%) (4,0%) (3,0%) (2,0%) (1,0%) 0,0% 1,0% 2,0% 3,0% 4,0% 5,0% 6,0% 7,0% 8,0% 9,0% 10,0% 11,0% 12,0% 13,0% 14,0% 15,0% 16,0% 17,0% 18,0% 19,0% 20,0% Fedex Posti bPost PostenNorge Japan Post PostNord Canada Post ECT La Poste NZPost Australia Post Royal Mail DPDHL PostNL Yamato SwissPost POL CTT Poste Italiane Austria Post Aramex UPS PROFITS ARE CHALLENGED OPERATING MARGINS FELL OR STAGNANT FOR MOST PLAYERS ChangeinEBITmargin2014to2017 EBIT margin [TTM 2017] Growing margins Negative margin Declining margins Negative margin Declining margins Positive margin Growing margins Positive margin Change in operating margin versus operating margin [FY 2014 to TTM2017] Integrators Postal organizations 28Source: Bloomberg, Accenture Analysis
  29. 29. Copyright © 2018 Accenture All rights reserved. | PARCEL VOLUME GROWTH DID NOT TRANSLATE DIRECTLY INTO REVENUES ParcelRevenue CAGR [FY 2014-FY 2016] 14,6% 9,8% 9,0% 7,8% 7,2% 6,4% 5,0% 4,3% 3,8% 1,8% 1,4% FedEX PostNL PostNord LaPoste PosteItaliane DPDHL RoyalMail NZPost Yamato UPS CanadaPost 21,2% 11,6% 12,7% 7,8% 6,0% 11,6% 8,8% 0,8% 7,3% 2,9% 3,1% NZPost LaPoste DPDHL FedEX PosteItaliane PostNL RoyalMail PostNord Yamato UPS CanadaPost ParcelVolumeCAGR [FY 2014-FY 2016] Source: Company Financial Statements, Accenture Analysis -5,4% -1,7% -3,3% 0,0% 1,2% -4,7% -3,5% 3,4% -3,2% -1,1% -1,7% NZPost RoyalMail FedEX PosteItaliane LaPoste DPDHL PostNord PostNL Yamato UPS CanadaPost ParcelRevenue per piece CAGR [FY 2014-FY 2016] Parcel Revenue = Parcel Volume x Parcel Revenue/Volume 29 Postal organizations Integrators PROFITS ARE CHALLENGED
  30. 30. Copyright © 2018 Accenture All rights reserved. | BUT THE IMPACT OF FALLING MAIL VOLUMES SOFTENED BY HIGHER YIELDS PROFITS ARE CHALLENGED MailRevenue CAGR [FY 2013-FY2016] -0,6% -1,2% -1,4% -1,5% -1,5% -2,7% -2,8% -3,4% -3,6% -5,2% -5,4% Austria Post La Poste CTT 0.0% DPDHL Australia Post PostNorge Royal Mail Canada Post PostNL Poste Italiane NZ Post Post Nord -2,5% -0,8% -2,7% -4,6% -6,2% -5,3% -4,1% -4,5% -9,6% -10,0% -5,0% -8,2% Royal Mail Poste Italiane DPDHL Austria Post La Poste CTT PostNorge Australia Post Canada Post PostNL NZ Post Post Nord MailVolume CAGR [FY 2014-FY2016] Source: Company Financial Statements, Accenture Analysis 2,5% 0,2% 1,5% 3,3% 5,0% 4,0% 1,5% 1,8% 6,8% 7,0% -0,2% 3,0%Post Nord Austria Post CTT La Poste DPDHL Royal Mail Australia Post PostNorge Canada Post PostNL Poste Italiane NZ Post MailRevenue Per Piece CAGR [FY 2014-FY2016] Mail Revenue = Mail Volume x Mail Revenue/Volume 30
  31. 31. Copyright © 2018 Accenture All rights reserved. | 2013 to 2016 US$MN Aggregate capital expenditure/aggregate revenue 2,8% 2,9% 3,9% 3,8% 2016201520142013 14.8% Average capital expenditure/revenue (2013 to 2016 aggregate) for top 10 spenders 13 417 13 862 18 582 2013 201620152014 +11% Capital expenditure trends 31 LOWER RETURN ON INVESTMENT DIFFERENT INFRASTRUCTURE AND CAPABILITIES ARE NEEDED Capital expenditure is rising, especially among the top revenue performers Source: Company Financial Statements, Accenture Analysis 18,852
  32. 32. Copyright © 2018 Accenture All rights reserved. | -15% -10% -5% 0% 5% 10% 15% 20% 25% -15,0% -10,0% -5,0% 0,0% 5,0% 10,0% 15,0% 20,0% Drivers of capital efficiency—Revenue CAGR versus invested capital CAGR [FY 2014 to TTM 2017] CTT Austria Post UPS Aramex Canada Post DPDHL Poste Italiane bPost Fedex PostNL Royal Mail PostNord Japan PostPosti Yamato PostenNorge NZPost SwissPost La Poste ECT Australia Post POL LOWER RETURN ON INVESTMENT Invested Capital CAGR [FY 2014 – TTM 2017] Note: (1) Pre-tax ROIC; Invested Capital (IC) = Op. Working Capital + Net PPE + Other Op. Assets + Goodwill; Last reported IC has been used for FY-12/2015 data points for all companies; Source: Bloomberg; financial reports; Accenture analysis RevenueCAGR[FY2014–TTM2017] REVENUES MISALIGNED WITH INVESTED CAPITAL LED TO A REDUCTION IN EFFICIENCY Postal organizations Integrators 32
