Romania’s courier and postal services market at a glance

Romania’s courier market is one of the most dynamic in terms of development, recording huge growth year-on-year, especially recently since the e-commerce has started flourishing, becoming a real catalyst of the revenues registered by companies in the courier sector.

While the economic crisis negatively impacted most of the business sectors, couriers left behind the financial turmoil, reporting increasing turnovers, the market actually blooming.  Although it may look like a contemporary El Dorado, in courier business competition is fierce, customer expectations and their demands are in an ongoing change, higher and higher and for keeping in the lead, for improving the business, there is need to constantly exceed expectations. And this takes to bring something new, to be one step ahead of the competition, basically to innovate. That is the philosophy of major players in the market who took the opportunity and shared ideas, set new directions for developing the industry during the Courier&Postal Services Forum 2014.

Yet, the advance couriers have seen is not confirmed by the postal services sector, which in Romania has experienced a decline lately. With the major player, the state-owned company Romanian Post, going through a challenging privatization process, having lower income and debts to cover, this year’s forecast does not look any better. However, the company struggles to implement a new strategy and provided the privatization is finalized this year, as scheduled, there are high premises for improvement.

Online commerce acts as a growth engine for the courier industry

In Romania, the courier market is one of the few that record consistent growth, companies posting increases of 15, 20, 30, even 50 percent in their turnover, figures which may seem unimaginable in other business. Last year, professionals in the market anticipated a growth up to 265 million euro in terms of revenue in the courier sector, following 250 million euro in 2012, a level similar to that recorded in 2008 when the market reached its maximum.

The upward trend visible in recent years and that will be maintained has been mostly stimulated by the e-commerce segment whose evolution and progress fueled the development in courier business.

”During the crisis, with all the financial difficulties the Romanian market faces, the courier market has recorded huge growth and will keep recording increases. The e-commerce is the main development engine. Just look at the food market which at the moment is close to 0 and which tends to increase”, Felix Patrascanu, CEO of FAN Courier, said during the Forum.

Romanians spent about 1 billion euro online according to Gian Sharp, CEO of Cargus, the amount reflecting expenditures on both goods and services. Compared to a report related to 2012 published by Ecommerce Europe, there is an improvement by 25 percent, since the respective results showed that Romanians transferred 800 million euro in etailers’ accounts. Of the 1 billion, goods account for nearly 30 percent – some 300 million euro, as Marius Ghenea, President of ARMO – the Romanian Association of E-Commerce, stated. He further confirmed the predilection Romanians have for technology, explaining that the IT sector represents some 70 percent of the market.

Couriers have nothing but to welcome the evolution recorded by online stores, their success being translated into new business opportunities for them. While they were initially focused on Business-to-Business services, e-commerce has revealed new paths, such as the Business-to-Consumer niche, and the newest, Consumer-to-Consumer, all these giving courier operators a wide range of expansion possibilities.

According to Gian Sharp, by 2020, the B2C is forecasted to grow by 25 percent, while the C2C market could register a growth rate of at least 60 percent.

In the current context where the target is far from being limited to the business field, couriers need to adapt to new consumer demands and needs and eventually they have to stand out of the crowd.

Differentiation makes the difference

Tending to become a cliche, innovation, creativity and differentiation remain the keys to success in the courier business as well.

“Innovation, creativity, along with differentiation and positioning are among the few factors that can make the difference between performance and failure in the courier market. On the same day delivery market, innovation is no longer enough. It is necessary to take a step forward, to take innovation to a new level, to find new ways to make things happen”, Octavian Badescu, Founder of Sameday Courier, said.

He went on pointing out the importance of delivering custom services since clients are looking for getting full control: to receive what they expect, when and where they want, with minimum costs, and possibly, receive it from someone they feel comfortable with. According to Badescu, couriers should exploit the evolving technology openings that enable them to provide such complex service to meet consumers expectations.

So, he came with a solution in this respect – a new mobile application meant to upgrade the traditional courier business by facilitating a direct communication between clients and couriers. Lokko, which will be launched on March 31, 2014, is a software application that will be available on smartphones designed to put the client in direct contact with the courier, allowing him to choose from a courier network directly from his mobile phone, basically, having full control on how, when and by whom, the service is delivered.

