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Big Investments in Cross-Border Delivery Infrastructure

Date: December, 2015 --

Big Investments in Cross-Border Delivery Infrastructure

A recent posting in the newsletter of Postal Technology International rather stopped us in our tracks. UPS (United Parcel Service) announced the opening of a sortation center in Lyon, France. The facility covers 86,000ft², or about 2 acres. The fully automated package sorting center cost €25m (US$28m) and can process more than 10,000 packages an hour. This is part of a 6 year program to invest $2 billion in facilities in Europe alone. For that money they could build 71 more sort centers in 71 more cities!   

What’s driving this huge investment by UPS? Global eCommerce.  A recent meeting of the world’s postal systems at the Universal Postal Union produced phenomenal news of the volumes of registered parcels passing through its EMS (Express Mail Service - which is tracked).

In January 2014, 5 million parcels per month passed through the system.

In January 2015, 7 million parcels were transported, a 40% increase of monthly volume in one year

And the volumes have continued to grow since then. The UPU predicts the system will carry 177 million parcels this year (EMS and regular service combined). Compared to the 2014 total of 101.3 million parcels, that is an increase of 21% per year

According to the International Postal Corporation, in 2014 alone, online sales of consumer goods world-wide grew by almost 20%. IPC is a cooperative association of 24 member postal operators in Asia Pacific, Europe and North America, including the USPS. It serves its members by driving “service quality, interoperability and business-critical intelligence to support posts by defending current business and supporting expansion into growth areas.” 

In 2013, IPC predicted double-digit growth of parcel traffic through 2018, which so far has occurred, with the US and Europe accounting for two-thirds’ of online sales; moreover, somewhat surprising given language barriers, it was expected that flows in Asia would comprise a larger and larger portion of the cross-border market. 

This has most definitely occurred, with Chinese exports of small packets to the US being especially prominent, and Chinese purchases abroad being huge. According to IPC’s recent survey of consumer cross-border online purchases, Chinese buyers purchasing abroad spent more, both absolutely and on average, than other consumers. As for average price, 65% of their purchases were between €100 and €300.

Chinese consumers stand out as the most active online cross-border shoppers with a quarter of them shopping cross-border every week. On average in the rest of the world, 63% of frequent cross-border online shoppers shop at least once a month. In China this figure rises to 99%, followed by the UK at 86%, and the US and Germany at a surprising 80%.

But China also sells: 80% of frequent cross-border online shoppers purchased from only 5 countries and China was the shopping destination of 29% of them, followed by the UK (19%), Germany (14%), the US (13%) and France (5%). 

All of this is phenomenal. eCommerce is causing fantastic economic changes and developments around the globe. Alibaba has purchased a minority interest in Singapore’s postal service, SingPost. A post office? Well, sort of, for SingPost specializes in being the customer service, fulfillment, pick and pack, and delivery arm for major eCommerce merchants primarily, but not exclusively, in Asia. Its listed market value is $2.9 billion, about the same as the market cap of the Austrian Post, which serves the German and Eastern European markets.

Statistics specialist Statista had predicted 2015 global eCommerce sales to hit $1.7 trillion dollars in value. Someone is delivering those packages to these online buyers and many of them go through the hands of the post offices, resulting in the huge aforementioned quantities. Assuming an average parcel holds a purchase of a $100 item, that sales amount would generate 1,700,000,000 parcels per year.   

This global growth in business is necessarily accompanied by a global growth in Big Data, which has been employed by some sophisticated companies for some years, and increasingly by a wider population of companies. Big Data can be used for surprising ends. 

We suspect that SingPost’s choice of diversification into warehousing and delivery outside Singapore was partially driven by careful tracking of who was selling how much of what goods in what countries, something it could accomplish as a participant in the UPU’s Big Data generator EMS and other tools.

UPS’s investment decisions were no doubt informed by trend tracking of consumer purchasing behavior around the world and Big Data of purchasing behavior of unidentified consumers, much of which it might have generated in its own system, and other data which is commercially available. The UPU and IPC, through their data capture capabilities, are able to see global, regional, and country-to-country trends in the volumes and make-up of the traffic carried by their members, on a daily basis.

Nearly any captured data can be put to valuable purpose. The UPU can watch trends in how long it takes for authorities to clear parcels through Customs, or deliver an inbound parcel from Customs to the purchaser. Aggregate such data over a time period and processing problems, such as a need for more staff on a week-end, leap out at the observer. Seasonal patterns quickly become visible as also do trends in the size and weight of parcels.  

If it were not a potential violation of privacy, Customs’ declaration form data, and seasonal trends in changes within that data, even stripped of names of addressees, could be used to identify the location of wealthy populations, or people with similar interests.

As countries and businesses increasingly appreciate the economic benefits of international eCommerce, international “direct-to-and from-consumer” business will continue to grow dramatically. This in turn will generate surprising kinds and volumes of Big Data that will be used to find and serve customers the way they wish to be served, remove obstacles in the payment/delivery/return process, uncover trends at an early stage, and continue to break down the borders, permitting more and more “borderless” trade. 

In every step of that way, Data Services, Inc. will be available to help you keep the data clean and effectively managed along with providing online access to your data with advanced tracking and analytics tools you need for maximum returns and effective growth.