InPost is an advantaged parcel delivery company that is taking market share in Europe, deploying capital at extremely high returns on incremental capital, and offers an asymmetric return probability.
I recently began looking into InPost, and this is by far the best write-up I’ve come across on the company. We had a similar service in Ireland called Parcel Motel, which eventually went out of business. It was initially popular because it allowed customers in Ireland to purchase items from the UK using a virtual address, which gave access to products that weren’t otherwise available. Brexit closed that loophole, and the work-from-home movement post-COVID was the final nail in its coffin.
Having seen the downfall of this service, I’m naturally more skeptical of InPost. I understand my perspective is quite unique, given that Ireland is different from the rest of Europe in terms of size and population density. I’m wondering if you could share why InPost might succeed where Parcel Motel failed?
Hey, thanks for the kind words. This is funny timing, because I am currently researching NU and have found your thesis to be very helpful to me.
Regarding Ireland/Parcel Motel, I have little knowledge of the company or of APM logistics in Ireland. It sounds like Parcel Motel was gaining business via UK-based revenue streams which is very different from InPost's business model. Almost all of InPost's revenues originate from domestic purchases with domestic e-retailers. Cross-border is a big growth avenue for InPost but one that is likely 3-5 years out from being visible materially within the P&L.
In general, there is a litany of dead/nearly dead companies that have failed to grow the locker network logistics company. InPost is actually growing its locker network at a greater rate than the sum of all of its competitors in each of the countries that it operates in, and it is doing so profitably with low leverage (<2x as of Q2'24) and with decreasing capital intensity and higher EBITDA/FCF conversion ratios, thus resulting in very strong returns on capital.
InPost has managed to thrive because they own and control the entire ecosystem which includes the front-end integration with merchants at checkout and the communication with customers via its app, as well as the back-end fulfillment capabilities that ensure that parcels are routed most efficiently, lockers are in good condition/maintained, etc. This sort of holistic approach is very different from competitors that think that they can just plop down a locker and that the rest will take care of itself. These seemingly small details have allowed InPost to achieve a commanding market share in Poland, and appears to be paying off in its other countries as well.
Over the weekend, I did quite a bit of research on InPost and the broader industry. I discovered that InPost was the inspiration for Parcel Motel in Ireland, and Rafał Brzoska actually supplied Parcel Motel with the lockers. It turns out what really led to Parcel Motel's downfall was its acquisition by UPS in 2017, which turned it into a closed network. The volumes from UPS alone were simply not sustainable.
Interestingly, the founder of Parcel Motel is now back with a new company called OOHPod. What makes OOHPod unique is that it operates as a completely open network—anyone can use it, and it’s fully agnostic in terms of merchant, courier, etc. I find this open network approach quite interesting and distinct from InPost's model. As you rightly pointed out, InPost's success comes from fully integrating across the logistics value chain. It’s not just about having lockers; controlling the entire ecosystem is crucial, and that's the main reason others have failed. This piece of the puzzle had eluded me before, but it makes a lot of sense now—and is quite compelling.
Another opportunity I find extremely intriguing is InPost’s mission to build a Pan-European locker network. The idea of dropping off a package in Lisbon and having it delivered to a locker in Berlin for a fraction of the price holds significant value. Local players would find it nearly impossible to replicate, so with its multi-country coverage, InPost is uniquely positioned to achieve this. It's a blue ocean opportunity.
Inpost is has tried the open courier route and Rafal will be the first to tell you that it didn’t go well. Maybe OOHPod can thrive where they have failed.
The Pan-European approach is similar to the cross-border opportunity that I mentioned.
Fantastic deep dive. I am based in Czechia and there's a local version of Inpost, Packeta Group (privately owned). Mix of PUDO and APM network (started as PUDO, then built up their APM network). Almost the same trajectory as Inpost in Poland - massive increase in revenues and profits over the course of its existence. Similar if not higher EBITDA margins. It's surreal because in Poland and Czechia you see the APM boxes everywhere, and everybody uses them. In big cities there are often locations where you see 5 of them next to one another, as there's intense competition. Then you go to Western Europe where the APM concept is still in its infancy. These 2 countries show that this model can be replicated everywhere else - just a matter of time before people realize the convenience of the box as opposed to a postman missing them at home at a specific hour and then dropping off the package at an undesirable location or returning back to sender. In Czechia, Packeta has also cleverly mixed the best of both worlds, enabling P2P package shipping between individuals - you ship via a PUDO joint that prints the shipping details on your package, and then the counterparty can collect via PUDO/APM (their choice). I am sure Inpost will figure this out too.
