Courier firms head towards European business models

After annual growth rates of more than 30% and two-digit profit margins, domestic courier firms are heading European business “recipes” – high volumes with much lower profit margins.
Last year, the Romanian private market of mail and courier services confirmed its growth potential rising to 130m euros, from 100m euros in 2005, with most courier companies seeing considerable increases in both turnover and income.
“In Romania, or for smaller companies in general, profitable business margins can be as high as two-digits, but the latest trend is for them to drop amid rising costs and shrinking prices, an effect of increased competition. At a European level, large companies count on smaller margins and much bigger volumes,” stated Octavian Badescu, chairman with the Association of Courier Firms in Romania.
Last year, most companies on the market witnessed insignificant variations or registered profit margins similar to those in 2005.
Are domestic courier firms going to keep the same profit margins in the following years?
“In my opinion, margins will fall. Looking at the current tariffs in Austria, we notice prices operated there are similar to those in Romania, while salaries are around five times higher. At the moment, there are quite good margins in Romania ranging between 10% and 20%,” said Bogdan Carcu, chairman with Curiero.
Despite the fact that the rapid growth rate of the courier market is benefiting domestic companies, they are still facing some challenges.
Awaiting the arrival of other powerful courier firms from abroad, domestic managers have two alternatives, either sell the company or pursue independent development with the risk of losing the position of a major player.
While international couriers’ are benefiting from the stepped-up trade between Romania and other EU states in the wake of integration, domestic firms can also profit from the stronger dynamics of the market.
“The biggest challenges are related to the firms’ ability to meet market demand and develop personal solutions for each customer,” said Bogdan Enache, country manager with TNT Romania.
Despite fierce competition on this market, domestic players are advantaged by the fact that market growth is not expected to slow down this year.