  33. 33. Copyright © 2018 Accenture All rights reserved. | LOWER RETURN ON INVESTMENT ALONG WITH SLOWING REVENUE GROWTH, FALLING ROIC SPARKS PEERS’ FEARS Source: Bloomberg, Accenture Analysis. Pre Tax ROIC [FY 2014] Pre Tax ROIC [FY 2015] Pre Tax ROIC [TTM 2017] Peer Median 10.3% 0.1% 0.8% -1.9% -0.6% -5.1% 11.3% 1.3% -8.8% -5.0% -25.5% -3.6% -1.7% -3.7% -0.8% -3.0% 0.3% -17.9% -3.3% -1.5% 8.5% -7.6% -4.4% Difference [FY 2014 – TTM 2017] 33 Pre-tax ROIC over time [FY2014 – TTM 2017] 30% 17% 17% 16% 10% 29% 8% 70% 22% 68% 12% 4% 11% 5% 9% 2% 9% 7% 5% -3% 8% 16% Fedex UPS Yamato DPDHL Aramex CTT Austria Post Poste Italiane bPost PostNL Royal Mail Japan Post PostenNorge NZPost SwissPost La Poste ECT Canada Post Australia Post Posti PostNord POL 33% 16% 16% 12% 9% 35% 7% 69% 24% 65% 9% 3% 7% 4% 9% 2% -13% 3% 0% 0% 6% 13% DPDHL Fedex Poste Italiane UPS Aramex Yamato Austria Post bPost CTT PostNL Royal Mail Japan Post PostenNorge NZPost POL SwissPost La Poste ECT Canada Post Australia Post Posti PostNord 30% 18% 15% 15% 5% 41% 9% 61% 17% 42% 8% 2% 7% 4% 6% 2% -9% 3% 4% 6% 12% bPost Posti DPDHL UPS Aramex POL Austria Post Yamato Fedex Poste Italiane CTT PostNL Royal Mail Australia Post NZPost Japan Post PostenNorge SwissPost PostNord La Poste ECT Canada Post 0% Peer Median 8.9% Peer Median 7.7% Postal organizations Integrators
  34. 34. Copyright © 2018 Accenture All rights reserved. | 0,4 0,6 0,8 1,0 1,2 1,4 1,6 1,8 Mar 16 Sep 16 Sep 17May 16 Jul 16 Nov 16 Jan 17 Mar 17 Nov 17May 17 Jul 17 Jan 18 Mar 18 Yamato 1.21 Austria Post 1.26 DPDHL 1.55 Peer Median 0.98 Aramex 1.4 Fedex 1.5 UPS 1.05 Integrator Median Posti 0.94 Poste Italiane 1.25 Postal Median Royal Mail 1.24 Japan Post 0.9 PostNL 0.89 bPost 0.84 CTT 0.44 Total return to shareholders—2-year [03/2016 to 03/2018] Integrators Postal organizations 34 VALUE CREATION QUESTIONS INTEGRATORS DELIVERED VALUE AS THE TOP PERFORMERS, BUT POSTAL PLAYERS’ GROWTH HAS STALLED Source: Bloomberg; Accenture Value Lab analysis
  35. 35. Copyright © 2018 Accenture All rights reserved. | 35 VALUE CREATION QUESTIONS HIGH FUTURE VALUE FOR INTEGRATORS REFLECTS GROWTH WITH CONSISTENT MARGINS 2,7% 3,3% 3,2% 5,2% 2,7% 0,9% 0,9% 2,4% 4,1% 3.0% CurrentValue Versus Future Value(1) [03/2018] 3,0% 0,7% 2,0% 0,7% 0,5% -0,1% 0,0% 0,0% -1,2% 0.6% Changein EBIT Margin [FY2018- FY2020] EBIT Margin [TTM 2017] 2,4% 13,6% 10,7% 10,9% 5,9% 13,4% 5,0% 9,2% 19,4% 9.7% Revenue CAGRProjection [FY2018- FY2020] 71% 53% 50% 43% 43% -73% -75% 29% 47% 50% 57% 57% 85% 86% 173% 175% Austria Post DPDHL Yamato UPS Fedex Aramex 14% 15% Royal Mail PostNL bPost Future Value Current Value WACC 8% 9% 6% 8% 8% 8% 10% 8% 9% 9% Note: (1) Current Value versus Future Value w as calculated using market capitalization data on March 2018 and financialdata as available on May 2017 Source:: Bloomberg; Analyst Reports; Accenture Value Lab Analysis Postal organizations Integrators
  36. 36. Copyright © 2017 Accenture All rights reserved. | Balancedacrosssegments Balancedacrosssegments Parcel andLogistics Balancedacrosssegments Balancedacrosssegments Balancedacrosssegments Logisticsfocused TechnologyandLogistics Balancedacrosssegments LogisticsandParcels LogisticsandParcels Balancedacrosssegments LogisticsandParcels ParcelsandFS LogisticsandFS LogisticsandParcels Logistics Logistics,Technology Logistics(Toll group) PostNord La Poste Swiss Post 5 Austrian Post bPost UPS DP DHL Posten Norge Posti (Itella) PostNL FedEx 6 Royal Mail Aramex Yamato NZ Post Poste Italiane Australia Post Canada Post Japan Post 30 15 5 12 15 4 12 11 9 8 9 7 6 6 4 3 3 Logistics and Transportation Parcels and Express Mail Technology and Softw are Financial Services Mail Others Mergers,Acquisitions and Joint-Ventures– DealBreak Down [2012 – 2016] 36 Note:(1) 5 firms: ANPost, CTT, ECT, USPS, POL haven’t reported any acquisitions and hence haven't been show n in the chart. Source: Bloomberg, Company Financial Statements, Accenture Analysis NEW M&A PORTFOLIOS WITH MAJOR ACQUIRERS FOCUSING ON INTEGRATION, THE SHARE OF INTERNATIONAL ACQUISITIONS HAS REDUCED