InPost has a similarly convenient option for P2P that is integrated with the merchants (like Ebay) that allows for the printing off of a label. But they have also popularized labelless P2P delivery.
Curious. Where have you come across Packeta Group's financials if it is privately owned? Would be very happy to examine for myself.
Lastly, in Czechia -- do you have any sense of the degree to which Packeta dominates the share of volume that flows through Czechia, despite there being multiple vendors on every corner? This is a long-term concern of mine that could poke the hole in the InPost thesis if new entrants can gain share of volume. I view it to be improbable given the integration with merchants, the potential durability of the brand, and the population density that they have achieved that is so far superior to new entrants. But nonetheless I could be wrong.
Apart from Poland, the Czech market is probably the best case study for the viability of APM concept as such thanks to deep market saturation by several players now. A few more highlights:
- There's a local version of Amazon, called Alza.cz, that has utterly dominated the local market (though next to no presence outside the country). And like Allegro in Poland, they decided to build their own APM network too, with more than 3,000 APMs deployed to date, which is neck and neck to Packeta's 3,400.
- Interestingly, Alza also enables traditional logistics companies (such as DHL, or even the sclerotic national Czech Post) to drop-ship their own packages into their APMs (not just Alza's products). So they are effectively doing what Allegro decided not to in Poland, and are in fact a strong competitor to Packeta in that respect, having a logistical division in their own right.
- Nevertheless, despite the intense competition from Alza, Packeta has managed to sustain high double digit growth in recent years (30-50% annually). From my own experience as a consumer, Packeta's strength is that it plays both PUDO and APM fields, and so people can mix & match. With the combined PUDO/APM network, you are almost always 5min away from the nearest one, unless you live in the middle of nowhere.
- Besides, Packeta and Alza recently worked out a partnership where they are mutually shipping into their respective APMs. So for being competitors, they apparently think the market is big enough to accommodate them both and, in fact, they don't mind cooperating.
- Last, Packeta is currently up for sale, and I would actually be surprised if Inpost wasn't one of the interested parties, considering the proximity of the two markets. Besides, PPF, the biggest Czech investment group, has 17% stake in Inpost, and is also one of the interested parties for Packeta. So PPF could seek to eventually combine the two enterprises.
As for financials, I only managed to dig up their consolidated financials for the last two years, before they published deconsolidated and they have quite a few companies in the group so tough to pull it all together. Feel free to reach out at david.zarecky@gmail.com if you were interested and I can send you what I have or we can just bounce ideas.
Our new Parcel Lockers are currently rolling out across the country, and we expect to have around 1,500 parcel locker locations around the UK by the end of 2024.
1. You say, "One UK-based full-time eBay seller posted a video a year ago describing the convenience of the InPost lockers and mentioned that he filled up the entire bay of lockers at one APM location with shipments to his customers the day before, and that he was returning the next day to do it again." While this evidences demand, it also evidences a potential supply problem. If one user can fill every locker, the company is unable to offer a service to anyone else until the lockers are empty. On the basis that there are many eBay full time sellers, this could be a problem. A successful business is one that is able to acquire new customers and retain them, creating a compounded growth in users. If people find that the lockers are full and unavailable, they will seek out alternatives. Is there any indication of how the company intends to address this issue? In my mind, the locker based system needs to be improved. If a parcel could be dropped down a chute and collected in a storage chamber, perhaps stacked using robotic automation, then each APM would instantly increase its capacity by many multiples.
