Austrian Post has won a major contract to deliver several million parcels of its major domesticB2C competitor Hermes which appears to be scaling back its operations in the country.
The postal operator announced today that from June 1, 2009, Hermes Austria will use its parcelsand logistics division for the delivery of parcels. The news boosted the company’s shareprice in early trading, although the value of the contract was not disclosed.
Austrian Post, which aims to achieve ambitious growth targets in market share for B2B parcelsand European combined freight this year, noted that the earnings contribution made by the newcontract will help to secure the planned operating result of its Parcel and Logistics Division in2009.
“Based on the assumption of a stable parcels market, we expect volume growth of several millionparcels on an annual basis resulting from this contract,” declared Carl-Gerold Mende, Austrian Postboard member in charge of the Parcel and Logistics Division.
Hermes Austria managing director Dieter Zillmann told Austrian media that the company would useAustrian Post for deliveries and continue to cooperate with DPD but also expand its Parcel Shopnetwork to 1,600 outlets for C2C shipments. “The current economic situation is a challenge for thewhole industry,” he said. The solution was not only sensible in “times of weak consumption” butwould avoid “further steps”, he commented. Hermes, DPD and Austrian Post would remain competitorsin the marketplace, he stressed.
German consumer parcels group Hermes entered the Austrian B2C market in July 2007 with the aimof achieving a 20% market share, primarily by undercutting Austria Post’s prices. It benefitedinitially from the parcel volumes of its parent, mail-order company Otto Group, and also woncontracts to deliver about seven million Quelle and Neckermann parcels in Austria.
In July 2008, Hermes Austria announced it was delivering up to 50,000 parcels daily and hadgained a market share of 38%. It aimed to consolidate with a 40% market share and 17 million annualparcels in the 2008/09 business year. Its delivery network comprises 750 delivery staff and 1,282Parcel Shops, while it operates with six hubs and 29 depots. Handling and sorting is provided byDPD Austria, the B2B parcels company in which Austrian Post had a minority share until 2005.
The market entry of Hermes and the loss of about one-third of its B2C volumes forced AustrianPost to dramatically re-size its B2C operations at the end of 2007, including depot closures. Mendesaid that over the last 18 months, Austrian Post had substantially modernised its parcel logisticsoperations. The clearly defined goal of the re-dimensioning process had been to ensure an optimalservice mix and an outstanding price-performance ratio.
“The hard and consistently high quality work of our employees and local management hasreally paid off. Following the necessary shock at the end of 2007, we have now achieved acompetitive cost level and represent the quality benchmark in the parcels sector,” he said. “Thecombination of these two factors convinced Hermes to contract Austrian Post with this parcelsvolume. The bar has been raised high. We will not rest on our laurels, but persistently pursue ourstrategy of further improving our cost structure and quality management.”
