Four integrators account for 85% of the Express market. This, in economic terms, is an oligopoly, a market that is dominated by a limited number of firms.
The integrated Express sector is very concentrated due to:
1) Capital intensity – the large investment required in transport assets and infrastructure
2) Scale – the need to have a presence in most of the world’s markets, in order to retain global service coverage
3) Network and learning/knowledge – for example, the knowledge of complex customs clearance and transportation procedures to support customers shipping internationally
4) Speed of development rewarding industry pioneers – the current players have established strong service offerings, brand positioning and customer relationships, thanks to their early entry into most international markets
Barriers to entry are high, reflected in the major market share of the integrators and the fact that no new entrants have come into the market in the last 40 years, and competition is strong.
Hubs, sorting, aircrafts, warehouses, customs, ground vehicles and facilities are all high and fixed cost items. Newcomers need a huge initial investment to compete and the cost of capital is considerable due to the risk involved. Differentiation achieved through customer loyalty, proven service quality, brand image and years of usage means the cost of creating a new brand is prohibitive and difficult to recover.