2. Related to the first point, which implies that APMs will need to be improved with the introduction of better technology, you say "InPost depreciates each APM on a 10-year basis, yet these machines’ useful lives are estimated to be in excess of 20 years." Is this really credible? Technology will advance a great deal between now and 2045. We should remember that Amazon is starting to deliver packages by drones already, so in twenty years, depositing a parcel in a locker may seem incredibly old-fashioned. We will probably have robotic automation in 20 years, so I very much doubt that an APM installed today will still be operating without further investment, two decades from now. Even one decade would be a stretch. Do you not agree?
3. Leading on from the last point, you show a chart which demonstrates that from Q1'23 to Q2'23 the number of APMs operated by Amazon dropped by a similar number to the increase in the number operated by InPost. The question is why. One explanation may be that Amazon does not offer its service to third parties, and so perhaps does not have sufficient parcel flow to make these machines viable. However, this would surprise me. Every time I have tried to order something from Amazon and selected an APM for collection, I have been told that there is no availability and it asks me to make an alternative selection. I usually get my third or fourth choice. Additionally, Amazon has recently launched a freight service for third parties which will utilize its fleet of trucks and logistics centers for the benefit of others. It makes sense because it opened its market place to third parties. This being the case, it would be a logical extension of its business model to allow third parties to also utilize its APM network. Ordinarily I would have expected Amazon to grow its number of APMs and even acquire InPost for that purpose. So why is Amazon reducing the number of APMs? Could it be that it sees these as an old fashioned solution and that it now has better alternatives such as the drones mentioned earlier, or robot delivery which is operational in parts of the UK (see:https://www.miltonkeynes.co.uk/news/people/company-behind-milton-keynes-robots-say-deliveries-have-quadrupled-over-past-year-of-lockdowns-3235672)? If so, this is likely to impact the InPost investment thesis as it does not have the same robotic technological capability. Has the company ever been questioned about this? If so, what is its response?
4. Finally, the APMs are located on land owned by others. Outside convenience stores, supermarkets and petrol stations. This means that InPost is very much at the mercy of these companies to continue to renew the lease at a fair rate. If InPost becomes too profitable, perhaps the land owners will start to demand a large rent. Is there any evidence of any issues in this regard?
I recently began looking into InPost, and this is by far the best write-up I’ve come across on the company. We had a similar service in Ireland called Parcel Motel, which eventually went out of business. It was initially popular because it allowed customers in Ireland to purchase items from the UK using a virtual address, which gave access to products that weren’t otherwise available. Brexit closed that loophole, and the work-from-home movement post-COVID was the final nail in its coffin.
Having seen the downfall of this service, I’m naturally more skeptical of InPost. I understand my perspective is quite unique, given that Ireland is different from the rest of Europe in terms of size and population density. I’m wondering if you could share why InPost might succeed where Parcel Motel failed?
Hey, thanks for the kind words. This is funny timing, because I am currently researching NU and have found your thesis to be very helpful to me.
Regarding Ireland/Parcel Motel, I have little knowledge of the company or of APM logistics in Ireland. It sounds like Parcel Motel was gaining business via UK-based revenue streams which is very different from InPost's business model. Almost all of InPost's revenues originate from domestic purchases with domestic e-retailers. Cross-border is a big growth avenue for InPost but one that is likely 3-5 years out from being visible materially within the P&L.
In general, there is a litany of dead/nearly dead companies that have failed to grow the locker network logistics company. InPost is actually growing its locker network at a greater rate than the sum of all of its competitors in each of the countries that it operates in, and it is doing so profitably with low leverage (<2x as of Q2'24) and with decreasing capital intensity and higher EBITDA/FCF conversion ratios, thus resulting in very strong returns on capital.
InPost has managed to thrive because they own and control the entire ecosystem which includes the front-end integration with merchants at checkout and the communication with customers via its app, as well as the back-end fulfillment capabilities that ensure that parcels are routed most efficiently, lockers are in good condition/maintained, etc. This sort of holistic approach is very different from competitors that think that they can just plop down a locker and that the rest will take care of itself. These seemingly small details have allowed InPost to achieve a commanding market share in Poland, and appears to be paying off in its other countries as well.
Thanks again!
