Companies such as Deutsche Post, whose DHL arm already offers a
range of services including help with local duties and red tape on
international deliveries, are best placed to cope, according to
Those such as Britain's Royal Mail and Belgium's Bpost that are more
focused on parcels and local markets, however, have much more to do,
Online shopping was supposed to be the big growth driver for postal
firms in an age of instant communication.
But shares in newly-privatized Royal Mail slumped 13 percent in two
weeks after it warned last month that Amazonís bid to capture a
bigger slice of deliveries would cut its revenue growth prospects by
at least half.
Amazon has roped in newspaper and magazine distribution firm Connect
for a new same-day parcel service in Britain ahead of the busy
Christmas season. The so-called "click and collect" service -- where
parcels are delivered to a pick up point rather than to a customer's
door -- follows the launch of Amazon's own delivery service last
What's more, analysts expect Amazon, and potentially others too, to
start rolling out similar services across Europe's 30 billion
euros-a-year parcels and express delivery market, leading many
investors to flee traditional postal firms.
Shares in PostNL, TNT Express and UK Mail -- as well as Royal Mail
-- have fallen 20-30 percent this year. Edmund Shing, global equity
fund manager at BCS Asset Management, says such firms have their
work cut out.
"Before becoming positive on the sector, I would like to see them
making efforts to improve productivity, adopt technologies like
softwares to optimize logistics networks, cut labor costs and have a
sustainable dividend policy," he told Reuters.
"It's a very competitive market, growth prospects are limited and
the barrier to entry is not very high. The danger for the market is
that Amazon might replicate its experiment across Europe and other
online companies such as eBay also launch their own delivery
services to cut costs."
Analysts said meeting the challenge could be painful for traditional
postal firms, many of which have already slashed jobs to cope with
the decline of letter deliveries and have unionized staff likely to
resist more lay-offs.
But some are better placed than others.
Kepler Cheuvreux analyst Andre Mulder said those included more
diversified firms, such as Deutsche Post and TNT Express, which have
strong international freight businesses.
"TNT Express has got the biggest earnings growth potential due to
cost savings,Ē he added, noting that TNT is aiming to cut its
warehouse capacity without compromising on efficiency by rolling out
new technologies, such as specialized software.
[to top of second column]
Deutsche Post, meanwhile, offers a variety of services through its
DHL logistics arm, including express courier, forwarding and
supply-chain services that go beyond basic package delivery.
This appears to be bearing fruit.
Juergen Gerdes, chief executive of Post-eCommerce-Parcel at Deutsche
Post DHL, told Reuters its parcel business was developing
"unbelievably and dynamically and we have only touched the tip of
the potential that the future will bring."
Earlier this year, the firm said it might even re-enter markets it
had exited such as France or Britain.
Investors have rewarded Deutsche Post with a higher valuation than
many peers. Its stock trades at 14.2 times forecast earnings against
12.3 times for Royal Mail, according to Reuters data.
Other postal firms say they are also fighting back.
UK Mail, for example, is investing in a new fully-automated central
hub near Coventry, central England, to increase sorting capacity and
Bpost is increasing delivery options for customers, including
installing parcels lockers in Belgium, while PostNLís Whistl
business is trialling electric "AirWheel" unicycles to speed up
delivery in urban areas.
Some investors, however, want to see signs that such strategies are
working before putting their money back into postal stocks.
"I participated in Royal Mailís IPO, but took profits shortly
afterwards," John Smith, senior fund manager at Brown Shipley, said.
"I would like to see quality management, sustainable dividend
payouts and strong growth potential before returning to the sector."
(Editing by Lionel Laurent and Mark Potter)
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