DHL is getting back into parcel last-mile delivery, but with a twist

 Source: ShutterStock

Source: ShutterStock


DHL is getting back into the U.S. parcel market, competing against FedEx and UPS, but you won't be seeing DHL trucks making the deliveries. 

After DHL pulled out of the U.S. market in 2008--though still bringing parcels to the U.S. from abroad and having the U.S. Postal Service deliver them--it is returning to the last mile market, but using contracted couriers rather than its own fleet. 

The name of the service is DHL Parcel Metro. In a prepared statement, the company said it is now available in Chicago, New York and Los Angeles. Dallas and Atlanta will be launched in the second quarter, San Francisco in the third quarter and Washington D.C. in the fourth quarter. The service has been under testing in several unspecified markets. 

Under the supply chain sketched out by DHL, a retailer that receives an order will prepare a package for pickup, a contracted driver will retrieve the parcel "for consolidation." After that, routes will be assigned to drivers for further consolidation and delivery.

Cathy Roberson, an independent logistics consultant and former UPS executive, described the DHL plan as "definitely different" from the way UPS and FedEx operate in the last mile delivery of parcels bought through e-commerce. 

"With the others, you have branded delivery vans that say UPS or FedEx, and they're wearing uniforms," she said. "That's not what DHL is doing here. They are basically partnering with a lot of local courier companies and doing local crowd sourcing. They are the ones that will be doing the last mile delivery. So it's not going to be a branded DHL van pulling up to your house."

It will be software that will match parcel and local couriers. (DHL appears to be defining "courier" widely; the graphic that accompanies the press release on DHL Parcel Metro to accompany its press release showed packages being picked up by van, by car, and by a bicycle). "The new service creates a ‘virtual delivery network’ of local and regional delivery vendors and crowd-sourced drivers and vehicles to ensure maximum flexibility and capacity over the last-mile," the DHL release said. "It does this via a bespoke software platform, which selects drivers that offer the appropriate service levels and sufficient capacity on specific routes and which meet the company’s rigorous quality standards."

DHL did not respond to an email or call to answer additional questions.  

Although there are plenty of companies that provide that last mile delivery to the e-retail customer, including the U.S. Postal Service, Roberson said UPS and FedEx have at least 80% of the market. Roberson called it a "duopoly."

The UPS employees are just that: company employees. And while the FedEx Ground employees may drive in FedEx-branded vehicles, and dress in FedEx uniforms, they are considered contract workers. But their status has been litigated many times in the past; this is just one example.

It will be the "bespoke software platform," Roberson said, that will determine which courier in their local and regional network will make the delivery from the e-retailer's warehouse. 

Roberson said use of local contractors for last mile delivery is not new for DHL, as it is used by the company in other parts of the world. But she also expressed some concern that having a limited degree of control over the network of couriers could create some difficulties. "How do they ensure there are enough people to make these deliveries?" she said. "I worry about the whole customer experience with this type of solution."

Although DHL is wading back into the market through DHL Parcel Metro, the fact is that for the DHL parent company as a whole--Deutsche Post AG--eCommerce has been a strong business. In a report that came out a day after the U.S. announcement, but which didn't reference the U.S. initiative, Stifel Financial Group said Deutsche Post's fourth quarter eCommerce revenue grew 10.3% year on year. And in a graphic, Stifel said that based on revenue-weighted EBIT margin, DHL's package business had recently surpassed the performance of FedEx, but was behind UPS.