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Completing the Internal Market for

Parcel Delivery and E-Commerce

State of Play and Possible Reforms

Presentation to the IMCO Working Group on the Digital Single Market

Brussels, 19 April 2016

Alex Kalevi Dieke

Director & Head ‘Postal Services and Logistics’

WIK-Consult, Bad Honnef, Germany

Opinions in this presentation are those of the author.

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Contents

State of Play: EU Delivery Services

Critical Assessment of Current Situation

Policy Options to Improve Cross-Border Deliveries

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State of Play

E-Commerce and Delivery Services

Europe is considered the third largest e-commerce market in the world.

~ 4 billion B2C parcels sent annually to customers (domestically or cross-

border) per year.

Substantial differences in the level of e-commerce sales between the 28 EU

countries, both for domestic and cross-border sales.

Germany and the UK are the most important European export countries in e-

commerce.

Import e-commerce most important to relatively small, open economies, e.g.

Ireland or Luxembourg.

True size of cross-border B2C e-commerce transactions is unknown, because

cross-border orders do not necessarily imply cross-border delivery.

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State of Play

Very Diverse Delivery Markets

Letter volumes:

20 (low) to 300 (hi)*

Parcel volumes: 2 (low) to 40

(hi)*

Huge price differences between Member States

Diverse delivery

standards (home or

outlet)

* Annual per capita volumes (WIK estimate, 2014)

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State of Play

Different Market Structures

• Incumbent posts

• Integrators (UPS, DHL, FedEx)

• Parcel networks (DPD/GeoPoste, GLS …)

• Retailers (Hermes, Yodel, Mondial Relais, Amazon …)

• Local couriers

Different players deliver

• Letter markets dominated by incumbent posts.

• Market shares generally close to 100%

• Some competition in few MS (DE, ES, IT, NL, SE), with shares <20%

• Large letters increasingly important to ecommerce (low-value goods), including imports from Asia

Monopolistic letter markets

• Parcel markets generally have several player with strong market shares (oligopolies)

• Incumbent posts not necessarily dominant

• Some incumbent post have important parcel business, others have hardly any

Diverse parcel market

structures

• Almost all delivery firms operate on national or local level

• Integrators and networks have different subsidiaries to meet national regulation (transport, safety, tax, labour, etc)

• Hardly any true cross-border operations

National presence to

meet regulation

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Critical Assessment

Concerns in Light of DSM

Expensive shipping fees by e-retailers,

particularly for cross-border

Refusal to sell to some destinations

Expensive list prices for cross-border parcels

Parcel pricing based on national borders, including for short distances

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Co-opetition‘ is

common practice

in the USA.

USPS delivers

parcels in rural

areas. Benefits

are shared with

UPS, FedEx etc.

Critical Assessment

Concerns in Light of DSM (cont’d)

Insufficiently developed delivery markets in some Member States

Little cooperation in the industry despite

strong scale economies

No critical cross-border volume to

realise scale economies

Lack of transparency about

parcel markets (services offered, volumes,

revenues, quality etc)

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Policy Options

Delivery: One in Many Inputs for E-Commerce

E-tailer

• sets price for goods sold online

• may or may not charge extra fee

for shipping and packaging

Inventory/

Pick&Pack

Inputs Inputs

€

Marketing/

SEO

Enterprise

Resource

Planning

(ERP)

Delivery

services

Product

Information

Management

(PIM)

Online-

Platform

Payment

solutions e-tailer

Etc

…

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Policy Options

New Regulation for E-Retailers?

E-retailers charge shipping fees

that are never identical to the

delivery cost they pay

Critical behaviour by e-retailers

can include

Excessive shipping fees

Refusal to sell to some

Member States

Possible policy options / e-commerce

Obligation to contract in all EU?

Non-discrimination?

Universal service?

Caps for shipping fees?

Options appear restrictive in light of

emerging market, and e-retailers’

self-interest to grow their business

More immediate objectives

Affordable prices and high-quality

for cross-border deliveries

Empower e-retailers to sell more

to foreign customers

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Policy Options

Better Delivery Services (Domestically)!

EU should address diversity in the state of parcel delivery markets

Focussed statistics and monitoring

Clear legal framework for a competitive parcel industry

No action needed in Member States where delivery markets perform well

Where there is lack of available (affordable) service in a Member State

Promote emerging delivery services (using state funds where

necessary)

Promote local initiatives for parcel shops

Regulators to scrutinize (incumbents‘) parcel pricing to avoid

excessive prices for delivery, including for outbound cross-border

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Policy Options

Better Delivery Services (Cross Border)!

Ensure interconnection and help

grow cross border volumes

Monitor postal industry

commitments (IPC/ECIP)

Ensure non-discriminatory

access in all Member States,

for all parcel operators and e-

retailers (avoid ‚closed postal

system‘)

Better interconnection expected to

grow cross-border volumes, thus

reduce average cost, and facilitate

decreasing prices)

Create more transparency about

offers and standards for delivery

Support information platform

on delivery services in the EU

Develop standardised

terminology

Understand differences in

delivery between MS

Standardise addressing

practices

Thus facilitate independent

logistics services to e-retailers

(consolidators, parcels brokers etc)

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Policy Options

Effective Solutions for Returns

Impose

access to

returns?

• Multiple offers for returns to e-retailers

• Multiple offers to delivery operators

(including foreign)

• Typically good market performance

• Market power in offering returns

• Competition policy issues: excessive

pricing, refusal to sell?

• Scope to leverage market power from

returns to delivery service

MS with competitive

parcel outlets

MS left with postal

outlets for returns

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Alex Kalevi Dieke,

Director

WIK-Consult GmbH

Postfach 2000

53588 Bad Honnef

Germany

Tel +49 2224-9225-36

Fax +49 2224-9225-66

email a.dieke@wik.org

www.wik.org