2010 courier outlook

February 24, 2010
by Gary Breininger

If you depend on courier services to deliver your goods, the economic upheaval and general market instability that characterized much of 2009 makes looking ahead in 2010 more challenging than ever.

The good news is amid the changes there are some clear patterns and trends in the market that provide at least some indication of where things are heading. Taking this information into account as you develop your buying plans for the year can place the odds in your favour to succeed.

A market poised for (modest) recovery
While the specific figures may vary, virtually all economists now agree that 2010 is going to be better than 2009 in terms of overall economic performance. Given the strong correlation between the courier industry and the overall economy this is good news for the sector.

It is also good news when one considers just how difficult 2009 was. According to our most recent Overnight/Later Canadian Courier Market Size Report, the courier market in Canada shrank by just over 14 percent in 2009. That equates to almost $800 million.

After a brutal 2009, experts expect Canadian courier companies to increase revenues by five percent in 2010.

Photo: iStockphoto

Given the high fixed costs associated with running many courier operations (especially for the larger firms—like DHL, FedEx, Purolator and UPS—who control a large share of the market), any loss of market value is concerning. They can’t shut down an operations hub because the volume of packages drops.

This should be of equal concern for the buyers who use their services. As it’s often been written, the ability of any transportation and logistics firm to provide reliable and dependable service is predicated on their financial health.

So what about 2010? Based on our forecast model, we believe Canadian couriers will increase their overall revenue by five percent, with most of this being fuelled by a combination of price increases and a growing (and higher-priced) export business. On a volume basis alone, growth will remain relatively low at under two percent.

Here’s a last (sobering) point on this topic: we believe it will take until 2012 before total industry revenues recover to their pre-recession (2008) levels.

Continued down-trading to non-express
There’s no doubt that cost control will remain a top priority for most organizations in 2010.