DB Schenker Logistics and GLS will extend their cooperation to Benelux, France and Spain after launching their long-term partnership in Germany last week, aiming to cover all European countries by the end of 2017.
The partnership, presented at a press conference in Hamburg last Friday, will enable each company to offer their customers both parcel and freight services across Europe under the name “DB Schenker Parcel.”
DB Schenker Logistics, with a dense coverage across Europe with 700 branches, focuses on transporting general cargo, with parcels being only a minor business until now, explained Ewald Kaiser, Head of Land Transport at Schenker AG and CEO of the Europe region.
“Our customers have drawn our attention to the fact that we lack one thing in our European service range – the parcel. It is not right to say that we are not active at all when it comes to parcels deliveries but it is a segment that has been underrepresented at DB Schenker until now. We are active in the parcels segment especially in the Nordic countries but our customers missed a comprehensive offering.”
Currently, DB Schenker ships over 35 million parcels in Europe generating just over €200 million in revenues from parcel deliveries, Kaiser revealed. “Our aim is to increase our parcels revenues to €500 million by 2020.”
In terms of GLS parcel volumes, the company transported 436 million parcels in Europe during the financial year 2014/2015. “At the end of the third quarter, we recorded a volume increase of 11% and we expect to continue taking part in the growing parcels market,” Rico Back, CEO of GLS Group, told journalists.
Asked by CEP-Research about the concrete goals for the cooperation with GLS, Kaiser replied vaguely: “The goal for DB Schenker is to pass over parcels to GLS and GLS passes over standardised palletised freight on to Schenker – and this all over Europe.”
Back added: “The difference to earlier is that we now have a systemised Europe-wide product. In addition, our IT systems have been linked. These interfaces were not so easy to establish. But to develop a competitive product, you need the communication between the shipper and the recipient. This was one reason why the start of our cooperation was delayed by two months.”
Kaiser stressed that the focus of the cooperation will be on cross-border parcels, with the domestic German parcel being just a complementary product. In Germany, the companies will offer both domestic and cross-border parcel services.
Responding to a CEP-Research query about DB Schenker’s existing parcel service, Kaiser said that the company operates its own parcel delivery service in the Nordic countries (Sweden, Finland and Norway) and also in Poland, with volumes being generated mainly through domestic parcels.
“In other countries, we have local partnerships.” The major part of the volumes in those countries is generated through cross-border parcels but he declined to name the delivery partners saying there are so many that it would take too long to name them all.
Explaining why DB Schenker chose GLS as a partner, Kaiser said: “Our two companies are extremely complementary in a positive sense. DB Schenker offers, apart from a few countries, a strong product range for general cargo/unit loads and a smaller parcels range. GLS, for its part, is very focused on parcels as a classical parcels operator. Therefore, our companies are comprehensively compatible and very complementary in terms of the product range.”
He added that the two companies don’t compete in any way. “Other parcel operators such as DPD, Hermes or UPS are also active in our core segment but GLS isn’t.” Back also highlighted DB Schenker’s Europe-wide focus as an important criteria for GLS.
Kaiser stressed that while DB Schenker’s classical segment of general cargo continues to grow, the growth is far from comparable to the parcels market. “In the e-commerce B2C parcels segment, growth of 17-18% is expected in Germany alone. Through our cooperation, we want to participate in it.”
“It was important to us that we can also offer forwarding services to GLS and to use our European network on long-distance routes. What we don’t cover and what GLS will do for us is last-mile delivery as we don’t have the infrastructure in most of the countries but we have the best partner for it.”
Back commented on the partnership with DB Schenker: “The European economy has been recovering and we expect 1.7% growth for the next year in the eurozone. Interestingly, the parcels market is growing above the general market development, up to 5%. In Europe, we have observed for many years a trend towards smaller parcels. For a general cargo provider, it is expensive to organise the last-mile delivery for these shipments which is what we focus on.”
GLS, which has been gradually expanding its European coverage over the years, is now present in every European country with own branches or partners, Back stressed. “We are convinced that a cross-border product is one of the fastest growing products. Now, we want to create something new from the country-specific products and establish a European system. I believe that the European system product will increasingly grow in the future, driven by e-commerce but also through Europe growing together. We want to have a part of the European product flows.”
Focusing on the B2B segment, GLS has had difficulties for many years to serve the mass B2C market, Back admitted. “For some years now, we have been active in the premium segment, with our B2B customers also shipping parcels to private recipients. We needed to ensure the same quality for private parcels that we offer in the B2B segment. We have made many efforts to provide this premium quality in a sustainable way. And now we ship 30% of our parcel volumes for the B2C segment. In some countries, the B2C share is even higher, in Eastern Europe in particular. For example, in Hungary, Czech Republic, Slovakia, Slovenia and Poland, the B2C share reaches up to 60%.
“But we remain focused on the B2B premium segment which is also growing, even though not at the same rates as B2C,” Back said.
Referring to Amazon’s ambitions in the German parcel delivery market, Kaiser said: “It is impressive what Amazon is doing. But for us, it is just another competitor which needs to be recognised. But it didn’t impact us in such a way that we would revise our strategy in the parcels market, not at all.”
Back commented: “GLS has always been focused on the B2B segment providing also 2C services for customers shipping mainly B2B. So we don’t have Amazon as a customer in Germany. When Amazon starts its own B2C parcel delivery service, it only has a secondary effect on us in Germany. In Italy, we offer a same-day service to Amazon with some shipments in Rome and Milan. But Amazon is not a big customer for us, generating only 1.3% of our revenues.”
On the issue of whether the flows of refugees to Europe had impacted GLS in any way, Back admitted that traffic jams and increased controls at the borders are a burden creating additional costs. “Until now, we have not passed these costs on the customers yet and we believe this will stop soon.”
