DHL Express is growing double-digit in Europe this year thanks to high service levels andcompetitive pricing, has increased its market share and does not see any “global trend” away from
premium express and towards cheaper deferred deliveries, Europe CEO John Pearson told CEP-Researchin an exclusive interview.The European express market leader is also aiming to profit from potential “customer confusion”over the planned UPS-TNT merger by presenting itself as “the most stable company”, he said at thecompany’s Leipzig air hub yesterday.
Speaking ahead of the Deutsche Post DHL Q3 results, which will be announced on November 8,Pearson said: “We are still having double-digit growth. We are anticipating a peak. The world isstill trading and we have taken market share.”
But he cautioned: “We are not foolish enough to think this will go on for a long time. Lookingforward, we are cautious and we are looking at variable costs. Our air network is flexible and wecan put things up and down relatively quickly.”
DHL Express made operating profits of €916 million on turnover of €11.7 billion in 2011, andimproved its profits by 31% to €598 million with a profit margin of 9.5% in the first half of 2012.DHL is “on track” at present to make profits of €1 billion, he commented.
The operator’s main success factors were its global presence and diverse customer base in manysectors and markets as countries sought to increase exports to compensate for low growth, the DHLExpress veteran said. In addition, the increased brand advertising in Europe, such as withManchester United, had paid off. “Our brand was suddenly out there.”
At the same time, DHL Express is competing with other express companies on price as well,Pearson made clear. “We try to go the market with market prices for larger customers. We recognisethat our tariffs were high historically. We have told staff to go out there and be competitive.”But he stressed DHL was not buying business. “We have walked away from tenders in some cases.”
He added: “We are selling at market-based pricing. Our European businesses are very profitableand have been for a long time. We have been selling at market rates and we have great servicelevel.” In September, for example, DHL Express Europe had performed at a 97% service level in termsof delivering shipments within the promised transit times, he pointed out.
DHL Express is aiming for higher prices next year, however, having announced an average 5% priceincrease in Europe from January 2013 onwards. Asked how the market had received this rise, Pearsonsaid: “Customers understand that prices have eroded in the past. They know we have absorbedadditional costs such as the security charge and other costs.” Competitors were likely to followDHL’s lead, he suggested. “In the past, outside the US we have announced price increases first andothers have tended to follow.”
In terms of individual countries, Pearson highlighted the strong performance of Germany and theUK. “In Germany our volume growth has been getting better and better in the last 18 months. Germanyhas been strong and that lies with exports,” he said. “The UK business has been transformed. Wehave been very active, especially with marketing. There we are getting more oriented towards B2Cvolumes.”
Asked about business in crisis-hit Southern European countries, Pearson differentiated betweenlarger markets such as Italy and Spain and smaller ones such as Portugal or Greece. “In Italy wehave growth with small customers and our performance is very solid.” Other markets doing wellincluded Central & Eastern Europe and the Nordics, he added.
DHL Express claims to have gained international express market share in Europe last year whileUPS and FedEx were stable and TNT dropped back. It puts its own share of the European time-definiteinternational market at 41%, ahead of UPS (23%), TNT (14%) and FedEx (10%), based on its marketanalysis. Worldwide, DHL claims to have outgrown the market last year with a 13% revenue increasecompared to market growth of 8%, leaving its estimated worldwide international express market shareat 32%, ahead of FedEx (27%), UPS (21%) and TNT (7%).
Questioned about the future European competitive environment given UPS’ planned acquisition ofTNT and FedEx’s recent acquisitions in France and Poland, Pearson commented: “There could be oneless competitor in Europe in future. History shows prices tend to go up. There would be a largeintegration process that could be confusing for customers. Our message is that we are the moststable company.”
In contrast to some express industry operators and analysts, Pearson, a former DHL Expressregional commercial director in Asia and the USA, played down the perceived trend away from premiumexpress service and towards less expensive deferred delivery. “I don’t believe there is a greatglobal trend towards deferred. There are as many people using economy who want express as the otherway round. I don’t think there are many customers who switched from time-definite to day-definite.”Although DHL Express has a deferred service called Economy Select, Pearson stressed: “We are whollyfocused on time-definite international, TDI.”
He added: “The shift from air to ground in the US is different. No one should confuse shippingfrom Seattle to Miami, which is within one country, with shipping between different countries inEurope.”
