DPDgroup is limiting volumes from Amazon to avoid over-reliance on the e-commerce giant, imposing capacity-related peak surcharges in major European markets and actively seeking acquisitions in South-East Asia, GeoPost president Paul-Marie Chavanne told CEP-Research in an exclusive interview.
The growth strategy of La Poste’s international parcels subsidiary and partnerships in Asia were other topics covered in a wide-ranging interview at a press event in Madrid celebrating the 75th anniversary of Spanish subsidiary SEUR.
Asked about the importance of e-commerce giants such as Amazon for the French group, Chavanne responded: “My strategy is not to be Amazon-dependent. I do not want more than 20% of volumes from Amazon at any business unit.”
At present, the e-commerce giant accounts for about 9% of DPDgroup’s volumes in Europe, rising to about 11-12% in some large markets, he said.
In Spain, for example, SEUR had increased its prices for Amazon parcels and the e-commerce giant had reduced its volumes with the company in response. In contrast, about 60% of parcel volumes at Spanish postal operator Correos are believed to come from Amazon, the GeoPost chief pointed out.
A 'junk' business model
In general, DPDgroup wanted to have a “balanced customer base” and avoid being over-reliant on large customers who could dictate rates and volumes. “I want to keep control of my business,” the long-serving executive emphasised.
However, in the international e-commerce market “there is room for everybody. Amazon will not eat up everyone”, he underlined.
Chavanne was openly critical of Amazon’s “growth-focused” business model. “It’s a junk business model. They are buying growth. It’s very unhealthy,” he commented.
“One day the regulators will react against Amazon,” he predicted. In India, for example, the government had obliged the e-commerce company to limit sales of own products on its marketplace to 25% in order to ensure that a large number of third-party Indian retailers were able to sell directly under their own name through the marketplace.
Surcharges in France, Germany, Spain, UK
Discussing business developments, Chavanne said that 2017 will be “a record year” again with peak season volumes about 30% higher than the average levels for the year as a whole.
DPDgroup has taken special measures this year to manage volume flows in line with available capacity. “We have introduced surcharges on volumes,” the GeoPost chief disclosed. This ‘fee per parcel’ is being applied in France, Germany, Spain and the UK.
In addition, there is a special agreement with Amazon that took several months to negotiate. “We have a contract with Amazon on service quality levels but Amazon has also committed not to give more than the agreed level of volume,” Chavanne explained.
If the US and European e-commerce market leader does send additional volumes for delivery, DPDgroup has retained the right to decide flexibly whether or not it can cope with them depending on its available capacity at the time.
Tigers "has three years"
Chavanne also discussed GeoPost’s international growth ambitions, including possible further acquisitions.
In Asia, GeoPost’s strategy of buying into Hong Kong-based B2B freight forwarding group Tigers (through its parent company Lenton) and gradually converting it into an intercontinental B2C player to target e-commerce flows from Asia to Europe is not yet paying off, according to Chavanne.
“My idea with Tigers and Lenton was to buy in competence. For two years we have been working to switch Tigers from B2B to B2C. But until now the gain is very limited,” he admitted.
Looking ahead, he said: “My strategy is not fixed. I do not know if we will keep Tigers or not. We will see depending on the success (of the transformation).” He gave the Hong Kong-based group a deadline of “three years from now” to develop its B2C business successfully.
Discussing GeoPost’s overall positioning in Asia, Chavanne made it clear that the French group has no ambitions to enter the domestic market in China, where it cooperates with China Post and SF Express. “It makes no sense today to create a company (in China),” he underlined.
The situation is similar in Japan, where GeoPost has a “strong partnership” with Yamato. “That will not change,” he said.
South-East Asia, however, is a different story and the group “is working actively” on potential agreements with local players in countries such as Thailand, Singapore, Malaysia, Indonesia and the Philippines. The group is already present in India through a 40% minority stake in major local player DTDC.
In the USA, GeoPost will continue to work commercially with the US Postal Service and UPS, Chavanne confirmed. Last December, GeoPost moved into the Brazilian market with the acquisition of a 60% stake in Jadlog.
In Europe, the group expanded with the acquisition of a 37.5% minority stake in Italian parcels market leader BRT at the start of 2017, while it holds a majority stake in the holding company of DPD Russia and SPSR, which merged this year.
