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Principles of e-commerce delivery prices

European national postal operators deliver millions of parcels a day and play a key part in the delivery sector. They are actively contributing to the success of a well-functioning, developing e-commerce market by providing affordable, high quality delivery services across Europe.

To feed into the debate on cross-border parcel delivery, as part of the European Commission's "Digital Single Market Strategy for Europe", PostEurop asked Copenhagen Economics to analyse the current state of the European cross-border parcel delivery sector, focussing on the factors which determine the prices for parcel delivery.

A thriving e-commerce market
The report confirms that the European e-commerce market is thriving, with domestic and cross-border online shopping on the increase. Its complex development is influenced by many drivers which benefit the highly competitive delivery sector.

Figures published by Eurostat on cross-border online shopping underestimate its actual development. For example, e-shoppers tend to perceive a transaction as domestic if the website they order on is in their own language.  In another instance, goods ordered from a local website may actually be delivered from a warehouse in another country. In 2014, 40% of online shoppers making their latest online purchase assumed the purchase to be from a domestic seller while the goods are from another EU country. 

An abundance of choice in delivery operators, delivery options and delivery routes
A strongly developing market such as e-commerce draws many actors towards parcel delivery activity. Today, e-retailers have an abundance of choice from a wide-range of delivery operators, while big players like Amazon are expanding into delivery logistics. E-retailers can pick and choose how their goods can be delivered to meet their needs, provided by a diverse delivery sector. This benefits consumers in turn. 

De-bunking myths around delivery prices
E-retailers play an important role in the end-price online shoppers pay for cross-border parcel delivery. A mystery shopping exercise revealed that there is a low correlation between the prices charged by e-retailers to e-shoppers and the prices postal operators' charge to e-retailers. E-retailers choose how to price the delivery service depending on e-shopper demands and the e-retailer’s general pricing strategy.  For example, “free delivery” is offered if the purchase exceeds a threshold.

In the delivery sector, as in other sectors, the price charged is market driven. It is a commercial decision influenced by demand and supply factors such as consumers' willingness to pay, volumes flows or the relative bargaining power of e-retailers. Digging into economic and operational conditions helps better understand price differences between domestic and cross-border delivery services as well as between individual countries. 

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