Moderate growth in the economy
The Norwegian economy posted moderate growth in 2014. At the end of the year, the price of oil fell sharply and had a large impact after many years of strong growth.
In Sweden the economy demonstrated some growth, but the recovery after the financial crisis has taken longer than previously expected. As a whole, the financial growth among Norway's trade partners was weak in 2014 following positive signs throughout 2013.
While the past year did not bring radical technology shifts in the mail and logistics industry, recognised trends have gained a footing and are increasingly colouring the market situation.
Mail services in continuous transition
The transition from traditional letters to electronic communication is progressing as expected. The expansion of digital solutions and a reduction in letter volumes by just under 10 per cent annually require constant, extensive change. The distribution of mail on Saturdays, the volume of which is less than one-fourth of a weekday delivery, is very costly. Posten Norge would therefore like to see the Saturday distribution obligation removed as quickly as possible.
The major customers who send out administrative mail, in both the public and private sectors, are all working on developing their electronic solutions. All public entities must start using digital mailboxes for communication with the general public before the first quarter of 2016. Public administration represents a significant portion of the total turnover of addressed mail (approx. 15–20 per cent). For Posten Norge this means that large, physical volumes will disappear in the course of the next few years.
For many, particularly those involved in marketing, written communication is still in a strong position. Customer newsletters, brochures and marketing letters continue to work best on paper. The mailbox is also an attractive option for online shopping. The quantity of small parcels in the mailbox is increasing, compensating to some extent for declining letter volumes.
Strong increase in e-commerce
Online shopping is growing at a rapid pace, approximately five times more than in-store shopping. This is changing the method Norwegian and Nordic consumers use when shopping. E-commerce is one of the areas demonstrating the strongest growth in the logistics market in the Nordic region, with high levels of cross-border trade.
Product delivery is a key aspect of online shopping, and delivery alternatives are playing a decisive role in the choice of online stores. Making the delivery process simple and smooth for consumers, and adapting it to differing needs and wants, requires close cooperation between everyone involved in the e-commerce value chain, including logistics operators.
As an increasing number of stores have both a physical and an online store, more stores will choose to connect both sales channels. For example some stores offer the ability to order goods online in the physical store, if the desired good is no longer in stock.
The 2014 E-commerce Report highlights four important trends in online shopping:
- More complex customer journeys. Consumers demand more from the customer experience.
- Interaction between online shopping and physical shops. Consumers expect to be able to shop where and when they want, and in the way that suits them best.
- Use of insight and analysis. The big winners will be those who manage to use insight in the right context with regard to consumers.
- Global e-commerce. A number of international companies have simplified the buying process so that the barriers related to customs duties, language and foreign currencies are disappearing.
A number of online stores in the Nordic countries plan to open online stores in additional countries in the coming years. First and foremost the Swedish online stores want to expand to their neighbouring Nordic countries, which will mean increased competition for the national online stores. The Norwegian online stores are demonstrating less interest in geographic expansion.
There is a clear relationship between economic growth in the Nordic region and the logistics market. Influential Nordic actors and large international networks are increasing competition in the Nordic region. As a result, prices will be under increasing pressure, which in turn contributes to the development of more cost-efficient logistics networks. Companies in the Nordic region continue to consolidate and centralise their logistics operations. An increasing number of companies that succeed in one country are expanding into the other Nordic countries. This centralisation has reduced logistics and production costs, but for some suppliers resulted in a larger number of transports. Some companies emphasize that the total environmental accounts have not been affected negatively since reduced energy consumption in production or fewer and more efficient warehousing units offset the environmental burden of increased transports.
Increased international transport to the Nordic region has also led to stronger competition from foreign low-cost carriers. Retail companies from Central Europe see opportunities for growth in the Nordic region. Structural changes are occurring in both the logistics industry and commerce, and traditional limits on the individual operator's responsibilities are evolving.
Logistics companies in the Nordic region will either become dependent on international alliances or have a presence in markets they are exporting to or importing from, like Asia. Logistics hubs in Europe will become increasingly important due to the centralisation of production and warehousing. Having a presence and good customer service in these hubs will be important for companies competing in the Nordic logistics market.
Acquisitions have played an important role for the Nordic mail and logistics companies in strengthening their positions. Interest in acquisitions was more subdued in 2014. Most companies that are still independent are either small or specialists in certain niches in the market. Some are also linked to major operators as subcontractors. More and more global and European logistics operators are establishing subsidiaries or separate businesses in the Nordic region.
However, if we take a wider view of the logistics industry, i.e. parcels, freight, temperature-controlled transport, storage services and third-party logistics, there is intense competition between operators. There will still be movement in the operator market, and further structural changes are expected in the years to come.
Focus on infrastructure and the environment
The Nordic countries are experiencing population growth with relatively high birth rates compared with the rest of Europe, combined with high net immigration rates. Urbanisation is also continuing, and an increasing proportion of the population is concentrated around the major cities and regional hubs.
Despite huge public investment in cities, the infrastructure is not keeping pace with the increase in vehicle traffic. Traffic is also creating increasing environmental and noise-related problems, resulting in a strong focus on railway expansion. Personal transport is prioritised, meaning that transfer of goods from road to rail is moving less quickly than we could wish for. Norway is working on renewing marine transport solutions in order to exploit this environmentally friendly mode of transport.
In Norway, Sweden and Finland longer, heavier articulated vehicles (25 metres/60 tonnes) are being used, which reduces the number of heavy goods vehicles on the roads as well as costs, fuel consumption and exhaust emissions.
Throughout Europe, innovative vehicle solutions for local distribution in cities are being tested and researched. It is important for logistics companies to work closely with customers, the authorities and the expert environments to identify good, future-oriented solutions.
Uncertainty in the Western economy
Economic growth in the Euro zone is standing still. Between the beginning of 2008 and the summer of 2009, GDP in the Euro zone fell by almost six per cent. Since then production has increased by just under four per cent, which means that the region still has not recovered what it lost after the financial crisis.
Among the large industrial countries, USA recovered quickest after the crisis. GDP is now almost nine per cent higher than at the beginning of 2008, following strong growth during the spring and summer of 2014. In particular, investments in businesses and homes are increasing from relatively low levels. The main driving force behind the American economy, namely private consumption, has picked up, but this upswing is offset by the relatively limited growth in salaries. The underlying growth in the British economy has been surprisingly strong for the past year and a half. The major Asian countries continue to have high growth, if slightly subdued.
For Norway, it has been six years since a fall as sharp as the one predicted now. The price of oil has fallen by 50 % since last summer, the Norwegian krone has decreased significantly in value and the outlook for the oil-dependent Norwegian economy has weakened considerably. The open Swedish economy is being held back by the weak growth of many of its most important trade partners. Exports have more or less stood still the past three years. Corporate investments are showing practically no growth. Households are pulling the economy, with a rather large increase in consumption and very high growth in house prices. The logistics operations are a reflection of the activity in the market and must constantly be adapted to market developments.