Parcel pricing may be set to surge, says new study

Management consultants atMcKinsey & Company, maintain that the parcel market in the U.S. is set to double by 2025, with Same-day delivery and instant delivery to accounting for one-fifth of the demand. Furthermore, a new study reveals that one in two customers is willing to pay extra for faster delivery.

These are the research findings contained in “Parcel delivery. The Future of Last Mile.” The analyses surveyed over 4,700 consumers in the U.S., Germany, and China.

As the trend toward buying goods online increases, so too does the desire to receive the ordered products as soon as possible. The market for same-day and instant delivery will account for around 20 percent of standard parcel revenue by 2025. Currently, the market share of same-day and instant delivery is less than one percent.

McKinsey expects average year-on-year growth of around 40 percent until 2025.

Driven by e-commerce, the parcel segment in mature markets like the U.S. or Germany is growing by seven to ten percent annually. By 2025, this volume is expected to double in the U.S. – with around 25 billion parcels being sent each year.

“Fast delivery is being requested more and more. Customers below the age of 35 are particularly keen to see faster deliveries. Older customers generally prefer to pay the lowest price for their delivery,” says Jürgen Schröder, McKinsey Senior Partner and expert in Logistics and Postal Services, said,

Nevertheless, price remains a determining factor for all customers. Regardless of age, almost 80 percent of those surveyed always choose the cheapest standard delivery to their home. When asked how much they would be prepared to pay for faster delivery, around 50 percent of those surveyed in the U.S. said around one dollar. Only one in six was prepared to pay $3 to $5 for faster delivery.

“The cost factor plays a crucial role in the growth of the same-day delivery segment: 50 percent of delivery costs for a standard parcel are incurred in the last mile, when the parcel is delivered directly to the front door,” says Florian Neuhaus, co-author of the study. “In the case of same-day deliveries, this share rises to as much as 90 percent.”

Managing the last mile poses significant challenges for parcel companies, Schröder observes:

“New competitors like Internet retailers are entering the market, and new business models are emerging. New technologies like autonomous vehicles and drone delivery still require further development, but offer opportunities to reduce costs and simplify delivery. Logistics companies and postal services should not only keep an eye on these innovations, but actively invest in their development.”

More than 40 percent of surveyed consumers would use AGVs (autonomous ground vehicles with lockers). Among younger respondents, this figure rises to one in two in favor of AGVs.

Schröder adds that by 2025, he expects it will be possible to deliver around 80 percent of parcels autonomously.

“However, some segments like grocery deliveries and immediate deliveries will continue to be delivered manually because there are still no cost-effective automated options in these areas