Deutsche Post's DHL expands U.S. delivery service in swipe at FedEx, UPS

[March 16, 2018]  By Alexandria Sage and Eric M. Johnson

SAN FRANCISCO/SEATTLE (Reuters) - Deutsche Post AG's DHL said on Thursday it was launching a delivery service for online retailers in eight U.S. cities, as the German logistics company takes a swipe at dominant players UPS and FedEx.

Through DHL eCommerce's Parcel Metro service, first reported by Reuters, contractors will make same-day or next-day deliveries from retailers and fulfillment centers directly to homes, the company said.

"This sector (e-commerce) offers a tremendous amount of opportunity to the logistics space," DHL eCommerce Americas Chief Executive Officer Lee Spratt said when announcing the service at an event in San Francisco.

Cowen & Co analyst Helane Becker said she believes Amazon is working with DHL to expand its presence in the United States.

"Amazon is growing 35+ percent per year, and they need to figure out a way to get stuff to the buyers. FedEx and UPS have told Amazon they won't scale with them, meaning that Amazon has to figure out a way to support their delivery network themselves," Becker said.

"It also helps that DHL's U.S. hub is in Cincinnati and that is where Amazon is building their air hub. We don't think that's a coincidence," she added.

DHL eCommerce Chief Executive Charles Brewer told Reuters Amazon is a large customer but Parcel Metro was not designed with Amazon in mind.

Amazon and FedEx did not immediately respond to requests for comment. UPS said it does not comment on competitor business strategies.

DHL has been testing Parcel Metro in Chicago, Los Angeles, and New York for the last two years, the company said. It will roll out in Dallas, Atlanta, San Francisco, and Washington, D.C. by end-2018 and look to add other global cities in the years ahead, it said.

Lee Spratt, CEO of DHL eCommerce Americas, unveils the German shipper's new urban shipping platform intended to help retailers get their products to ruban customers quicker, in San Francisco, California, U.S., March 15, 2018. REUTERS/Alexandria Sage

Parcel Metro relies on third-party contract couriers and app-based driver pools to pick up products like books, shoes, shampoo, and electronics from retailers or warehouses and deliver the items directly to households, Spratt said.

Parcel Metro will offer delivery windows ranging from two hours, to same-day, and next day, and could add a Saturday delivery option, Spratt said.

For less-urgent e-commerce orders, DHL will continue its years-long practice of handing off packages to the U.S. Postal Service for "final-mile" delivery, it said.

DHL's move is a gamble. The company lost billions of dollars on a failed U.S. expansion a decade ago. https://tinyurl.com/y9wu42dt

Parcel Metro follows DHL's plans, announced in summer 2016, to spend $137 million on seven new or expanded e-commerce fulfillment centers in the United States, where DHL currently delivers roughly 500 million pieces annually.

By comparison, UPS delivered 750 million packages during last year's holiday season alone.

(Additional reporting by Nick Carey in Detroit; Editing by David Gregorio)

[© 2018 Thomson Reuters. All rights reserved.]

Copyright 2018 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.