-Jake
Over the weekend, I did quite a bit of research on InPost and the broader industry. I discovered that InPost was the inspiration for Parcel Motel in Ireland, and Rafał Brzoska actually supplied Parcel Motel with the lockers. It turns out what really led to Parcel Motel's downfall was its acquisition by UPS in 2017, which turned it into a closed network. The volumes from UPS alone were simply not sustainable.
Interestingly, the founder of Parcel Motel is now back with a new company called OOHPod. What makes OOHPod unique is that it operates as a completely open network—anyone can use it, and it’s fully agnostic in terms of merchant, courier, etc. I find this open network approach quite interesting and distinct from InPost's model. As you rightly pointed out, InPost's success comes from fully integrating across the logistics value chain. It’s not just about having lockers; controlling the entire ecosystem is crucial, and that's the main reason others have failed. This piece of the puzzle had eluded me before, but it makes a lot of sense now—and is quite compelling.
Another opportunity I find extremely intriguing is InPost’s mission to build a Pan-European locker network. The idea of dropping off a package in Lisbon and having it delivered to a locker in Berlin for a fraction of the price holds significant value. Local players would find it nearly impossible to replicate, so with its multi-country coverage, InPost is uniquely positioned to achieve this. It's a blue ocean opportunity.
Inpost is has tried the open courier route and Rafal will be the first to tell you that it didn’t go well. Maybe OOHPod can thrive where they have failed.
The Pan-European approach is similar to the cross-border opportunity that I mentioned.
Fantastic deep dive. I am based in Czechia and there's a local version of Inpost, Packeta Group (privately owned). Mix of PUDO and APM network (started as PUDO, then built up their APM network). Almost the same trajectory as Inpost in Poland - massive increase in revenues and profits over the course of its existence. Similar if not higher EBITDA margins. It's surreal because in Poland and Czechia you see the APM boxes everywhere, and everybody uses them. In big cities there are often locations where you see 5 of them next to one another, as there's intense competition. Then you go to Western Europe where the APM concept is still in its infancy. These 2 countries show that this model can be replicated everywhere else - just a matter of time before people realize the convenience of the box as opposed to a postman missing them at home at a specific hour and then dropping off the package at an undesirable location or returning back to sender. In Czechia, Packeta has also cleverly mixed the best of both worlds, enabling P2P package shipping between individuals - you ship via a PUDO joint that prints the shipping details on your package, and then the counterparty can collect via PUDO/APM (their choice). I am sure Inpost will figure this out too.
Great feedback. Thank you David.
InPost has a similarly convenient option for P2P that is integrated with the merchants (like Ebay) that allows for the printing off of a label. But they have also popularized labelless P2P delivery.
Curious. Where have you come across Packeta Group's financials if it is privately owned? Would be very happy to examine for myself.
Lastly, in Czechia -- do you have any sense of the degree to which Packeta dominates the share of volume that flows through Czechia, despite there being multiple vendors on every corner? This is a long-term concern of mine that could poke the hole in the InPost thesis if new entrants can gain share of volume. I view it to be improbable given the integration with merchants, the potential durability of the brand, and the population density that they have achieved that is so far superior to new entrants. But nonetheless I could be wrong.
Hi Jake, thanks for reacting so quickly.
Apart from Poland, the Czech market is probably the best case study for the viability of APM concept as such thanks to deep market saturation by several players now. A few more highlights:
- There's a local version of Amazon, called Alza.cz, that has utterly dominated the local market (though next to no presence outside the country). And like Allegro in Poland, they decided to build their own APM network too, with more than 3,000 APMs deployed to date, which is neck and neck to Packeta's 3,400.
- Interestingly, Alza also enables traditional logistics companies (such as DHL, or even the sclerotic national Czech Post) to drop-ship their own packages into their APMs (not just Alza's products). So they are effectively doing what Allegro decided not to in Poland, and are in fact a strong competitor to Packeta in that respect, having a logistical division in their own right.
- Nevertheless, despite the intense competition from Alza, Packeta has managed to sustain high double digit growth in recent years (30-50% annually). From my own experience as a consumer, Packeta's strength is that it plays both PUDO and APM fields, and so people can mix & match. With the combined PUDO/APM network, you are almost always 5min away from the nearest one, unless you live in the middle of nowhere.
