Morgan Stanley: DHL's Problems Help FedEx, UPS

Share this article:
DHL's recent customer service problems may benefit FedEx and UPS in their current quarters and into next year, according to a stock research report released yesterday by investment bank Morgan Stanley.

However, though DHL's September hub integration was a disappointment, the company said the aftereffects won't cause a long-term deviation from DHL Express' overall financial objectives.

In the Morgan Stanley report, DHL acknowledged losing several large customers -- $280 million of revenue, representing nearly 6 percent of its business -- because of difficulties after the integration of its air hub in Wilmington, OH, in early September. An earlier Morgan Stanley report said on-time delivery fell to 55 percent in some cases.

DHL management said service levels have improved and customer losses have stabilized, according to Morgan Stanley, and nearly half of the lost customers have returned, though some needed discounts to come back.

Morgan Stanley's research note also covered other DHL issues:

· DHL may raise rates: "In conversations with shippers over the past several months, we've heard anecdotes of DHL raising pricing to more closely match UPS and [FedEx]. ... Specifically, DHL has approached 80 to 90 customers that have the most heavily discounted rates in an effort to raise pricing more in line with its competitors," Morgan Stanley said. DHL said 25 percent to 30 percent of those customers "have accepted these higher rates while others have walked away to the other carriers, including the U.S. Postal Service."

· Market share gain is not DHL's main focus: DHL illustrated that it's "not likely to be the spoiler in the domestic market, including one statement that it has 'no aspirations to gain rapid market share.' DHL has been curbing the growth rate of its ground product, which has dropped to the 20 percent range for the past five to six months, about half the growth rate seen in January and February."

· DHL is not looking to buy an LTL carrier: Given that UPS recently bought LTL carrier Overnite and FedEx created a less-than-truckload division in 2001, "DHL is routinely confronted with the question about its intention to enter this market. Management put this to rest by stating that it currently has its hands full on the domestic package front and does not intend to fill this in the next two to four years, noting that it's not mission critical to retain domestic customers."

Share this article:
You must be a registered member of Direct Marketing News to post a comment.

Next Article in Direct Mail

Sign up to our newsletters

Follow us on Twitter @dmnews

Latest Jobs:

More in Direct Mail

Direct Mail Helps Old Chicago Make Some Dough

Direct Mail Helps Old Chicago Make Some Dough

Hold the digital. Why direct mail accounts for a large portion of the pizza chain's marketing pie.

Delivered: Birthday Deals Mailers

Delivered: Birthday Deals Mailers

What's in our mailbox this month: Birthday Deals. See which ones are good deals—and which ones you shouldn't deal with.

USPS Commissions Brain Research on Direct Mail

USPS Commissions Brain Research on Direct Mail

The Office of the Inspector General seeks neuroscientists to investigate human responses to digital and physical media.