Rising demand, high concentration and postage rate increases implemented to help the USPS recover from recessionary losses have caused considerable price growth
Los Angeles, CA (PRWEB) January 30, 2015
Letter and parcel delivery services have a buyer power score of 3.0 out of 5, which indicates equal buyer and supplier power. The vast market share of major carriers limits the level of competition in this market, curbing buyer power. During periods of increased demand new entrants to the market boost competition only marginally due to their miniscule market share. According to IBISWorld analyst Hayden Shipp, major carriers control most of this market's shipping capacity, and as such, they wield considerable influence over prices.
Prices for letter and parcel delivery services have grown significantly during the past three years despite relative stability in carriers' wage and fuel costs. This relationship is notable because wages and fuel are the main components of carriers' cost structures. Carriers' package volumes have risen during the past three years due to growth in the number of businesses, per capita disposable income and trade volume. Booming e-commerce has magnified the impact of these demand drivers because this market's carriers are responsible for shipping nearly all goods purchased online to their end users, continues Shipp. The market's major freight integrators (i.e. UPS, FedEx and DHL), whose combined market share is second only to that of the USPS, have continually raised rates for package shipping alongside rising demand. Additionally, the USPS boosted postage rates well beyond the rate of inflation in 2014, which is normally the limit for such increases, in an effort to recoup recessionary losses.
Buyers' ability to reduce costs through long-term shipping contracts is limited in this market. Despite recent growth, carriers' average profit margins remain low, limiting the steepness of contract discounts. Additionally, long-term contracts do not necessarily shield buyers from rate increases and they raise otherwise negligible switching costs. Therefore, the best strategy for most buyers is to use multiple carriers; doing so allows buyers to continually leverage shipping options. For regional and local shipping, buyers can often receive more personalized delivery service and improved responsiveness from a small carrier. For more information, visit IBISWorld’s Letter & Parcel Delivery Services procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of letter and parcel delivery services. Suppliers, which are also called carriers or couriers in this report, transport mail and small packages domestically and internationally. This report includes the US Postal Service (USPS) as well as couriers that operate internationally, nationally, regionally and locally. This report excludes general freight and logistics services for bulk items and heavy shipments (i.e. typically more than 150 pounds).
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Buying Lead Time
Key RFP Elements
Buyer Power Factors
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IBISWorld is one of the world's leading publishers of business intelligence, specializing in Industry research and Procurement research. Since 1971, IBISWorld has provided thoroughly researched, accurate and current business information. With an extensive online portfolio, valued for its depth and scope, IBISWorld’s procurement research reports equip clients with the insight necessary to make better purchasing decisions, faster. Headquartered in Los Angeles, IBISWorld Procurement serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.