DHL takes on US rivals at the shop-front

DHL is planning to open a new front in its competition with United Parcel Service and FedEx by launching a chain of retail outlets in the US.

The German courier company believes it needs a bricks-and-mortar presence in America to woo customers from the two main domestic operators.

John Pearson, vice-president of commercial operations, said DHL had yet to decide how many stores it needed but the number could reach the thousands.

“We are in the process of mapping out where we need to beand what is realistic,” he toldthe FT.

The prospect of DHL-branded shop-fronts springing up across the US underlines the company’s ambition to become a significant force in North America. The Deutsche Post subsidiary has secured about 10 per cent of the US parcel market since its Dollars 1bn acquisition of Seattle-based Airborne two years ago.

Retail outlets would help DHL strengthen its reach among lucrative small business customers not big enough to receive dedicated pick-up services.

UPS and FedEx each have thousands of stores in the US, acting as receiving points forparcels while also offering a range of business services and office supplies.

In 2003 FedEx bolstered its retail operation via the Dollars 2.4bn acquisition of Kinko’s, a photocopying chain. UPS bought Mail Boxes Etc two years earlier.

DHL offers its services through almost 4,000 independent parcel stores and the Office Max retail chain.

It is unclear whether DHL will build its retail presence through acquisitions, organic growth or a combination. The amount of investment is also uncertain. Mr Pearson said a firm strategy could be decided by the end of this year.

DHL’s US sales grew by 52 per cent last year to Euros 4.3bn (Dollars 5.2bn). But the expansion has come at a heavy cost, with Dollars 1.2bn of investment committed and losses of Euros 495m racked up in 2004.

Mr Pearson said the US business was on track to break even by the end of next year as planned, helped by improving service quality. More than 97 per cent of deliveries have been on time for the past three months, compared with less than 90 per cent at times last year. “We have addressed integration-related teething problems,” said Mr Pearson.

He emphasised that DHL’s goal was profitable growth rather than market share gains at any cost. “Our aim is to be a viable third operator. It was neverour belief that we could get a 30-40 per cent share.”