Price Forecast: Letter & Parcel Delivery Services

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  • Tags : Transport & Logistics | Letter & Parcel Delivery Services | Price trend | Price forecast | Procurement research | Category market forecast

Recent Price Trend - Letter & Parcel Delivery Services

In the three years to 2017, the price of letter and parcel delivery service prices has been rising at an estimated annualized rate of 2.5%. Prices have been growing despite sharp declines in fuel prices, which have been driven by the expanding domestic production of oil. The resulting decline in supplier purchase costs has placed downward pressure on price; however, demand increases in conjunction with high market share concentration have caused prices to rise nonetheless. Rate increases from USPS, which controls nearly half of this market, have also contributed to the overall increase in price.

In the three years to 2017, demand for market services has been rising in line with growth in the number of businesses, total trade value and per capita disposable income. Increases in total trade value and the number of businesses have led to a rise in domestic and international shipping volumes, particularly by businesses. Meanwhile, rising per capital disposable income has made it easier for consumers to purchase goods and have them shipped to their residences. Moreover, e-commerce has been growing during the past three years, driving further demand for market services, which are used to ship nearly all small goods purchased online.

Furthermore, the high market share of the top four carriers has allowed suppliers to significantly increase prices in response to heightened demand. Although the number of market carriers has grown slightly, the resulting increase in competition has not curbed price growth much. New entrants to the market do not considerably boost competition because they have miniscule market shares. Furthermore, USPS, this market’s largest player, has been implementing significant rate increases in the past three years to boost revenue; the agency’s stamp prices, package shipping rates and postage rates have risen overall, to buyers’ detriment.

Buyer power is also hindered by the moderate level of price volatility. Because fuel costs are passed to buyers directly, drastic fluctuations in the world price of crude oil have caused market prices to shift significantly from one year to the next. Moderate price driver volatility makes it more difficult for buyers to budget for their future letter and parcel delivery expenses. Unfortunately for buyers, long-term contracts in this market do not prevent rate increases, and rising fuel costs will be passed onto buyers regardless.


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