Business units and market positions
Excerpts from Deutsche Post AG's 2014 Group Annual Report.
The postal service for Germany
As Europe’s largest postal company, we deliver about 64 million letters every working day in Germany. We offer all types of products and services to both private and business customers, ranging from physical, hybrid and electronic letters and merchandise to special services such as cash on delivery, registered mail and insured items. Our E-POST product provides a secure, confidential and reliable platform for electronic communication. It allows companies, public authorities and private individuals to send secure communications whilst reducing processing costs.
In the reporting year, the domestic market for business communications was approximately €4.6 billion (previous year: €4.5 billion). In order to accurately reflect actual market conditions, we look at the competition-relevant business customer market and include those companies that provide services to business customers, i.e., both competitors with end customers as well as consolidators who offer partial services. At 64.5%, our market share declined slightly compared with the prior year (64.7%). As at 1 January 2014, we raised the price of standard letters from €0.58 to €0.60. The prices for registered and forwarded mail were also increased.
Targeted and cross-media advertising
Our portfolio of dialogue marketing products allows advertisers to reach specific customer target groups. We offer end-to-end services – from address management to conception and creation, to print, shipment, response management and performance evaluation. Dialogue marketing is cross-media, personalised and automated. Dialogue campaigns can be managed entirely automatically so that digital and physical items reach recipients during the same period of time. Our digital services allow companies to determine their target groups by analysing the visitors to their websites or online shops.
The German dialogue marketing market comprises advertising mail along with telephone and e-mail marketing. In 2014, this market shrank by 1% to a volume of €17.0 billion. Advertisers in industries such as retail have decreased or restructured their expenditures. The insolvencies of the publishing house Weltbild and the do-it-yourself chain Max Bahr were also felt. Our share of this highly fragmented market increased slightly to 13.0% (previous year: 12.8%). In the reporting year, we raised the price of our Infopost product for the first time in 18 years.
Sending mail and parcels internationally
We carry mail and lightweight merchandise shipments across borders and provide international dialogue marketing services. We offer international shipping services for business customers in key European mail markets and by offering innovative products we set ourselves apart from the competition. For example, we are developing international shipping solutions for consumers (B2C) in the growing e-commerce sector. Our portfolio also comprises consulting and services for all physical and digital dialogue marketing needs. Furthermore, we offer physical, hybrid and electronic written communications for international business customers. Customers outside Germany benefit from our expertise and experience in order to do business successfully in the German market.
The global market volume for outbound international mail was approximately €6.4 billion in 2014 (previous year: €6.7 billion). The decline in lightweight letters and press products could only be compensated for in part by the increase in heavier items. Our market share declined to 15.1% compared with the previous year.
Worldwide portfolio of parcel and e-commerce services
At around 29,000 parcel acceptance points in Germany, we offer many innovative parcel services via over 13,000 retail outlets, 12,000 Paketshops, 2,750 Packstations and around 1,000 Paketboxes. Our customers can choose whether they wish to receive their parcels in the evening, on the same day or even as soon as possible. The new parcel boxes allow parcels to be securely sent and received from home around the clock. We help our business customers to grow their online retail businesses. Our shopping portal, MeinPaket.de, provides small and medium-sized retailers with an additional sales channel. On request, we can even cover the entire logistics chain through to returns management. We are developing the online food retailing segment at our online supermarket, Allyouneed.com, and our 2-Man-Handling offers a solution for delivering furniture ordered online.
The German parcel market volume totalled around €8.8 billion in 2014 (previous year: €8.2 billion). We expanded our market share to 43.0% (previous year: 42.3%).
In the future, we intend to offer the experience we have gained in e-commerce in Germany to many important markets around the world. In Europe, we have, to this end, already connected more than 1,000 Paketshops, planned Packstations and introduced six-day delivery in the Netherlands. Outside Europe, the well-established business of Blue Dart Express in India will provide a foundation for further e-commerce services in Asia. In the United States, we are increasingly developing into a service provider for the e-commerce industry. We have expanded the existing shipping routes in and out of the most important international markets, for example, from Germany, the United Kingdom and the United States to China.
Leading provider of international express services
In the Express division, we transport urgent documents and goods reliably and on time from door to door. Our network spans more than 220 countries and territories, in which some 80,000 employees provide services to more than 2.5 million customers. As a global network operator that applies standardised processes, we are constantly optimising our service to keep our customer commitments and respond specifically to customers’ wishes. All of this makes us the leading provider of international express services.
