Luke Lloyd, head of markets at IPC, shares his views on how the parcel and postal sector will continue its progress in sustainability, adoption of AI and big data, and innovation in e-commerce fulfillment and last-mile delivery in 2025
What progress do you think we’ll see in sustainability next year – what will be the focus?
Due to some changes in politics and public opinion in 2024, with the Green Party losing votes in many countries, sustainability initiatives in 2025 may increasingly need to demonstrate their return on investment to be accepted.
For example, there are still many opportunities for posts to improve energy efficiency within their buildings, thus saving costs for posts. This includes better insulation, lower-energy lighting and using a sorting center’s rooftop to install solar panels. La Poste Groupe is accelerating the development of energy self-consumption by installing solar power plants on the rooftops and car park canopies of 250 sites. The project aims to achieve a total installed photovoltaic capacity of 20MWp by 2028.
Moreover, generating renewable energy on-site helps address the growing need for electricity to charge electric delivery vehicles, while also presenting the possibility of selling surplus energy back to the grid, providing clean energy to other users.
What role will AI/big data play next year – where are the biggest opportunities?
As AI matures, we’re seeing more use cases from posts using it across many departments. Posts can now see what AI initiatives other postal operators are successfully implementing, and this will give them more confidence to undertake AI-backed initiatives. For example, both Swiss Post and PostNord have shared examples of how AI tools have enabled them to increase operational efficiency in their sortation centers, with the technological investment quickly paying off in terms of efficiency improvements.
Postal customers are increasingly using AI to create a hyper-personalized online shopping experience, and so they expect their delivery providers – i.e. posts – to likewise focus on using AI to generate efficiencies and new revenue opportunities.
Posts need to also exercise caution about which AI tools they use, as posts handle a large volume of sensitive customer information. AI also provides opportunities for cyber criminals to access postal data, so the issue of cybersecurity will be important in 2025.
How will last-mile delivery continue to evolve – what tech will we see?
As consumers continue to demand free delivery for their online purchases, e-retailers and delivery providers try to increase their use of PUDO points and parcel lockers as a way to manage the cost of last-mile delivery. A higher density of parcel lockers will encourage consumers to use this delivery location more, so we can expect continued expansion of parcel locker networks (and increased sharing of lockers by delivery providers) in 2025.
AI-supported tools that may aid last-mile delivery efficiencies in 2025 include route optimization and proof-of-delivery tools. Many posts are also developing their own in-house AI-supported tools to support last-mile delivery via a multitude of small efficiency gains and new initiatives.
Another last-mile consideration is in the postal fleet. We will continue to see a switch to more electric vehicles in the last mile, and posts will need to consider how to use and recycle the batteries from aging vehicles. For example, Swiss Post is testing the use of discarded electric scooter batteries as energy storage units. After seven years of service, these batteries still have around 80% capacity, which is insufficient for delivery purposes but ideal for stationary storage. This allows Swiss Post to recharge scooters overnight, improving energy efficiency.
How will the e-commerce market change and continue to influence the parcel and postal sector?
According to the IPC Global Postal Industry Report 2024, last year saw parcel volume increase by 6.8%, while mail volume decreased by 8.6%. This clearly shows the growing importance of parcels within the postal industry, to compensate for the equivalent decline in letters.
Cross-border e-commerce delivery now makes use of complex supply chains, with direct injection of parcels into domestic postal business by such players as Shein and Temu. With the anticipated increase in protectionist trade policies in 2025, such as the discussions about lowering the US de minimis level (which is currently US$800), it can be assumed that domestic parcel injection will increase.
Re-commerce (i.e. online sale of used goods) will continue to grow in 2025. The resale of electronics (e.g. refurbished smartphones) is growing strongly, while Vinted, Depop and other clothing resale platforms will also continue to grow in 2025. The European re-commerce market was valued at €75bn [US$78.9bn] in 2023 and is projected to reach €120bn [US$126bn] by 2025, according to Cross-Border Commerce Europe. Parcel lockers will play an especially important role in the drop-off of second-hand items that are sold online consumer-to-consumer.
Anything else you’re predicting for 2025?
It has now been a year since PostNord Denmark abolished its Universal Service Obligation (USO). Many other posts have been observing the situation in Denmark to see the impact of this action on the national postal operator. Throughout 2025, many posts will be in contact with authorities and regulators to discuss how the USO can be adapted to reflect the continued decrease in letter volume in most countries.
One key area of potential diversification is financial services. According to the IPC Global Postal Industry Report, income from financial services in the postal industry grew by 3.7% in 2023. In recent years, many posts have invested in financial services and utilities – such as insurance, loans or energy supply – to diversify revenue sources and increase their profit level.
Posts are well placed to leverage their wide network of retail points and post offices to offer these services in addition to their traditional offering of postal services. For example, La Poste Groupe’s 2022 acquisition of CNP Assurances, a major French insurance provider, allowed the group’s La Banque Postale division to grow in volume.