- Besides, Packeta and Alza recently worked out a partnership where they are mutually shipping into their respective APMs. So for being competitors, they apparently think the market is big enough to accommodate them both and, in fact, they don't mind cooperating.
- Last, Packeta is currently up for sale, and I would actually be surprised if Inpost wasn't one of the interested parties, considering the proximity of the two markets. Besides, PPF, the biggest Czech investment group, has 17% stake in Inpost, and is also one of the interested parties for Packeta. So PPF could seek to eventually combine the two enterprises.
As for financials, I only managed to dig up their consolidated financials for the last two years, before they published deconsolidated and they have quite a few companies in the group so tough to pull it all together. Feel free to reach out at david.zarecky@gmail.com if you were interested and I can send you what I have or we can just bounce ideas.
Have you seen this? https://www.royalmail.com/sending/parcel-lockers
Our new Parcel Lockers are currently rolling out across the country, and we expect to have around 1,500 parcel locker locations around the UK by the end of 2024.
Competition is hotting up it would seem
Great post. Thank you Jake.
I have a few questions.
1. You say, "One UK-based full-time eBay seller posted a video a year ago describing the convenience of the InPost lockers and mentioned that he filled up the entire bay of lockers at one APM location with shipments to his customers the day before, and that he was returning the next day to do it again." While this evidences demand, it also evidences a potential supply problem. If one user can fill every locker, the company is unable to offer a service to anyone else until the lockers are empty. On the basis that there are many eBay full time sellers, this could be a problem. A successful business is one that is able to acquire new customers and retain them, creating a compounded growth in users. If people find that the lockers are full and unavailable, they will seek out alternatives. Is there any indication of how the company intends to address this issue? In my mind, the locker based system needs to be improved. If a parcel could be dropped down a chute and collected in a storage chamber, perhaps stacked using robotic automation, then each APM would instantly increase its capacity by many multiples.
2. Related to the first point, which implies that APMs will need to be improved with the introduction of better technology, you say "InPost depreciates each APM on a 10-year basis, yet these machines’ useful lives are estimated to be in excess of 20 years." Is this really credible? Technology will advance a great deal between now and 2045. We should remember that Amazon is starting to deliver packages by drones already, so in twenty years, depositing a parcel in a locker may seem incredibly old-fashioned. We will probably have robotic automation in 20 years, so I very much doubt that an APM installed today will still be operating without further investment, two decades from now. Even one decade would be a stretch. Do you not agree?
3. Leading on from the last point, you show a chart which demonstrates that from Q1'23 to Q2'23 the number of APMs operated by Amazon dropped by a similar number to the increase in the number operated by InPost. The question is why. One explanation may be that Amazon does not offer its service to third parties, and so perhaps does not have sufficient parcel flow to make these machines viable. However, this would surprise me. Every time I have tried to order something from Amazon and selected an APM for collection, I have been told that there is no availability and it asks me to make an alternative selection. I usually get my third or fourth choice. Additionally, Amazon has recently launched a freight service for third parties which will utilize its fleet of trucks and logistics centers for the benefit of others. It makes sense because it opened its market place to third parties. This being the case, it would be a logical extension of its business model to allow third parties to also utilize its APM network. Ordinarily I would have expected Amazon to grow its number of APMs and even acquire InPost for that purpose. So why is Amazon reducing the number of APMs? Could it be that it sees these as an old fashioned solution and that it now has better alternatives such as the drones mentioned earlier, or robot delivery which is operational in parts of the UK (see:https://www.miltonkeynes.co.uk/news/people/company-behind-milton-keynes-robots-say-deliveries-have-quadrupled-over-past-year-of-lockdowns-3235672)? If so, this is likely to impact the InPost investment thesis as it does not have the same robotic technological capability. Has the company ever been questioned about this? If so, what is its response?
4. Finally, the APMs are located on land owned by others. Outside convenience stores, supermarkets and petrol stations. This means that InPost is very much at the mercy of these companies to continue to renew the lease at a fair rate. If InPost becomes too profitable, perhaps the land owners will start to demand a large rent. Is there any evidence of any issues in this regard?
Thank you in advance.