German parcel and logistics group Hermes will step up its international expansion strategy thisyear after growing well in 2012, although profits dropped due to high investment costs, executives
said today.In its home market, Hermes, part of Hamburg-based retailer Otto Group, will introduce newdelivery options for consumers and set up a supervisory board after forcing sub-contractors to paydelivery workers by the hour instead of per parcel delivered.
Presenting its 2012 results at a press conference in Hamburg, Hermes said its 12 groupcompanies, providing retail-related and logistics services worldwide, increased overall revenue by7 per cent to €1.93 billion. Parcel volumes were 7.5 per cent higher at 417 million, and overallconsignments, including bulky goods, increased by 4.5 per cent to 452 million. Hermes increasedvolumes with non-Otto Group customers by 13 per cent to 284 million parcels thanks to newcontracts, taking external sales to about 70 per cent of total volumes.
However, the company did not give any individual breakdown of revenues or volumes in its fivemarkets of Germany, the UK, Austria, Italy and Russia. In 2011, Germany generated nearly €1 billionof the overall €1.8 billion revenues while the UK accounted for a further €300 million.
Hanjo Schneider, CEO Hermes Europe and Otto Group board member for services, said last year’srevenue and volume growth was “a good result” given the difficult economic environment. Hehighlighted Russia as the fastest growing market, although from a low basis, and said the UK alsogrew well last year.
But he admitted that Hermes Services, covering the Otto Group logistics activities and somesmaller businesses, had lower profits last year due in particular to the €120 million investment incapacity expansion in Germany. “The downturn for Hermes Services is mostly due to Hermes Germany.We had a profit decline in Germany,” he disclosed.
For 2013, Hermes is aiming for overall revenue growth in the 5-8 per cent range with growthfor all business areas. “The strategy Hermes has been rigorously pursuing of internationalising itsvaried service is a proven success. As a consequence, we expect our positive trend to continue andto achieve revenue of over €2 billion for the first time in 2013,” Schneider stated.
With some 22,500 parcel shops, Hermes has the largest retail network in Europe and couldextend this shop-in-shop solution to some 30,000 locations within the next 2-3 years, he added.
Outlining Hermes’ overall strategy, Schneider said the operator had grown over the last fewyears from a German parcels company into a global full-service provider for retailers with a broadrange of services, ranging from sourcing, freight transportation and European delivery toe-commerce fulfilment services for companies in Europe and overseas. “Our aim is to offer small aswell as large retailers all the solutions they need to tap new markets in Europe, Asia or in SouthAmerica. This is why we are looking to set up new sites worldwide and expand our sales structure,”he explained. New sales offices will be set up in the USA, France and the Benelux countries tooffer services of Hermes companies to retailers looking to expand internationally.
In particular, the group will target e-commerce companies for future growth. The fast-growingEuropean e-commerce market was worth €112 billion last year, or 9.2 per cent of total retail sales,and could soar by 70 per cent to €191 billion in the next five years, he predicted. “I believe a20-25 per cent market share is completely realistic,” he declared. In the USA, China, India, Russiaand Brazil, Hermes will offer e-commerce services to local firms that want to sell to Europeanconsumers.
To strengthen its position as a partner for global retail, Hermes will develop itsinfrastructure significantly in 2013. In quality control and certification, the company will openadditional sites in Hong Kong, Shanghai and at production sites in India. In terms of sourcing,2012 saw market developments boosted in Bangladesh, Myanmar and Cambodia. In the coming months,relations to producers will be established in Taiwan and Indonesia in particular.
In Germany, Hermes is pushing ahead with the expansion of regional-based sales offices, thusintensifying business in the European road transport segment for small and medium-sized clients.The German parcel unit is opening a depot in Wilhelmshaven in the country’s north-west in May 2013,completing the €120 million investment in 18 new depots over the last two years. The company willalso introduce new parcel delivery options in Germany, offering recipients the opportunity tocreate individual ‘delivery profiles’, introducing fixed time-windows for deliveries, andre-routing to alternative delivery points.
In response to criticism of pay levels and working conditions for sub-contracted deliverypartners in Germany, Hermes said it has now certified all its general contractors and had secured aminimum wage of €7.50 for delivery staff, with levels up to €10.50 in some regions. A 20-personsupervisory board, including 10 employee and union representatives, will be set up this year tomonitor corporate responsibility, including sub-contractor conditions. One member will be thewell-known TV journalist Sabine Christiansen.
