News

The dawning of a new year is the time to reflect on the year just past and to ponder the likely events coming up in 2007, particularly in terms of the developing structure of the UK express parcels and pallet markets. This time last year Triangle published an article predicting further consolidation among the main brands, following the takeover of Lynx Express by UPS and the absorption of Nightspeed by Amtrak. We have witnessed in previous years such consolidations take place with, for example,  the withdrawal of Hellman, the demise of Geodis United Distribution (the former United Carriers) and the passing of NCN, to give just three examples. On the other hand, new network operators have appeared such as APC and various specialist pallet networks. We argued, however, that there still remained too many network operators and that over-capacity continued adversely to affect network profitability. What is driving consolidation now is the economic size of the delivery. Delivering that extra parcel to the same place is negligible in terms of additional cost, and in Germany the average parcels per drop is believed to be about twice that in the UK.

Compared to the other main European express markets of France (nine express brands) and Germany (seven express and parcel brands), the UK started 2006 with 15 express parcel brands, predominantly in the B2B sector, and a further ten express pallet brands - a total of 25 overnight B2B express parcel and pallet networks. This number  excludes the B2C networks such as Home Delivery Network, ParcelNet and Amtrak and also the specialist freight operators Christian Salvesen, Bibby Distribution and the HazChem Pallet Network. Our forecast for 2006 was that the consolidation process would continue, and indeed it did, although we had to wait until the second half of the year to discover where the changes would happen. The two main events of 2006 were the sale of Target Express to City Link's parent company Rentokil Initial and the purchase of the ANC Group by FedEx. The Target Express/City Link tie-up was clearly about scale. The combined business will emerge in a clear fourth place in the UK market behind DHL, TNT and UPS in terms of total turnover.

FedEx's motivation, like that of UPS, is more likely to establish its own managed UK collection and delivery operation to provide a comprehensive import and export, European and intercontinental service. Being primarily an intercontinental express operator (outside of the States at least), FedEx had previously provided nationwide UK ground services through an agreement with Business Post which is now expected to cease by September. So what does Triangle predict for 2007? Well, more of the same is the most likely outcome, although with a couple of provisos. Mergers and acquisitions over the past two years have been mainly between companies without venture capital support, and it would seem that the venture capitalists are not as attracted to the market as they once were. In addition, some words of caution to those network operators seeking the "one stop shop" solution through acquisition: most of the customer benchmark surveys carried out by Triangle in UK and European express markets over recent years have shown that the shippers are not totally enamoured by this concept. Acquire for scale, certainly - this should lead to better deals for the customer - but not solely to establish the "one stop shop" solution for the shippers, as there is little evidence of significant demand.