DHL Steps Back Into U.S. Package Delivery in Challenge to UPS, FedEx
March 15 2018 - 5:31PM
Dow Jones News
By Erica E. Phillips
Deutsche Post AG's DHL business is tiptoeing back into the
domestic parcel delivery in the U.S., drawn in by the strong growth
in e-commerce to bring new competition to a market that's been
dominated by United Parcel Service Inc. and FedEx Corp. for a
decade.
DHL said Thursday it is launching a new same-day and next-day
delivery service for online retailers in Chicago, New York and Los
Angeles. The service will expand to Dallas, Atlanta, San Francisco
and Washington, D.C., by the end of the year, and will rapidly add
more cities over the next few years.
"We pay a lot of attention to what consumers are demanding of
the online marketplaces and retailers they're buying from," said
Lee Spratt, chief executive of DHL eCommerce's Americas division.
"Faster, cost-effective delivery is going to be a future
requirement to play in this space."
The firm has been testing its new delivery service, dubbed
Parcel Metro, in select cities over the last two years. The service
engages drivers through crowd-sourced applications for deliveries
within a few hours and taps into local couriers and delivery
companies for one- and two-day deliveries, using DHL eCommerce's
warehouse facilities to consolidate orders.
DHL's move to launch some U.S. delivery services again could
increase competition for both UPS and FedEx, currently the dominant
players in speedy e-commerce deliveries in the U.S. Both companies
have been raising prices aggressively to help cover the costs of
surging residential deliveries, which are more expensive than
traditional business-to-business stops. A new, low-cost entrant to
the market could make that more difficult.
"We need another small-parcel provider here," said Cathy
Roberson, a logistics industry analyst. "The shipping rates need to
come down. They're getting a little ridiculous, so bring it
on."
Representatives for FedEx and UPS did not immediately respond to
requests for comment.
The move by DHL appears to be just a stepping stone for now and
it could be several years before the firm's network is big enough
to compete with UPS and FedEx, Ms. Roberson added. "This sounds
like a very cautious but logical approach" to re-entering the
market, she said.
DHL pulled back its U.S. express-delivery unit in 2008 after
investing billions of dollars to challenge UPS and FedEx, an effort
that included the acquisition of the delivery services of smaller
operator Airborne Express and a regulatory battle over the
German-owned company's right to fly cargo aircraft in the U.S.
Since then, the firm has focused on international parcel shipments,
handing off domestic deliveries from its warehouses to the U.S.
Postal Service. DHL eCommerce currently operates 21 warehouses in
the U.S.
The decision to launch delivery services in more populous urban
markets also echoes a strategy employed by Amazon.com Inc., which
has been handling deliveries from its own fulfillment centers in at
least 37 U.S. cities, as well as through its Prime Now one- and
two-hour offering in more than 50 markets globally. Amazon is also
rolling out a delivery service for third-parties, "Shipping with
Amazon," where the online retail giant will pick up packages from
businesses and ship them to consumers.
Under DHL's new Parcel Metro service, vehicles and drivers will
not display the DHL brand, Mr. Spratt said. But consumers will be
able to see a picture of their driver and follow deliveries to
their doorsteps on a map, similar to the functions in the Uber
Technologies Inc. ride-sharing app.
-- Laura Stevens contributed to this article.
Write to Erica E. Phillips at erica.phillips@wsj.com
(END) Dow Jones Newswires
March 15, 2018 17:16 ET (21:16 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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