Upswing, but weaker than anticipated
2013 began with new optimism and the economy showed progress from the preceding year. Over the year, however, the growth estimates were adjusted downward and optimism was more muted.
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 transition
The transition from the traditional letter to electronic communication is progressing steadily as expected. An annual downturn of nearly 10 per cent makes it very challenging to ensure continued cost-effective mail distribution. The European mail companies are all working to reduce their distribution costs. Many are reducing the number of days on which mail is delivered, and this is also being considered in Norway.
The major customers who send out administrative mail, in both the public and private sectors, are all working on developing their electronic solutions. Via Altinn, the Norwegian government has already digitised many government procedures In March 2014 Posten Norge’s Digipost was chosen as the public sector’s digital mail supplier. This will be a step towards simpler, more efficient communication and administration.
For many people, however, particularly those involved in marketing, written communication is still in a strong position. Customer newsletters, brochures and marketing letters 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
8 out of 10 Nordic consumers bought tangible goods on the internet in 2013, more or less the same as in 2012. However, people who already shop online are buying more. The turnover of most Nordic and international online stores grew strongly in 2013 and parcel volumes reached record levels during the Christmas period.
In 2012, Posten and Bring's Nordic e-commerce report highlighted the concepts of simplicity and convenience as the most important reasons for shopping online. Nordic consumers are also very satisfied with their online purchases. Online stores are creating increasingly high-quality digital buying experiences, which means satisfaction and online shopping will continue to rise.
The 2013 e-commerce report emphasised the consumers' desire for freedom of choice in all phases of the transaction. Consumers want the freedom to choose when and how they shop, pay for goods and receive deliveries. It is important to take consumer power seriously and provide simple ways for customers to choose the options that suit them best.
Delivery is a key aspect of an e-commerce transaction. Over a third of consumers say that delivery options are crucial when choosing an online store. 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.
The growth in e-commerce affects consumer expectations regarding and requirements of traditional trading. People increasingly expect bricks and mortar stores to offer their goods online as well. For bricks and mortar stores without an online presence, there is a strong risk of losing sales and market share. We also note that online stores are increasingly establishing and planning bricks and mortar stores or showrooms.
International e-commerce is increasing, which may present a challenge for Nordic online stores. It also offers opportunities for larger coverage and sales areas. Over half of Nordic internet customers have shopped with foreign online stores. Their main reasons for this are better choice and lower prices. Many online stores appear multinational through websites in various languages and customer service offices in several countries, while the logistics are centralised in the Nordic Region or in Europe.
As in previous years, logistics activities in the Nordic Region continue to be consolidated and centralised. An increasing number of companies that succeed in one country are expanding into the other Nordic countries. Retail companies from Central Europe also see opportunities for growth in the Nordic Region. Structural changes are happening in both the logistics industry and commerce, with traditional limits on the individual operator's responsibilities evolving.
Logistics centres are growing in size and transport routes are expanding, while transport times are under increasing pressure. Increased international transport to the Nordic Region has led to stronger competition from foreign low-cost carriers.
Logistics companies in the Nordic Region are increasingly dependent on international alliances, or on having a presence in markets they are exporting to or importing from. Logistics hubs in Europe will become increasingly important due to the centralisation of production and warehousing. Having a presence and expert customer service in these hubs will be crucial in future for companies wishing to compete in the Nordic logistics market.
Tools for managing complex logistical structures and resources are constantly improving. Customer expectations regarding value-adding services as part of the logistics are also increasing.
Nordic mail and logistics operators also strengthened their positions via acquisitions in 2013. Most companies that remain independent of the major groups are either small or specialists in certain market niches. 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.
If we take a wider view of the logistics industry, encompassing parcels, goods, temperature-controlled transport, storage services and third-party logistics, however, there is intense competition between operators. There will still be movement in the operator market, and we expect to see further structural changes in the years to come.
Focus on infrastructure and the environment
The Nordic countries have relatively high rates of national increase 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.
Sweden and Finland are using longer, heavier articulated vehicles (25 metres/60 tonnes), which reduces the number of heavy goods vehicles on the roads as well as costs, fuel consumption and exhaust emissions. This is also being trialled in Denmark and Norway, and will become more common in the next few years.
Throughout Europe, innovative solutions for local distribution in cities are being researched and tested. It is important for logistics companies to work closely with customers, the authorities and the expert ¬environment to identify good, future-oriented solutions.
Cautious optimism regarding the Western economy
The financial crisis, recession and subsequent currency crisis in Europe sent the global economy into a depression worse than any since the 1930s. Growth out of the trough has been weak despite low-interest policies and fiscal stimuli.
After the growth in 2013 turned out to be lower than expected at the start of the year, growth estimates for 2014 are now moving in a favourable direction again. This applies particularly in Europe and the USA. In certain emerging economies such as China, the extraordinary growth of the past few years is now expected to diminish.
This offers hope for positive development in the Nordic logistics market. However, the industry is so competitive that market growth will not necessary lead to improvements in ¬margins.
Norway is still «a different country» in Europe. In recent years, however, growth has been threatened by concerns about oil prices, costs and a potential property bubble. Future economic development in Norway is more uncertain than it has been in recent years. On the other hand, growth in Sweden and Denmark is expected to increase in the coming years in line with the rest of Europe.