DP-DHL Strategy 2020 is a bigger change than it appears

Outlined to investors last week, ‘Strategy 2020’ describes the three principles of DP-DHL’s corporate strategy. “Focus, Connect and Grow” elucidates the combination of a focus on integrated logistics markets, enabling the company to offer connections between the different divisions resulting in the ability to grow in the markets of e-commerce and emerging markets.

Although emerging markets are mentioned as offering above average prospects, the strongest message in the presentation of Strategy 2020 is the opportunity offered by e-commerce. Indeed this is regarded as of such importance that the Mail division is to be renamed “Post – eCommerce – Parcel.” The “German Model” of e-commerce logistics will be introduced on a worldwide scale, including markets as large and different as US and even India.

Other divisions, such as Express, will be orientated to support this strategy. Indeed this already appears to be happening to a degree. Frank Appel, the company’s CEO asserted that DP-DHL wants to use its existing global presence “to establish itself as the number one provider of cross-border e-commerce services on the most important international trade lanes, and one of the top three B2C domestic parcel delivery service providers in selected markets.” Whilst this is a huge ambition, it is not unreasonable for a company of the size of DP-DHL to establish a competitive advantage by leveraging its scale, ability to invest in capital intensive operations and existing global presence. If it can grab just a modest part of the global e-commerce market it will provide a lucrative revenue stream with the possibility of transforming DP-DHL.

Yet there is a modicum of irony in the ‘Strategy 2020’ focus on e-commerce.

The idea behind the creation of the present Deutsche Post –DHL was to expand beyond the old-fashioned business of mail and into the growing global logistics market. The underlying assumptions were that national postal services would gradually fade-away where as express, freight forwarding and contract logistics would grow with international trade. Now the tail appears to be wagging the dog. e-commerce has suddenly made mail services appear capable of huge growth. In contrast logistics outsourcing is not quite the exciting story it once was. The re-orientation is not quite a volte face, as the Mail business has remained stubbornly profitable through the years of DP-DHL’s existence in contrast to the variable performance of the other divisions; however it does imply a deep change in strategy.