eCommerce Growth: what does Portugal need to keep up with Europe?
Recently, the International Post Corporation (IPC) released the Global Postal Industry Report 2018.
This study analyses over 50 postal operators from Europe, North America, Asia Pacific and BRICS countries, and it shares some valuable information about the industry.
According to the report, the Postal Industry reached 392.3 billion euros in revenue, up 7.2 billion euros from the previous year. Although mail has had a slight volume decrease of 4.6%, the delivery of parcels is increasing, with a volume growth of 14.3% and a revenue growth of 10.8% comparing to last year. In fact, most of postal operators referred that parcels and express are a key growth driver for their business. And, as the study also stated, this increase in parcels’ volume can be explained by the eCommerce growth over the last years.
But since this is a global study, we started to wonder: How is the situation in Spain? And in Portugal? Is parcel delivery also increasing in these countries?
Well, you can see that for both countries, the tendencies for mail and parcels are similar, but with slightly different numbers.
According to ANACOM, in 2017, Portugal had a 5.1% decrease in mail volume, and parcel volume increased by 3.1%. In Spain there was a decrease of 3.9% in mail volume, while parcel volume showed the biggest growth of all activities, with an 18% increase, 4% more than the global average.
In some of our previous articles, we have assessed that Portugal and Spain’s eCommerce market is not as developed as in other European countries. And this can be for two reasons: a) Iberia is in the early stages of growth, which explains the slower growth in the beginning, but then a booming growth, before it stabilizes, as we can see in the graph below, or b), there are intrinsic barriers in the market that slows this growth, and eventually, changes the actual market curve.
So, by analysing the numbers from the IPC study, we can already see that Spain is in the growth phase, while more developed markets are hitting stages of maturity, which it explains the above average growth.
But when we look at Portugal, we can observe that its Postal Industry is growing, but its growth is far below the average – and, as we said before, its eCommerce industry isn’t as established when compared to other European countries.
And, since Portugal is a European country, with a neighbouring country that is growing at a faster pace than the rest of the globe, you would assume similar growth in Portugal, especially because there isn’t any geographical reason for trailing behind Europe. So, are there any barriers that is slowing Portugal’s growth? Well, to get to the bottom of this, it’s important to look into the core eCommerce requirements: Internet Penetration, Online Buying Behaviour and Logistics.
According to Internet World Stats, 72.4% of Portugal’s population uses the Internet, which is on the lower scale once you compare it to other European countries. The European Union’s average is of 85.7%, 13% higher than in Portugal. We can pretty safely state that 7.5 million people is not exactly a bad number, but still far behind from what we expect to see in Europe.
Online Buying Behaviour
This is where the picture starts to change drastically. Whilst the EU’s average of Individuals who bought online in the past year is of 60%, in Portugal, only 37% of its population made online purchases. That means that almost half of those 7.5 million using the internet, don’t buy online. That’s a big alert, because there are no intrinsic reasons why Portuguese people shouldn’t buy online when compared to other European countries.
As we stated in our last article, Portugal’s logistical infrastructure is not up to par compared to leading European countries – there is a lack of investment in upgrading and transforming its postal infrastructure. So, we knew up front that there was some work to do in this area.
What does this mean?
Let’s start by answering the question that led us here: are there any barriers that is slowing Portugal’s growth? From the information that we collected, we can see that the answer is: yes! Numbers show some barriers emerging on the three core requirements for eCommerce. Portugal’s Internet Penetration is 13% lower than EU’s average, its Online Buying Population is 23% less than the EU’s average and Portugal is one of the European countries that scores the lowest when it comes to the logistical structure to support eCommerce.
In face of that answer, our natural instinct was to try to find out why those barriers emerged, so we could maybe point out some ways to overcome them. And that’s when things got even more interesting: we simply couldn’t find enough information.
So, there is pretty much only one reasonable conclusion we can reach here, without any risk of this article turning into a guessing game. In order for Portugal to improve its eCommerce playing field, the major stakeholders, like the government, the regulators and the market players need to make efforts in all the core eCommerce requirements. And to do that, first of all, we need to take a step back and analyse exactly what are the reasons behind these numbers. Why is it that 72% of the population is connected to the Internet? What happens to the other 28%? And why are online purchases done only by 37% of the Portuguese population? What’s preventing the logistics infrastructure from developing even further and at a faster pace? Is it a problem with the communication’s infrastructure? Is it a cultural aspect? Is it something else?
And since we found close to zero research or information on these very important questions, we believe that it is very important to start a debate about these topics, and to really try to understand why things are the way they are, so that in the future we can try to solve it.
And we do believe that we will get there. We can already see upcoming changes on logistics, for example, as CTT, one of our logistics partner is investing in automated postal equipment. And DHL Express, a major carrier in Europe, is also making efforts to improve Portugal’s logistics infrastructure, by investing in Lisbon’s airport.
And you know why those investments are happening? Because important questions were made and answered through research, surveys, indexes and numbers. So, yes. The final answer that this article brought us is that, ironically, we basically need make more and better questions. And of course, start implementing ways to answer these questions.