International time-definite shipments are our core business
Our main product is Time Definite International (TDI), which offers pre-defined delivery services. We also provide industry-specific services to complement this product. Our Medical Express transport solution, which is tailored specifically to customers in the Life Sciences & Healthcare sector, for example, offers various types of thermal packaging for temperature-controlled, chilled and frozen content. These shipments are specially monitored due to their sensitive nature. Collect and Return is used predominantly by customers in high-tech industries. Technical products are collected from the user, taken in for repairs and then returned.
Our virtual airline
As an express service provider, we operate a global network consisting of several airlines, some of which we own 100%. With an annual average of 3.4 million transported tonnes, our virtual airline is one of the leading international air freight carriers.
The combination of our own and purchased capacities, which include varied terms of contract, allows us to respond flexibly to fluctuating demand. We do not enter into long-term capacity obligations until our demand for cargo space exceeds the existing offering. We use the available cargo space for our main product TDI for long-term freight contracts – block space agreements – and we sell temporary excess capacity on the air freight market. The largest buyer of this is the DHL Global Forwarding business unit.
In the reporting year we launched further initiatives to renew our fleet. In Europe and the United States in particular, we are replacing aircraft that have reached the end of their life cycle with newer aircraft which are more efficient and have higher capacity.
Market leadership in international express business extended
We succeeded again in extending our leading market position in the international express business: at 34% (previous year: 33%), we were well ahead of the competition in 2013. In financial year 2014, the international express business continued to benefit from e-commerce and the growing importance of small and medium-sized enterprises in international trade.
Expanding the network in the Europe region
With a market share of 41% (previous year: 40%) in 2013, we were the leading provider of international express shipments in the Europe region. In the reporting year, we completed the first construction stage of the expansion of our hub in Leipzig. We are also investing in our network in the UK: by 2016 we plan to expand our East Midlands hub as well as locations in Manchester and Heathrow, amongst others.
Strengthening market presence in the Americas region
In the Americas region, we succeeded in strengthening our market presence. In 2013, our market share rose one percentage point to 18%. This positive development validates our decision to continue investing in the expansion and automation of our hub in Cincinnati. We have also expanded our business in Mexico and strengthened our position as the leading logistics service provider in the region with additional investments in our main hubs and locations.
Supporting growth in Asia
With a market share of 44% (previous year: 42%) in the Asia Pacific region, we were able to further expand our leading position in the international express market in 2013. In response to rising demand, the second half of 2014 saw us break ground for our fourth gateway in Tokyo, which will increase our capacity and enhance the standard of our services. In addition, since November 2014 we have offered new intra-Asian flights that connect Thailand, Vietnam, Malaysia and Hong Kong. In doing so, we are responding to the growing business needs of our customers in these areas and reducing delivery times.
Reliable partner in the MEA region
Business in the MEA (Middle East and Africa) region developed positively in the reporting year. The political unrest in the Middle East, central and eastern Africa and the Ebola outbreak present on-going challenges. Whilst ensuring the safety of our employees and adhering to legal requirements, we nevertheless maintained our operations and proved ourselves to be a reliable partner to our customers.
Volume growth requires continued investment in our network. New facilities in Saudi Arabia doubled our capacity to serve the region. In Dubai we completed the region’s largest express service centre. This supports the expansion of trade relations between both Saudi Arabia and the United Arab Emirates and their most important partners such as China, Japan and the United States. In Egypt, we shall be offering customs clearance services for the first time. In the Sub-Saharan Africa region we increased our presence in the reporting year to well over 3,500 service points. Our position there as an established logistics service provider is also evident in the fact that relief organisations are repeatedly using us as a partner for transport to crisis areas.
The air, ocean and road freight forwarder
The Global Forwarding and Freight business units are responsible for air, ocean and road freight transport within the Group. Our freight forwarding services not only include standardised transports but also multimodal and sector-specific solutions as well as individualised industrial projects.
Our business model is very asset-light, as it is based on the brokerage of transport services between our customers and freight carriers. Our global presence ensures network optimisation and the ability to meet the increasing demand for efficient routing and multimodal transports.
