InPost, Changing the Game in European Logistics
How does the Polish company plan to conquer Europe?
Although listed on the Dutch stock market, InPost is a Polish company headquartered in Krakow. Revenue has risen from 1.2B PLN in 2019 to more than 8.8B in 2023 ($300M to $2.2B) a 54% CAGR. With the rapid expansion of e-commerce, InPost has demonstrated impressive growth. As global e-commerce continues its upward trajectory, InPost has capitalized on this trend by revolutionizing the last-mile delivery experience through innovative technologies such as automated parcel lockers. Looking ahead, what are the company's future prospects and outlooks?
In this article, we delve deeper into InPost's future strategies, exploring how the company plans to navigate challenges, capitalize on opportunities, and maintain its position as a trailblazer in the logistics industry.
Company overview
InPost acts as an intermediary between the seller and the customer to facilitate parcel delivery. They are renowned for their last-mile delivery services, particularly through their Automated Parcel Machines (APMs) and Pick Up Drop Off (PUDO) points.
InPost’s parcel lockers are strategically located in easily accessible areas such as supermarkets, train stations, and shopping centers. These machines offer the convenience of 24/7 parcel collection and drop-off.
InPost operates through two primary channels:
B2C Channel: This constitutes the majority of InPost’s business. It involves delivering parcels from businesses to consumers using their extensive network of APMs and PUDO points.
C2C Channel: In this channel, customers leverage InPost’s network to facilitate peer-to-peer transactions, enabling individuals to send parcels to each other efficiently.
This solution has several main advantages:
It is cost effective. Using lockers can be more economical for both customers and retailers, as it reduces the need for repeated delivery attempts and it spares transportation
It improves customer satisfaction through more flexibility. The lockers are available 24/7 and the user experience is simple and convenient
It increases security as parcel lockers provide a secure method of delivery, reducing the risk of theft or missed deliveries
It reduces the carbon footprint per parcel
Although customers primarily interact with the end-point services (APM and PUDO), the roles of warehouses and transportation are crucial, intricately connected across various geographies.
The company offers various mobile services designed to enhance customer convenience. InPost Mobile facilitates parcel collection and returns, while InPost Pay streamlines checkout with a single click. In addition, InPost Fresh operates as a specialized marketplace featuring 200 FMCG sellers, offering specific delivery channels such as refrigerated APMs.
Geographical footprint
InPost is present in Europe with 3 main geographies: Poland, France and UK.
Poland
Poland is InPost's original market, where the coverage of Automated Parcel Machines (APMs) is extensive. Between 2017 and 2023, the number of APMs increased from 2.6k to 22k, reflecting a 43% compound annual growth rate (CAGR). During the same period, the volume of parcels processed through these APMs surged from 33 million to 493 million annually, representing a 57% growth rate. This substantial increase in parcel volume has led to a higher utilization rate of the APM network.
The network's density is notable, with 61% of the population within a 7-minute walk of an InPost APM, and half of the Polish population utilizing these machines.
Economic performance has improved correspondingly. From 2017 to 2023, InPost achieved a revenue CAGR of 49% and an EBITDA CAGR of 89%, culminating in a 2023 EBITDA margin of 46%.
International revenues
InPost operates in several international markets under different brands:
InPost: United Kingdom, Italy, Spain, and Portugal.
Mondial Relay: France, Luxembourg, Belgium, and the Netherlands.
International markets represent 40% of total InPost revenue (for 34% of the volume) and volumes are growing 2x faster than Poland.
InPost entered the French market in 2021 with the acqusition of Mondial Relay. Since then, the company continued to invest in order to expand the capabilities of Mondial Relay. PUDO points increased from 18k to 26k and 5.3k APMs were installed. The volume of parcels surged from 176 million to 240 million.
In the UK, InPost owns the 1st APM network with 6.4k machines. The volumes are growing fast and the country became EBDITDA profitable in 2023.
Strategy
The strategy is divided into 5 pillars:
Offering best-in-class consumer experience
Scaling the business in Europe
Sharing the benefits of the model with merchants and consumers
Development of services
Empowering people
This strategy is traditional yet logical, as customer experience is crucial for long-term performance and creating a strong business moat. A prime example is Amazon, which has heavily emphasized this aspect.
Business scaling will happen through network concentration with the addition of new APMs and PUDOs. Market share in most international markets remains low enough to provide substantial growth opportunities. In Poland, InPost represents around 50% of the total market whereas it represents 10% in France and 5% in the UK (according to the company).
This growth will also be driven by the introduction of new APMs, enhanced technological and operational efficiency at logistics hubs, and, naturally, an increase in the user base.
For now, no new geographies are identified for expansion but it is highly possible that geographical expansion will happen in the coming years.
The company also plans to align with key market trends, including hyper-personalization, out-of-home delivery, Big Data, AI, sustainability, and circularity. While these trends offer both risks and opportunities, the primary risk currently stems from increasing competition.
Market concentration
The e-commerce and last-mile delivery markets are highly fragmented, with numerous players competing for dominance. This industry is rapidly evolving, driven by significant investments in technology aimed at streamlining operations, reducing costs, and improving delivery times. Size is a critical factor, as larger companies can reduce costs, enhance operational capabilities, exert greater pricing power, and increase profit margins.
In this competitive landscape, InPost remains a relatively small regional player compared to giants like Amazon, FedEx, and UPS. Therefore, three main scenarios could unfold:
Expansion through acquisitions. InPost may continue to expand by acquiring local players to quickly reach a critical size in new markets. This strategy would allow them to absorb costs effectively and establish a sufficient network to meet required service levels. For example, InPost acquired Mondial Relay for operations in France and Benelux and purchased a 30% stake in Menzies in the UK.
Acquisition by a larger competitor. Another possibility is that a larger player might decide to acquire InPost to leverage its network and last-mile delivery capabilities, further consolidating their position in the market.
Merger with a Peer: InPost could pursue a merger with a similar-sized peer in the industry. This merger could create a more competitive entity with a broader geographic footprint and enhanced operational capabilities. By combining resources, technology, and networks, the merged company could achieve significant economies of scale, improved service levels, and a stronger market position. However, merger are risky and rarely profitable for shareholders.
In either scenario, InPost's future will likely involve significant strategic moves to navigate and thrive in this dynamic and competitive industry.
Market outlooks
We will use the last-mile delivery market outlook to establish the benchmark market to calculate the future revenue CAGR for InPost. This will enable us to complete the fair price estimation, which we will present following the metrics and SWOT (strengths, weaknesses, opportunities, threats) analysis.
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