Really good write up. The piece that concerns me is Allegro - Management's tone and the decision to go down the legal route make me think this is going to be terminal to the relationship. On the flip side, the diversification into new geographies is happening at such pace this becomes less of an issue overall, but with (I think!) c.18% of revenues coming from Allegro there is still some work to do to replace them.
Indeed it’s definitely still a risk but I think the valuation more than compensates for this risk now. By the time the contract is up for renewal, it’ll be an even smaller portion of revenue if they were to lose it all. I still don’t believe that Allegro gave the capability to fulfill all deliveries during peak period like holidays so it’ll be interesting to see how they solve this.
Excellent in-depth update. The one I just never have enough patience to do myself lol, though I did come to the same conclusions yesterday. The way this company scales, where they are way ahead of even Amazon, in the UK, is incredible. Laser-focused. I'll happily trade today's (in the large scheme of things, irrelevant) profits of today for the economic moat of tomorrow.
Thank you for the feedback, much appreciated. A simple metric to boil InPost down to is growth relative to the market growth rate and they are gaining market share aggressively, even in Poland despite the Cold War with Allegro.
I may have said this before on your channel (if so never mind my repetitive ramblings) but I am based in Czechia, where Inpost is not present but there is a very extensive APM network too (one of the densest in Europe after Poland). The market dynamic here is fascinating, as there are 2 major players - an Amazon-like retailer called Alza, with its own market-leading parcel network, and an Inpost-like logistics player called Packeta, with a combination of APM and Pudo network (Pudo is much larger though). Both co-exist, both are greatly profitable, and both are expanding. Yes, they do compete to some extent, but the ultimate lesson from my home market is that I don't think this is a last man standing type of business duel - the e-comm market is so large that it can easily accomodate a leading retailer with its own APM network, and a logistics player that caters to all the other e-shops. I personally have a premium subscription (equivalent to Amazon Prime) with Alza, but anytime I buy from a 'small' e-shop somewhere, I would go through Packeta's network. It's maybe 50/50 for me, even with the free deliveries on Alza network. Anyway, enough ramblings.
Hey Paranoid, I really appreciate your thoughts and insights, definitely don’t consider them ramblings. The market dynamics in Czechia sound fascinating, and I think there are valuable lessons to take from them. Sure, a country may have one dominant platform like Amazon, Allegro, or Alza, but as you mentioned, there are countless smaller e-commerce shops on Shopify and similar platforms. These businesses can’t realistically build out their own logistics networks, so they need to rely on third-party infrastructure like InPost.
On a separate note, do you ever see InPost entering Czechia? And how far along is the Czech market compared to Poland in this story?
Hi Wolf, actually, Inpost has a strong Czech connection as the largest shareholder, PPF Group, at 28.75%, is Czech-based (a diversified conglomerate with all sorts of investments, Inpost is just one of them). I think they've been buying shares over the years so their stake in Inpost has been going up and they probably see it as a core investment. As to whether Inpost could enter the Czech market - given the market saturation with current incumbents I mentioned, it's highly unlikely other than through M&A. They could buy out Packeta (Zasilkovna) business, which is basically their Czech carbon copy - currently owned by a local private equity consortium. It would make sense, as markets are neighboring, so there could be some synergies / economies of scale, but then again, Czech market is quite small (at best 1/3 of the Polish one), so it's not going to move any needles. I'd expect Inpost to remain laser-focused on their expansion in Western Europe on the much larger underpenetrated markets.
In terms of market saturation, I am pretty sure CZ is at the top quartile of European markets in terms of APM/Pudo deployment per capita, but haven't seen the latest statistics yet (it's a fast moving target). This is a good source, btw, I just haven't had time to subscribe yet. https://lastmileexperts.com/index.php/reports-subscriptions/
The business is growing well, most margins expanding. Expecting to see some bottom line hit while it digests, integrates and extracts economies from Yodel.
Indeed, I think the speed of the integration is what caught the market off guard. When you zoom out though, you can see this is a positive for the long-term.
