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DP DHL hints at major expansion in e-retail

15 November 2017

Deutsche Post DHL Group is becoming both brave and ambitious in its aspirations for growth in the e-retail logistics space, says Thomas Cullen, analyst at research firm Transport Intelligence.

The Bonn-based giant is hinting that it is about to seriously expand its presence in the grocery e-retail market in Germany.

Speaking at an investment conference around the release of its latest quarterly numbers, CEO Frank Appel commented that DP DHL was “getting more and more traction there”, although he did not elaborate. The company already operates a modest-sized grocery retailing operation in Germany called ‘Allyouneed Fresh’.

The wider vision that Mr Appel outlined was a service complementing its operations in e-retail related logistics, notably last-mile consolidation and delivery. The company has introduced a series of innovations in an attempt to strengthen its ‘last mile’ operations, including an electrically powered truck and a sort of electric trolley. While these are interesting they are unlikely to transform what is often the difficult economics of such activities. What is probably more pertinent is DP DHL’s strong market share that appears to make the company think that it can expand into difficult areas such as grocery e-retailing.

If this strategic direction continues, DP DHL will become a quite different company. Already e-commerce related parcel activity is growing at 15.5% in contrast to traditional postal activities which shrank by 0.8%. An expansion into retailing would imply a huge investment in fulfilment centres, although DP DHL implies that it aims to use its existing infrastructure – including that within DHL Supply Chain – as much as possible. It also asserts that it is developing new warehouse automation and data analytics capabilities. Even so, the necessary investment would be enormous.

Much of the rest of the Group is also growing reasonably, with DHL Express seeing profits climb by 11.4% in the first nine months of 2017, although EBIT in the Global Forwarding/Freight division fell.

However, if only part of the apparent aspiration of DP DHL to enter e-retailing is realised these other businesses will be dwarfed by what would have to be an Amazon-sized operation, at least within Germany.