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CROSS BORDERTHE DISRUPTIVE FRONTIERAccenture Post and Parcel Industry Research 2019
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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
GROWTH GAINS MOMENTUM
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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 DutcheCommerceconsumers buy from abroad
of GermaneCommerceconsumers buy from abroad
of Irish consumers buy from abroad; the highest number of international online shoppers in the world
of NordiceCommerceconsumers buy from abroad
63% 62% 84%83%
3
SMALL SHIPMENTS RULE
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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%
POSTAL PLAYERS DOMINATE
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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 know70%
of cross-border deliveries*
Delivery provider for most recent cross-border eCommerce order [% of respondents]
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China is a front runner and isexpected to continue to lead cross-border growth
Source: Accenture analysis
China outbound express is mainly on the rise
China to United StatesChina to Canada China to Australia
China to European Union
9%-19%
-2%-6%Range of Decline
Range of Increase
CHINA DRIVES CROSS-BORDER GROWTHCHINA 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%
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 MARKETLOW 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)
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
Industry Models Consolidator
Traditional
Disruptive
Freight
Freight
Alt. Delivery/Post
Post
Post
Alt. Delivery/Post
8
SHIFTING POSITION IN VALUE CHAINPOSTS ARE MOVING TO COMMODITIZED ROLES
USPSShipper/Retailer
FEDEX AMAZON UPS
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WHAT’S HAPPENING—AND WHY?THE STORY SO FAR
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PREFERENCES ARE EVOLVINGCUSTOMER 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
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 localregulations
Cross-border payments/multicurrency
ROI
23%
12%
12%
9%
9%
7%
6%
4%
m-Commerce
Rise in alternativepayment methods
Internet of things
50% of retailers offeringinternational delivery
Online marketplacescontinuing to dominate
Easier entry toemerging marketsGreater knowledge of how todo business internationallyChina’s "One Belt OneRoad" scheme
Profitability is challenging cross-border eCommerce retailers—they must compete with domestic retailers on speed and delivery prices
RETAILER EXPECTATIONS RISERETAILERS ARE DEMANDING MORE
Offering exchange and returns
Pricing/costs of products & services
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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 SERVICESTART-UPS SIMPLIFY WITH TARGETED INNOVATION
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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 MODELSDOMESTIC 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.
Build-your-own supply chain
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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 eCommercetrade 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-idUSKCN1C10C2https://ir.jd.com/node/7876/pdf
$15BAlibaba’s committed investment in China logistics over 5 years.
PLATFORMS SEIZE POWERA DO-IT-YOURSELF MENTALITY IS EMERGING
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WHERE NEXT?DISRUPT TO DELIVER
RELIABILITY IS KEY
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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?
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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 UPDATINGPREMIUM SERVICES CAN ONLY BE ACHIEVED THROUGH…
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• 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
FIVE ACTIONS FOR THE FUTURENEW PRODUCT
PORTFOLIOSCROSS-BORDER
SUCCESSSERVICES+ =
FOR MORE INFORMATION
/in/brodybuhler
BRODY BUHLERGlobal Managing Director, Accenture Post & Parcel Industry
@brodybuhler
www.accenture.com/postal
/in/andre-pharand
ANDRE PHARANDSenior Executive – Global Consulting Lead – Postal & Parcel Industry
@andre_pharand
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