The leader in a revived air freight market
The global air freight market grew in 2014, whereby volumes increased more significantly than capacities. According to IATA, the global airline industry association, worldwide freight tonne kilometres flown during the reporting year increased by 4.5%. As airlines brought more wide-body passenger aircraft into service, air freight rates saw a decline in the first half of the year. In contrast, freighter capacities as a proportion of overall capacities decreased to 37.6% in the reporting year (previous year: 38.5%), as major freight carriers deployed their freighter aircraft more carefully. This situation, in conjunction with a strong increase in demand, resulted in increased pressure on capacity buying rates in the second half of the year. After transporting 2.2 million export freight tonnes in the previous year, we remained the air freight market leader in 2014.
Ocean freight market experiences surplus capacities and volatile freight rates
In the international ocean freight market, ocean carriers have put many new, larger vessels into operation in recent years. Nevertheless, freight carriers have successfully limited the effective supply increase – either by adjusting travel speeds, blank sailings or capacity reallocations. Although ocean carriers have implemented higher freight rates, they were unable to improve their profitability. As a result, market freight rates remained very volatile, above all on the important container routes between Asia and Europe. After transporting 2.8 million twenty-foot equivalent units in the previous year, we remained the second-largest provider of ocean freight services in the reporting year.
Slight growth in European road freight market
The European road freight market grew slightly in 2014, with estimates between around 0.5% and 2.5% (previous year: –1% to 1%). The primary reason for this development was above all the stabilised macroeconomic environment in Europe in the first half of the year. Nevertheless, the market remains highly competitive. Due to our successful service portfolio, DHL was able to slightly outperform market growth in the Freight business unit.
Customer-centric outsourcing solutions in two business units
The Supply Chain division comprises the two business units Supply Chain and Williams Lea. As the world’s leading contract logistics provider, DHL creates a competitive advantage for its customers in the supply chain business by delivering customised logistics solutions based on globally standardised modular components including warehousing, transportation and value-added services. In the Williams Lea business unit, we offer solutions for digital and document workflow, business support services, communications and publishing, brand and marketing services as well as optimised flow of information.
Contract logistics for a complex global marketplace
A highly complex, intertwined and rapidly changing global marketplace is the source of unprecedented change for the supply chain industry and its customers. Stand-alone warehousing and transportation operations cannot adequately respond to the fast pace of business change and growing interconnectedness created by global commerce. Our core business in Supply Chain comprises increasingly integrated logistics solutions that combine value-added and management services with traditional fulfilment and distribution offerings. Planning, sourcing, vendor management, production, packaging, repairs, returns and recycling are the new norm in contract logistics solutions. Through the global standardisation and innovation of offerings such as service logistics, DHL’s Supply Chain business will further solidify its already strong leadership position in global contract logistics.
Strategic market growth for increased market share
DHL remains the global market leader in contract logistics, with a market share of 8% (2013) and operations in more than 50 countries. The market is highly fragmented: the top ten players only account for around 21% of an estimated €168 billion market. We lead the market in our key regions of North America, Europe and Asia Pacific and also enjoy a very strong position in rapidly growing markets such as Brazil, India, China and Mexico. We continue to make significant investments into infrastructure and talent in these four key markets, strengthening local capabilities for growth.
Emerging markets increasingly offer growth opportunities for more advanced integrated logistics solutions as a result of growing consumerism and an increasing demand for complex logistics solutions, above all for global e-commerce. Our global scale, standardised value-added services and local knowledge give us a strong position in emerging markets.
Industry expertise in key sectors
Customers value the innovation derived from our breadth of experience and depth of knowledge in Automotive, Life Sciences & Healthcare, Technology, Consumer, Retail, Engineering & Manufacturing, Energy and Chemicals.
Specialised sector solutions with a global focus on Life Sciences & Healthcare, Technology and Automotive will allow us to capitalise on market opportunities and accelerate growth.
The Life Sciences & Healthcare sector is increasingly outsourcing components of its supply chains in response to cost and consolidation pressure. To meet our customers’ demands, we have developed solutions to comply with the high regulatory requirements of this growth industry including direct and temperature-controlled transport. Demand for service logistics and a variety of value-added services is increasing in the Technology sector, creating business opportunities in both mature and emerging markets. In our Automotive focus sector, production is shifting increasingly to emerging markets such as China, India and Brazil, in which we already have a strong presence and targeted investment plans. Management services such as lead logistics provider (LLP) provide sustainable growth opportunities in this highly competitive outsourcing sector.