Hermes, the Greek god of commerce, is also the messenger of the gods. Today, European companies and consumers associate the name with premium, fast and reliable logistics services. In Germany, the Hermes Logistik Gruppe (HLG) has become the country’s largest independent home delivery service in the B2C and C2C sectors and is now looking to tap the European market. So what is the Hermes business model? Where in Europe has it already chalked up success? And where does it see potential in the CEP market of tomorrow?
In 2007/08 HLG shipped 246 million parcels and posted sales of 1.04 billion euros. Its 13,700 ParcelShops in Germany provide a nationwide network of collection points for private parcel deliveries and are also used by distance sellers as proxy delivery points. The Hamburg-based company, although more renowned for its home delivery operations, also has a broad base of diverse operations in transport logistics.
Despite the much-cited economic downturn and growing fears of consumer reticence in the wake of the global financial crisis, HLG is looking to press on with its national and international strategy for growth. This includes the continued expansion of its European network, which HLG intends to build on this year.
Growth market: Europe
Experts are moderately optimistic about growth chances for the European CEP market for the coming year. This trend continues to be driven by increasing growth in global trade, high levels of imports for domestic production, ever-greater interdependence for international deliveries and the growing significance of eCommerce in particular for distance selling. At present, losses experienced in traditional catalogue-based mail order are being more than compensated by developments in online business, TV shopping and cross-border retailing. Figures published claim that turnover on the European home delivery market alone will grow to over ten billion euros by 2016. A Boston Consulting survey from 2006 reveals that figures for 2005 were not even half of this.
The home delivery market needs to be geared up to profit from this trend: especially if, like Hermes, traditional customer-friendly services are available through a multi-channel approach. This has been effectively established in Germany, successfully harnessed in Austria and stands to gain acceptance in many other markets. Today, the Group operates over 20,000 ParcelShops across Europe. In five years, this is expected to reach 30,000.
International and dynamic – HLG in the CEP markets of tomorrow
Increasingly, HLG is focussing on European domestic and cross-border business. In many countries throughout Europe, the company is already the preferred logistics provider for home deliveries.
One of the key milestones on its road to European expansion was the market launch in Austria in 2007. In the meantime, HLG has secured a 38% share of the Austrian parcel delivery market. In October 2007, HLG acquired a stake in the Italian logistics provider Porta a Porta. With effect from 1 January 2009 restructuring has given a new face to the Italian company, and now the new Hermes-Porta a Porta operates B2C home deliveries in Italy.
Close collaboration with its sister companies Parcelnet in the UK and Mondial Relay in France means that Hermes is already established on Europe’s most essential markets – markets that generate over 80% of total turnover on Europe’s parcel delivery market.
“Our aim is to operate throughout Europe under a single brand, building up our own logistics network in many countries to offer top-quality services wherever we work. We want our customers to see us as a premium service provider,” says Hanjo Schneider, CEO Hermes Europe. “We are in an extremely good position to continue our expansion policy. Today, we already have a 22% share of the European parcel market, currently valued at 1.5 billion euros. On top of this we are exploring other national markets and assessing entry options, such as in Spain and Russia. What’s more, we have established a successful partnership with such trusted associates as Swiss Post in Switzerland, TNT in Benelux and DPD in other European countries,” continued Schneider.
The internationalisation of Hermes Transport Logistics
Transport logistics at HLG is also set to become increasingly international. In the course of 2009, the business unit will be unveiled as an independent company under the name of Hermes Transport Logistics, taking on the competition for new customers on the European market. The integration of Otto International Logistics within the company will also enable it to add sea and freight to its FTL business.
“Hermes is exploiting its in-depth experience in national and European distance selling and its undoubted expertise in FTL business to put the new brand on a winning track,” says Frank Rausch, executive director responsible for transport logistics. “Otto International Logistics will bolster the new brand with its competence and decades of experience as an import freight forwarder – as well as with its overseas operations. With such team strength, we are looking to provide national and international customers with a full-range service offering of logistics services all from under one roof.”
In paving the way for European expansion, Hermes is converting its traditional swap body operations to trailer-based FTL to comply with international demand. In the medium term, up to 2,500 semi-trailers will operate FTL traffic in the key European markets of the UK, France, Italy, Austria, Benelux and increasingly in Germany. Talks have already been held with various high-volume shippers about networking transportation services that can be more economically and ecologically distributed through the Hermes network. Effective 1 March 2009, Frank Rausch will lead Hermes into the sea and air freight business.
“Our new full-service offer opens up exciting opportunities for profitable growth particularly through the acquisition of new clients who are looking to take advantage of our appealing product innovations and service – as well as our favourable freight costs. By 2013, we are looking to develop the Hermes Transport Logistics brand and remodel it into a technological leader with a major share of the German and European markets,” explains Rausch.