Whilst that stands for courier services with delivery in the same day, Gian Sharp, raised standards by proposing some novel approaches for the courier industry. Although they may seem futuristic for the Romanian market, the CEO of Cargus sees a more extensive development for this sector, which, for instance, may include drones as couriers.

On the other hand, General Logistic Systems works on improving its service offer focusing on the current growing demand and changing habits, determined by the online business development. According to Miklos Szoboszlay, Division Manager at GLS, couriers must me able to ensure flexibility, reliability, higher responsiveness and fast and custom solutions. His point of view is shared by Adrian Adam, General Manager of Urgent Curier who concluded that the new courier market means flexibility, short delivery times, fastness on all segments.

Privatization, the solution for the Romanian Post

Unlike the courier market, postal services have seen a decline over the past years being affected by a drop of global mail volumes of letter-post and the economic uncertainty. Yet, the advance in e-commerce also impacted the parcel and express services area which registered a progress in the European Union, accounting for over 50 percent of total revenues in the market which in 2012 came to approximately 90 billion euro.

Despite letter-post volumes moving down – the total worldwide traffic fell by approximately 3.5 percent to nearly 351 billion items, this segment remains the main income driver for posts.

Domestic parcel traffic of national postal operators fell by 1.5 percent to an estimated 6.4 billion items in 2012, because of the strong competition among courier companies and the economic issues still afflicting Europe.  However, with the exponential growth in e-commerce and postal services, operators working on adapting to changing consumer demand, the domestic parcel volumes are expected to turn to an ascending trend line.

In Romania, a market of over 300 million euro, the most important player is the Romanian Post, a state-owned company controlled by the Ministry for Information Society and Fondul Proprietatea, which is the minor shareholder with a 25 percent stake.

Apart from the regular postal services, the Romanian Post also provides courier solutions through its specialized service, Prioripost, without great success, though, mainly due to insufficient decentralization, according to Alexandru Petrescu, Vice-President of the company: “Decentralization process is extensive, complex and sometimes painful. Unfortunately the company’s revenues and expenditures balance represents the company as a whole. I therefore return to the previously mentioned point concerning decentralization. At the moment we seek to branch out in a direct marketing system, we seek to branch out in a similar system with Prioripost, in everything related to courier and other associated services and other revenue sources we think about – and I mean the financial services field”.

After an unsuccesful privatization attempt, the Romanian Post expects to eventually carry out the ongoing privatization process this year, Petrescu believing that this is the key for improving the business. At the same time, for attracting a strategic investor to acquire a majority stake in the company, the Romanian Post seeks to streamline its business by reducing working hours, hiring part-time workers, reducing the retail network, cutting down expenses through a more flexible labour supply.

According to Petrescu, privatized posts stand out for being more innovative and quicker in modernizing their operations, at the same time having faster and better operations because there are clearer goals set for top management by owners and shareholders, whereas governments usually set more complex, less clear objectives, hencethe privatization becomes a must for increasing competitiveness and for benefitting from investments in some key areas.

There are some measures implemented by the Romanian Posts meant to turn the company into an attractive business, such as converting all outstanding debts to the state budget into equity, launching strategic products – financial services, insurance - so as to provide a broader range of products, or launching the franchise project.

Asked what does the first franchise of the Romanian Post mean, Alexandru Petrescu explained: „It is Gheghe village, Bihor County. Franchise projects have been included in the development and cost optimization strategy of the Romanian Post for many years, it is not an attempt to reinvent the wheel(...). We specifically focused on rural areas because we have important costs there and among numerous requests from some entrepreneurs, we have gone through a number of criteria and we have started a project – it was launched in December, but it will be operational starting April”.

When it comes to anticipate a possible evolution in the courier market, ”sky is the limit” probably fits the best. There are so many development opportunities arisen with the expansion of online commerce which in Europe, despite amazing figures posted year-on-year has still a marginal participation (below 10 percent) in total retail market – online and traditional, keeping a great growth potential. Moreover, the Consumer-to-Consumer market opens new doors for couriers. Those doors are also open for postal services operator that likewise couriers need to carefully understand the changing needs and custom their offers so as to provide upgraded services, maintaining competitive in a challenging, yet rewarding market.