Really good write up. The piece that concerns me is Allegro - Management's tone and the decision to go down the legal route make me think this is going to be terminal to the relationship. On the flip side, the diversification into new geographies is happening at such pace this becomes less of an issue overall, but with (I think!) c.18% of revenues coming from Allegro there is still some work to do to replace them.
Indeed it’s definitely still a risk but I think the valuation more than compensates for this risk now. By the time the contract is up for renewal, it’ll be an even smaller portion of revenue if they were to lose it all. I still don’t believe that Allegro gave the capability to fulfill all deliveries during peak period like holidays so it’ll be interesting to see how they solve this.
Excellent in-depth update. The one I just never have enough patience to do myself lol, though I did come to the same conclusions yesterday. The way this company scales, where they are way ahead of even Amazon, in the UK, is incredible. Laser-focused. I'll happily trade today's (in the large scheme of things, irrelevant) profits of today for the economic moat of tomorrow.
Thank you for the feedback, much appreciated. A simple metric to boil InPost down to is growth relative to the market growth rate and they are gaining market share aggressively, even in Poland despite the Cold War with Allegro.
I may have said this before on your channel (if so never mind my repetitive ramblings) but I am based in Czechia, where Inpost is not present but there is a very extensive APM network too (one of the densest in Europe after Poland). The market dynamic here is fascinating, as there are 2 major players - an Amazon-like retailer called Alza, with its own market-leading parcel network, and an Inpost-like logistics player called Packeta, with a combination of APM and Pudo network (Pudo is much larger though). Both co-exist, both are greatly profitable, and both are expanding. Yes, they do compete to some extent, but the ultimate lesson from my home market is that I don't think this is a last man standing type of business duel - the e-comm market is so large that it can easily accomodate a leading retailer with its own APM network, and a logistics player that caters to all the other e-shops. I personally have a premium subscription (equivalent to Amazon Prime) with Alza, but anytime I buy from a 'small' e-shop somewhere, I would go through Packeta's network. It's maybe 50/50 for me, even with the free deliveries on Alza network. Anyway, enough ramblings.
Hey Paranoid, I really appreciate your thoughts and insights, definitely don’t consider them ramblings. The market dynamics in Czechia sound fascinating, and I think there are valuable lessons to take from them. Sure, a country may have one dominant platform like Amazon, Allegro, or Alza, but as you mentioned, there are countless smaller e-commerce shops on Shopify and similar platforms. These businesses can’t realistically build out their own logistics networks, so they need to rely on third-party infrastructure like InPost.
On a separate note, do you ever see InPost entering Czechia? And how far along is the Czech market compared to Poland in this story?
Hi Wolf, actually, Inpost has a strong Czech connection as the largest shareholder, PPF Group, at 28.75%, is Czech-based (a diversified conglomerate with all sorts of investments, Inpost is just one of them). I think they've been buying shares over the years so their stake in Inpost has been going up and they probably see it as a core investment. As to whether Inpost could enter the Czech market - given the market saturation with current incumbents I mentioned, it's highly unlikely other than through M&A. They could buy out Packeta (Zasilkovna) business, which is basically their Czech carbon copy - currently owned by a local private equity consortium. It would make sense, as markets are neighboring, so there could be some synergies / economies of scale, but then again, Czech market is quite small (at best 1/3 of the Polish one), so it's not going to move any needles. I'd expect Inpost to remain laser-focused on their expansion in Western Europe on the much larger underpenetrated markets.
In terms of market saturation, I am pretty sure CZ is at the top quartile of European markets in terms of APM/Pudo deployment per capita, but haven't seen the latest statistics yet (it's a fast moving target). This is a good source, btw, I just haven't had time to subscribe yet. https://lastmileexperts.com/index.php/reports-subscriptions/
The business is growing well, most margins expanding. Expecting to see some bottom line hit while it digests, integrates and extracts economies from Yodel.
Indeed, I think the speed of the integration is what caught the market off guard. When you zoom out though, you can see this is a positive for the long-term.