German parcel delivery firms are stepping up efforts to improve first-time home deliveries andoffer convenient alternatives as B2C volumes soar in the pre-Christmas peak season and a planned
minimum wage threatens to drive up costs in the sector.DHL, Hermes, DPD and GLS are all upgrading their delivery services at present by offeringrecipients more choice while trying to maximise the number of parcels successfully delivered at thefirst attempt. Parcel volumes in Germany are set to hit a new record this year as online shoppingbooms.
B2C market leader DHL Parcel is growing at a high single-digit rate so far this year, withrevenues up 8.2% to €2.64 billion and volumes 7.9% higher at 724 million parcels over the firstnine months. The company, which expects to deliver more than one billion parcels this year, hasintroduced diverse service improvements, such as advance notification of delivery times and eveninghome deliveries in diverse cities of items such as online food orders.
The most controversial moves, however, are the launch of a new ‘DHL Parcel Shop’ network and thetesting of ‘parcel boxes’ at people’s homes. This summer the company unveiled plans for 20,000 ‘shop-in-shop’ parcel drop-off points in addition to its 13,000 post offices and 2,500 Packstationself-service parcel terminals as alternative delivery options.
However, leading rival Hermes has claimed that DHL is trying to persuade some of its 14,000parcel shop partners to switch to the Bonn-based operator. “We’re aware of some 1,500 approachesbut have only lost a few partners so far,” Hermes Germany managing director Frank Iden told theDeutsche Verkehrs-Zeitung (DVZ) in an interview.
In response, Deutsche Post DHL CEO Frank Appel said at the Q3 results press conference that hedid not know if shop operators were switching from competitors but added: “If we have a moreconvenient offering, then operators will decide for us. The volumes we can offer to parcel shopsare higher than those of competitors.”
Competitors have also criticised the ‘parcel boxes’ that DHL is currently testing in thesouthern city of Ingolstadt. Home-owners can buy the large secure boxes, which can only be openedwith a special RFID key, for €99 and install them in front of their homes. They can then registeron DHL’s ‘paket.de’ website to have parcels delivered by DHL into the parcel box if they are absentat the time of delivery.
But rivals claim that DHL is effectively creating a new ‘exclusive’ delivery network and want tobe able to deliver into the parcel boxes as well. GLS CEO Rico Back told the DVZ that consumerswould own the parcel boxes and should thus be able to decide who could deliver parcels into them. “It would be better if they (DHL) did the pilot test with an open system,” he said.
Meanwhile, DPD is pressing ahead with its B2C expansion which aims to make recipients into ‘thedirector of their parcels’ by offering a wider choice of delivery locations and options. In recentmonths DPD has introduced more advance notification of home deliveries, shorter ‘time-slots’,map-based delivery tracking and more interactive options for customers to change the delivery timeor location. The latest service, DPD NOW, offers delivery of online orders within 90 minutes or onthe same day in cooperation with the tiramizoo city courier network.
In parallel, the company has expanded its parcel shop network to 4,500 locations and aims toexpand it to 8,000 shops by the end of 2014. However, DPD, which makes up to three home deliveryattempts, has denied German media reports that it plans to restrict home deliveries and forcerecipients to collect their items from parcel shops instead.
Hermes has also unveiled several initiatives to improve its services. The company is testing aso-called ‘mobile service’ enabling private customers to hand over a pre-paid parcel to any Hermesdelivery person anywhere, whether at the time of a delivery or “in the street”. The company hasalso signed a cooperation agreement with German e-commerce association bvh offering discountedrates to its members.
Up to 5,000 additional part-time workers with some 2,000 vans will be making deliveries for thecompany in the run-up to Christmas. Hermes, which expects record volumes again this year, stressedthat it delivers 95% of its parcels at the first attempt and makes up to four home deliveryattempts. Iden stressed that Hermes will continue to focus on home delivery while its 14,000 parcelshops offer an alternative pick-up and drop-off location.
For its part, GLS has reduced the time-slot of its ‘FlexDelivery’ B2C service to just 1-2 hoursand is trying to focus on the profitability of home deliveries, according to CEO Back.
All parcel firms in Germany will be affected in some way by the introduction of a minimum wagein the country, which has been agreed by the Christian Democrats and Social Democrats as part oftheir ongoing negotiations to form a coalition government. The new minimum wage is expected to be€8.50 per hour but neither the level nor the introduction date has yet been decided.
Both Hermes chief Iden and GLS CEO Back said they could ‘live with’ such a minimum wage. ButIden warned that this will “significantly” impact on Hermes’ costs. “Of course we will have toincrease our prices. Such additional costs cannot be compensated with internal savings in a leanorganisation such as Hermes,” he commented.
DP DHL chief Frank Appel predicted that the minimum wage would impact on competitors butstressed it would not result in any “competitive advantages” for DHL since its collective wagelevels were already higher. “Fundamentally we are in favour of minimum salaries in serviceindustries,” he declared.
Both DHL and UPS, which is also expanding its B2C activities in Germany, employ drivers directlyand have collective wage agreements. In contrast, Hermes, DPD and GLS rely largely onsub-contractors whose wage levels they cannot legally decide but which they can influencestrongly.
