You have no chance. Absolutely no chance.
The only consistent pattern emerging from commercial transport markets is that of inconsistency – with little or no common factors shared between transport sub-segments. Quite simply, the fundamentals underpinning each of those sub-segments are vastly different, with COVID exposing and exaggerating huge variances in outcome.
In the following paragraphs, we aim to give a succinct overview of COVID impacts and implications on some key commercial transport sectors – and to briefly discuss the effect on fuel and fuel payments strategies. There are, undeniably, significant effects. They require bold action. Now.
Resilient FMCG
In many parts of Europe, national lockdowns have led to “panic buying”. With super- and hypermarkets remaining open almost everywhere and demand for chilled and ambient groceries not only holding firm, but increasing at an average of 13% across the continent between March and July, significant pressure was put on supply chains.
Product availability was not the issue: driver and warehousing staff resources were, however, a very serious problem and caused both stock shortages and outages in April and May.
The FMCG sector has survived intact. As far as fuel is concerned – the heightened requirement for contactless payment showed up the sector’s failure to adopt mobile, tokenised and app-based payment technologies. This, in our view, is the single biggest gap in the Commercial Transport fuel sector – and we expect fuel network operators, card issuers, payments providers, forecourt software engineers and transport fleets themselves to engage heavily in restructuring of the market away from “physical” payments and towards mobile and contactless fuel payments processes.
Desperate times for “General Haulage”
If one of the keys to transport company survival during the COVID pandemic has been very clear specialism of activity, segment or route (and we believe it has), then that large, amorphous “blob” of the market largely referred to as “general haulage” has undergone the most painful of times. For those mid-market operators engaged in non-specialised, often “spot” haulage activities, CFS has seen negative growth figures for a six month period up to August 2020 of – in some cases – minus 45% over the same period in 2020.
With manufacturing output beyond FMCG decimated across the continent (think of the downturn in construction, automotive and textiles markets, for example), those classic segments for general haulage have suffered accordingly. Expect, as a result, significant consolidation and rationalisation of that part of Europe’s Commercial Transport sector. And adjust marketing and sales focus accordingly.
Uncertain times for cabotage and international bridging…very uncertain times
Perhaps unsurprisingly in the context of the paragraphs above, and while contract international and FMCG logistics has remained robust, we predict 2020 will be the first year since EU eastward expansion to record a year-on-year decline in both cabotage and bridging between third-party countries. Our current forecast is a 2020 decline of between 25% and 30% over 2019 numbers.
To a degree, this is a natural and an organic effect of manufacturing slowdown and economic stagnation/decline.
The interesting questions, however, are around the future. As international quarantine lists are re-imposed, and as recessions bite hard, to what extent will economic nationalism and market protectionism drive further declines in international cabotage and bridging? There has been a massive effect (as yet unquantified) on Polish and Eastern European transport companies, who dominate the European cabotage and bridging space (Poland has, alone, a 27% share).
So, in that context – how should issuers and payments companies restructure their activities? Will there be a resurgence of the national operator? Will there be further consolidation in the international market, making large Eastern European operators larger still? Will pan-European network requirements focus in even further on a very limited number of low-excise locations in key corridors? We’re thinking through all these potential implications, and may well be able to help you do the same.
Last mile – the explosion of subcontracting and the “gig economy”.
Let’s be clear, if a little bit provocative: if you’re a fuel card issuer, a fuel payments provider or a fuel retailer/network operator and you don’t have a crystal clear strategy to capture growth from the explosion in last-mile delivery (vans), and the associated subcontractor market, then you are either negligent, insane, or both. Sorry.
Pre-COVID, the fastest growing commercial transport segment in Europe was local parcel delivery – with an average 17% year-on-year growth rate over the 5 year period 2014-2019 (averaged across Europe). During and since COVID, consumers across Europe have started to shop overwhelmingly online. Indications are that 2020 fuel sales in this sub-segment will be some 30-35% higher than in the corresponding period of 2019. That is not a one-off – habits will not return to the old way. Last mile delivery growth is here to stay.
And yet, issuers and network operators still don’t have effective and compelling local propositions for the LMD market. They still don’t have effective, workable and compelling subcontractor propositions which pass on the benefits of (for example) Amazon’s, Hermes’s, DHL’s and UPS’s fuel buying power to their growing army of individual subcontractors. Why not? Conservatism? Complacency? Risk aversion? Laziness? ………One thing is for sure – there will be a very significant first mover advantage for somebody or other in this segment. It’s the golden goose.
So…….
If you would like CFS to work with you in planning and executing a strategy to maximise your business opportunities in the “new normal”, then get in touch with us by email to mst@cfs-europe.cc or visit our website at www.cfs-europe.cc
Look out for Part 2 in a few days time, when we’ll be looking at the effects of COVID-19 on Corporate Fleet segments...
