DHL retreats from US domestic market – focus on international operations
11 Nov 2008
DHL has abandoned its five-year campaign to become a "third alternative" to the big two, UPS and FedEx, in the US express shipping market, and has said it will cease all domestic US services early next year. A global market leader in international express, overland transport and air freight, and also the world's number one in ocean freight and contract logistics, DHL said it will focus exclusively on international operations to/from 15-20 US metropolitan areas.
"The basic reason is that the US is a highly concentrated duopoly market and the reality is. . .UPS and FedEx's scale, market reach and brand awareness have made it impossible for us to make it economically viable," DHL Express CEO John Mullen said in a conference call.
DHL lagged US market leader UPS, Memphis-based FedEx at No. 2 and third ranked US Postal Service. At a distant No.4, DHL controlled only about 5 per cent of the US express and ground market, according to market analysts.
According to Mullen, DHL lost around $10 billion over the last five years on its US venture, at an annual rate of approximately $1.3 billion. This, said Mullen, was "a level of loss that cannot be sustained."
DHL is still in negotiations with UPS to turn over the domestic line-haul flight portion of its international shipments to/from the US to its rival. Mullen said he hoped the deal would be finalized by year end.
Meanwhile total job losses as a result of the decision to shut down domestic services are expected to top 9,500 and will be in addition to 5,400 DHL US jobs already cut earlier in the year.
DHL generates about $1 billion in revenue in the US market from international services.
