Marek Ròżycki, managing partner at Last Mile Experts; Dean Maciuba, managing partner for North America at Last Mile Experts; and Ian Kerr, founder of the Postal Hub Podcast, give their thoughts on DHL’s return to the US last-mile delivery market
DHL’s previous attempt to conquer the last mile in the USA at the turn of the century ended in a strategic withdrawal: five years after the much-lauded acquisition of Airborne Express 18 distribution hubs were closed, thousands of workers laid off and losses totaled in the region of US$10bn.
A number of factors led to the failure, some were outside DHL’s control, such as the difficult economic environment at the time of closure of their US operations. DHL was, however, criticized for poor strategic decisions, failing to harmonize with Airborne’s culture and for not maintaining Airborne’s attention to customer service. The general feeling was that price rather than quality were used to win business, but DHL never gained more than a small share of the market. The combination of these factors led to substantial losses, which became too big to accept.
Now it seems that DHL is back. DHL eCommerce has announced DHL Parcel Metro, a new fast and flexible service for online retailers focusing on same-day and next-day delivery (full story here).
It looks like DHL has learned from its experience with Airborne Express – the new model will be (comparably) asset-light. It’s also cashing in on the big trend in e-commerce toward same-day and next-day delivery.
With DHL Parcel Metro, DHL won’t set up a local delivery network – it will use local and regional delivery contractors, and maybe even a crowdsourced fleet. This will be cost-effective and flexible.
DHL will be drawing products from merchants who have warehouses close to their customers. This is why DHL is focusing on large markets such as New York, Chicago and Los Angeles, where the large merchants already have fulfilment centers in close proximity.
By accessing items from local fulfilment centers, DHL doesn’t have to invest in line haul and, in this sense, it is creating a disruptive model. DHL will most likely focus on moving product that’s already in a local/regional fulfilment center, so there will be a reduced need for DHL to have its own network of distribution centers. Moreover, DHL already has e-commerce fulfilment centers in place it can incorporate into its distribution solutions for Parcel Metro.
It’s also noteworthy that this initiative will be managed under DHL’s eCommerce unit not DHL Express, in the same way that European Union (EU) B2C business is under DHL/DP Parcel and not Express.
DHL already has an enormous e-commerce footprint in the USA via US Postal Service (USPS) Parcel Select. DHL has been managing distribution of e-commerce goods via the USPS but it has, so far, been an unbranded effort. DHL was just providing a logistical connection to get parcels into the USPS network.
Now DHL will be active and visible: the next step is to deliver faster via next-day and same-day delivery.
The whole subject of a major EU Integrator attempting to enter the USA mirrors several unsuccessful attempts by FedEx and UPS to exploit EU markets in the 1990s and the first decade of this century. It seems that the Americans have now secured a strong foothold in Europe via FedEx’s acquisition of TNT and UPS’s gradual acquisition/development strategy (their attempt to buy TNT was thwarted a few years ago).
The question now is whether Parcel Metro will be able to stand out among the competition and take market share from UPS and FedEx. DHL has chosen a disruptive model while the two US ‘duopolists’ are struggling to convert their B2B models to the demands of B2C e-commerce last-mile delivery. Time will tell but, whatever the result, things will be ‘hotter’ in the US delivery space.
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Ian Kerr is the founder and host of the Postal Hub Podcast, the weekly podcast for the postal and delivery sectors.
Marek Różycki is managing partner at Last Mile Experts, specializing in CEP and e-commerce last-mile advisory.
Dean Maciuba is a parcel industry expert and has previously served UPS and FedEx for 37 years across multiple professional positions in sales, marketing and operations. Today, Maciuba is the managing partner for North America at Last Mile Experts.