Pitney Bowes has agreed to the $475 million acquisition of Newgistics, a provider of package deliveries, returns, fulfillment and digital commerce solutions for retailers and ecommerce brands, to accelerate Pitney Bowes’ further expansion in the U.S. domestic parcels market, according to a company press release.
The deal is expected to close late in the third quarter or early in the fourth quarter. Pitney Bowes plans to continue operating the businesses as independent units for the rest of this year, and into the first quarter of 2018 to avoid any disruptions during the busy holiday shipping season.
In addition to the acquisition of Newgistics, Pitney Bowes also announced the opening of a new Presort Services Operating Center in Huntington Beach, Calif., that will further expand its entry into the U.S. domestic parcels space. This will be the second high-speed parcel sorting center in the Pitney Bowes Presort Services network. The company has a similar center in San Francisco.
Continuing to operate these businesses separately through the holiday season is probably a sound decision, given that e-commerce shopping and shipping activity this holiday season is expected to grow again as consumers start shopping earlier than ever. That new sorting center in California should come in handy for the same reason.
"Over the next few months, our number one priority is to deliver for our clients during the peak holiday season," Lila Snyder, president of global e-commerce at Pitney Bowes, tole Retail Dive in an e-mail. "But the expansion of our Presort Services network and the Newgistics acquisition are both part of our longer-term growth strategy, helping us accelerate our entry into the U.S. domestic shipping market at scale and create new opportunities for our clients year-round."
That longer-term strategy has become clear over the last few years. The company has been edging gradually into logistics during that time, acquiring companies like Borderfree and Enroute Systems, which specialize in aspects of e-commerce logistics.
"Pitney Bowes is undergoing the largest transformation in its 97-year history and parcels are an important part of our growth strategy," Snyder added. "Our existing enterprise and SMB clients are handling more parcels than ever before, as are the 300-plus retail clients we’ve added in the past two years. It is critical that we have the right e-commerce and parcel shipping capabilities to support their needs."
Pitney Bowes is making these moves as the global shipping and logistics market is undergoing a transformation as well, driven by factors such as ongoing e-commerce and mobile commerce growth and demand for express delivery, free shipping and other special services.
The e-commerce growth is not just happening during the holiday season either. Proof of year-long consistent growth was seen in the results of Pitney Bowes' own recent Parcel Shipping Index study, which showed a 48% increase in global parcel volume over the last two years. Parcel volume grew from 44 billion parcels in 2014 to 65 billion in 2016, and is estimated to continue increasing at a rate of 17% to 28% each year between 2017 and 2021. That sounds like a market opportunity worth pursuing, even if you need to spend hundreds of millions of dollars on acquisitions to do it.
Newgistics can provide a big boost to Pitney Bowes' shipping ambitions, as it provides a range of ecommerce solutions on behalf of nearly 500 retail clients, and is a workshare partner of the U.S. Postal Service, processing almost 100 million parcels annually. This includes more than 50% of all Parcel Returns Select packages shipped through the USPS. Its parcel services and e-commerce logistics network includes nine operating centers and an asset-light national transportation network of more than 50 partners.
Where will Pitney Bowes' shipping ambitions take it from here? Major shipping companies continue to invest in and grow their own capabilities to handle the booming effect of e-commerce, so Pitney Bowes will have to keep pace with these companies if it hopes to be a contender.