According to the new report 'Central and Eastern European Express Outlook', the market as a whole continues to grow far above the European average with an average annual increase of almost 15%. Companies are already jostling for position to take advantage of the fast-growing changing CEE market as it develops further by means of various initiatives such as IT solutions, investments in hubs and (retail) networks, new services and partnerships with domestic players.
Despite this potential, the market is characterized by differences between countries in terms of industry verticals, levels of e-commerce and home deliveries (B2C – business-to-consumer), preferred service options (eg. road/air) and general stage of development.
“These characteristics will have an impact on the opportunities and challenges to which companies already present in the market or those looking to enter or expand their presence are going to be subjected,” says Erik van Baaren, Datamonitor express analyst and author of the study.
The Polish parcels and express market is the largest in the CEE region and still one of the fastest growing as it serves as the European hub of major companies' manufacturing and distribution operations, requiring high volume transport capacity from their service providers. Opportunities exist for all companies involved, although the country's inadequate road and air capacity could limit long-term growth.
However, Russia's rapid economic growth plus the strong interest of foreign companies in the market have turned its parcels and express sector into the fastest growing market of all countries in the CEE region. The country's express market is also one of the least developed. It presents major challenges to those active within it, for example the country's poor infrastructure and less open business practices.
Since its recent accession to the European Union, Bulgaria's express and parcel market has been witnessing very strong growth and has become one of the fastest growing markets in the CEE region. Like Russia, unstable political conditions could still present difficulties to foreign companies operating on the domestic market.
The Czech Republic has emerged as one of the most promising markets for the express and parcels industry in Europe. It is currently the third largest in the CEE region after Russia and Poland. The country is also one of the more developed nations in this region. This has altered the demand side of the express market with high growth still expected in traditional verticals such as automotive, partly shifting in the long term to service sectors such as pharmaceutical and IT. It does have major challenges to overcome with the upgrading of road infrastructure and lack of qualified staff.
The Hungarian market continues to benefit from its strategic location in Europe as well as its attractive investment climate. Datamonitor forecasts Hungary's express and parcels business will grow at a compound annual growth rate of 11.4% over the next the 5 years, presenting major opportunities for companies active in it.
One of the market segments that has not come to full fruition is the B2C sector which is still one of the less developed in Europe as Cash-on-Delivery (COD) deliveries are still the norm with development of online and mobile payment solutions still in its infancy. This is a problem in most CEE countries which also affects cross-border B2C deliveries. Despite these problems, the popularity of e-commerce and rising domestic consumption is expected to make the B2C market sector a long-term growth driver.
As is the case in Western Europe, a shift is taking place from air to road services as the quality of the 'Economy' product is improving due to investments in countries' road infrastructure and operator networks.
This will complicate the international side of the express market which is still dominated by the integrators (DHL, TNT, UPS and FedEx) as other networks (GLS and DPD) build up their position and smaller industry specialists attack niche areas (eg. specific industries, emergency shipments).
“The domestic markets are still predominantly controlled by the incumbent post offices and local players offering relatively cheap services,” says Van Baaren. “However, as the CEE region's economies develop and service quality and value-added services become more important selection criteria, this market segment could become a more heavily contested market place.”