  37. 37. MARKET CONTEXT DEMAND SHIFTS IMPLICATIONS VALUE CREATION VALUE CREATION: WHERE NEXT?
  38. 38. Copyright © 2018 Accenture All rights reserved. | EXPLORE NEW OPERATING MODELS ▪ Connectivity and analytics ▪ Drive synergies across the network ▪ Rethink the last mile ▪ Intelligent automation DRIVE PROFITABLE GROWTH ▪ Capture new delivery segments ▪ Manage costs aggressively ▪ Explore alternative labor models ▪ Pricing as a strategic lever ROTATE TO THE NEW ▪ Digital products and services ▪ Shift capabilities ▪ Digital workforce ▪ Be agile 1. 2. 4. BUILD AN ECOSYSTEM ▪ Embrace innovation ▪ Strategic partnerships ▪ M&A portfolio ▪ “Win-win” regulations 3. 38 HOW CAN POST AND PARCEL WIN IN THE FUTURE? FOUR ACTIONS CAN REALIZE VALUE
  39. 39. Copyright © 2018 Accenture All rights reserved. | 39 DRIVE PROFITABLE GROWTH INTEGRATE ECOMMERCE SOLUTIONS AND NEW SERVICES • Build capabilities to capture new wave of delivery growth from segments, such as grocery and meals • Manage costs aggressively across all processes and drive greater automation and efficiencies • Explore alternative labor models to provide flexibility, skills and capacity at lower cost • Take pricing to the next level using analytics and AI to change customer behaviors and drive higher density
  40. 40. Copyright © 2018 Accenture All rights reserved. | 40 EXPLORE NEW OPERATING MODELS TRANSFORM OPERATIONS • Build integrated solutions by collaborating with retailers to aggregate demand and compete with platforms • Rethink the network and drive synergies across the supply chain • Explore new delivery models to drive low cost local delivery • Use data analytics and automation to reduce errors and improve productivity in support functions
  41. 41. Copyright © 2018 Accenture All rights reserved. | • Drive innovation and speed to market and through collaboration with partners • Actively seek partnerships across the value chain to create a mutually beneficial ecosystem • Use M&As to gain access quickly to new capabilities and/or markets; recalibrate M&A portfolio if necessary • Find “win-win” solutions with regulators and labor unions to respond to opportunities for growth and profitability 41 BUILD AN ECOSYSTEM INNOVATE AND COLLABORATE
  42. 42. Copyright © 2018 Accenture All rights reserved. | 42 ROTATE TO THE NEW BE READY TO PIVOT • Enhance and develop products through digital such as identity management and payments • Apply new capabilities and use data differently to handle the rapid growth of new markets such as grocery and meal segments • Empower the workforce with advances in wearable devices, smart machines and augmented reality • Increase flexibility, be agile and responsive to change
  43. 43. Copyright © 2018 Accenture All rights reserved. | 43 THANK YOU Brody Buhler Global Managing Director Accenture Post and Parcel Industry robert.b.buhler@accenture.com Brody Buhler @brodybuhler 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 more than 442,000 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. This document makes descriptive reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks. ABOUT ACCENTURE
  44. 44. FIND OUT MORE www.accenture.com/PostandParcel

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