What’s behind Europe’s shrinking parcel and letter volumes?

We take a look at postal networks across Europe and how the parcel delivery market has changed in 2022

After two years of record results driven by the dynamism of the parcel delivery market in the wake of the Covid-19 pandemic and successive lockdowns, 2022 proved to be much more challenging.

Marked by several major geopolitical and macroeconomic shocks such as the war in Ukraine, record inflation in many countries, a sharp rise in energy costs and an overall slowdown in household consumption weighed on the sector and put an end to the growth in parcel deliveries while, at the same time, the downtrend in letter volumes continued.

Geopost, one of Europe’s leading parcel delivery networks and part of France’s Le Groupe La Poste, for example, said that the operating environment was challenging in 2022 and that it saw slight volume adjustments. Still, the group managed to lift its sales by 6% year on year to Euro 15.6 billion ($17.0 billion).

According to Geopost, it delivered 2.1 billion parcels worldwide last year, down slightly (-1.3%) from 2021. The group attributed the development to an overall slowdown in consumption and the normalization of the parcel delivery market.

Geopost’s 2021 record operating profit of more than Euro 1 billion declined to Euro 669 million last year. “[The decrease was] mainly related to the slight decline in express volumes, reflecting the first impacts of the decline in purchasing power in an inflationary context, reinforced by a negative base effect related to the peak traffic in the first half of 2021 and the Euro 149 million impairment of DPD Russia’s assets,” the group noted.

Shrinking volumes in France

France’s Le Groupe La Poste reported steady 2022 business and earnings in a “highly unfavorable” environment. According to the group, the structural decline in mail volumes continued with an 8% year-on-year drop last year. At 2.6 bilion items, parcel deliveries were 3% lower than in 2021.

“After strong growth in e-commerce up to the end of the first half of 2021, the impact of the return of inflation began to be felt on consumer spending in 2022,” Le Groupe La Poste noted in its results statement.

New records for Deutsche Post

Germany’s Deutsche Post DHL Group once again grew profitably in the past financial year. With revenues of Euro 94.4 billion, the group exceeded its record from the previous year by 15.5%.

“The jump in revenues resulted entirely from the international business of the DHL division, despite the fact that global trade and e-commerce normalized in 2022 as expected, with slowing momentum in the final quarter,” the firm commented. Deutsche Post DHL Group’s 2022 EBIT came in at Euro 8.4 billion, up from Euro 8.0 billion in 2021.

Sales of the group’s post & parcel Germany division decreased from Euro 17.4 billion in 2021 to Euro 16.8 billion last year. The development was ascribed to the expected normalization in parcel shipments and limited opportunities for price adjustments in the letter mail business.

Overall, parcel volumes were down 8.3% year on year. “This decline is not surprising, as parcel volumes were heavily influenced by the pandemic in 2021, especially in the first half of the year. Letter mail volumes again showed structural decline, falling by 0.7%,” Deutsche Post DHL Group said in its results statement.

The firm added that cost increases due in part to significantly higher energy prices had a negative impact on earnings, with EBIT decreasing to Euro 1.3 billion (2021: Euro 1.7 billion).

Lower results for Royal Mail

The UK’s Royal Mail also reported declining parcel and letter volumes. In its trading update for the nine months to the end of December 2022, the company said that its performance was driven by a return to structural decline in letters, weaker retail trends, the impact of industrial disruption (18 strike days through the end of the year) and lower test kit volumes.

Royal Mail’s total sales were down 12.8% year on year in the nine-month period. According to the firm, total letter revenues declined 6.1% year on year, with volumes for addressed letters excluding elections shrinking by 8.0%.

“Compared to pre-pandemic levels, addressed letter volumes (excluding elections) were down 25.0% and total letter revenues were down 14.0%, reflecting the fundamental change in volume and revenue mix with parcels now accounting for 54% of total revenues vs. 48% pre-pandemic,” Royal Mail noted.

The firm added that total parcel sales fell by 17.8% year on year, with volumes down 20% in the period under review.

Portugal’s mail volumes drop

According to CTT – Correios de Portugal, its revenues grew by Euro 58.8 million or 6.9% to Euro 906.6 million last year. Sales of CTT’s mail division amounted to Euro 460.9 million in 2022, which was 3.7% higher than the previous year. The company attributed the growth to the full integration of NewSpring Services, a company specializing in business process outsourcing, and the contribution of a laptop sales project that started in Q4 2021 and still generated extra revenues in Q1 2022.

According to CTT, addressed mail volumes declined by 5.6% year on year in 2022. “In 2022, transactional mail volumes decreased by 5.8% year on year, mainly due to the declines in ordinary mail (-4.6%), an intrinsic trend in the postal sector primarily due to the digital transformation of communications, as well as in international inbound mail (-28.3%) and international outbound mail (-15.4%),” CTT said.

“It should be noted that the downward trend in international inbound mail observed since H2 2021 continued in 2022 due to the entry into force as of July 1, 2021 of the abolition of the VAT exemption on postal items below Euro 22 (“de minimis”), leading to the need for customs clearance of all items of extra-EU origin, which resulted in an increase in customs transit times due to a complex and one-by-one process, which ultimately led to the migration of this type of traffic to express networks,” the company added.

CTT’s express and parcels division generated sales of Euro 259.0 million last year, which was Euro 3.3 million or 1.3% higher than in 2021.

“Revenues in Portugal amounted to Euro 132.2 million, a year-on-year decrease of Euro 3.0 million, and volumes totalled 33.1 million items, a growth of 1.1% vis-à-vis 2021,” the firm said. “It should be noted that Q1 2022 was impacted by a difficult year-on-year comparison, as Q1 2021 was a quarter marked by the effects of the restrictions associated with the Covid-19 pandemic, particularly the second lockdown, which strongly boosted e-commerce activity,” it added.

Poste Italiane improves results

In Italy, Poste Italiane generated sales of Euro 11.9 billion last year, a year-on-year increase of 6.0%. The development was attributed to positive or normalized contributions from all business areas. The group’s EBIT accelerated by 24.1% to Euro 2.3 billion.

Sales of Poste Italiane’s mail, parcels and distribution business amounted to Euro 3.7 billion in 2022. This corresponded to a 1.2% drop when compared to 2021. According to the company, the structural decline of the mail business was successfully offset by growth in the B2C parcels segment.

“In the last five years we have faced various challenges, such as those represented by the Covid-19 pandemic and by a turbulent macroeconomic environment. These factors have had a significant impact on both the economy and our customers, but [we] managed to deliver on all commitments to stakeholders,” Poste Italiane CEO and general manager Matteo Del Fante commented in a statement. He added that 2022 will be the point of reference for a new strategic plan for the business that will be presented later this year.

Challenges for Austrian Post

Austrian Post faced challenging overall geopolitical and economic conditions in 2022. High inflation and the war in Ukraine, together with the related energy shortages, affected consumer behavior and forced the company to address both sales and costs to maintain operational stability.

“Against this backdrop, 2022 was satisfactory with stable revenues of Euro 2.5 billion,” CEO Georg Pölzl said in a statement. “Although sales were down 4.0% in the first half of the year compared to the very sound H1 2021 figures, second-half revenues increased by 4.2%,” he added.

Sales in the group’s mail division decreased slightly by 0.5% year on year to around Euro 1.2 billion in 2022. The parcel & logistics segment saw revenues drop from Euro 1.3 billion in 2021 to Euro 1.2 billion.

“Revenues in 2022 in the mail division were negatively impacted by the structural decline in addressed letter mail and direct mail volumes due to electronic substitution. Special effects for traditional letters as well as price adjustments across the entire product portfolio had a positive impact,” Austrian Post noted.

The drop in sales in the parcel & logistics segment was mainly attributed to the group’s Türkiye parcel business, as well as declines in pandemic-related special logistics services.

Last but not least, Austrian Post warned that the political and economic challenges of last year are also expected to shape the economic environment in 2023.

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