DHL increases prices by just over 2% in a decade…wow?!?

July 14th, 2009

A colleague of mine was running a DHL press conference last week and invited me along as a blogger (they just opened a big distribution centre locally).

During the Q and A one of the guys from DHL stated they have only increased prices twice in the last decade, one at 0.75% increase the other just over 1% making for ~2% increase.

That is amazing if you ask me.  As a point of comparison during that time crude oil prices (a driving cost in logistics) have gone from (inflation adjusted) $21.12/barrel in 1999 to $126/barrel in 2008! Source: InflationData.

How did they achieve it?

Well DHL has an internal measure (and belief) that they shouldn’t have to increase prices as long as they focus on productivity gains.

By driving productivity as costs increase DHL have actually been quite successful don’t you think?

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3 Responses to “DHL increases prices by just over 2% in a decade…wow?!?”

  1. Nathaniel Flick Says:

    This is a year old article, but somewhat telling that DHL is the low-cost carrier of choice, but it doesn’t necessarily make it the profit leader:

    After researching some news articles on DHL, I’m not convinced they are exactly turning much profit. In fact, when they bought Airborne in 2008 they paid 1.2 Billion and lost 879Million. Not stellar numbers.

    Other companies like UPS appear to raise their rates by 4.9/5% but with all the ‘key’ customers in their rosters it ends up being more like 2.5/3%. UPS, DHL and FedEx are simply undercutting each other in a highly competitive market. Seems like margins are pretty tight for all concerned.

    Workers at FedEx (I’ve met a few in the states) say they don’t have much say in their careers, and that includes pay raises. Unions have less and less sway in the shipping industry which could be partly to blame, but it seems that “cutting costs” ranks higher than “pleasing workers” (see Walmart for another example of this).

    Seems like DHL is just undercutting UPS and FedEx and it can because it’s owned by Deutsche Post, a foreign conglomerate. Having bought Airborne’s assets didn’t hurt either.

    Long and short, maybe DHL’s success isn’t as impressive as it looks?

    Hopefully I’m not raining on the parade. Thoughts?

  2. Ben Young Says:

    This is great to add to the discussion – from that and other information on DHL they are clearly still in a growth and market acquisition phase versus a saturated market and profit reaping mode. Their productivity drive will help maximise profits once they get to that point. What do you think?

  3. Nathaniel Flick Says:

    I think DHL is the low-margin carrier in the business and unless they acquire more assets I don’t see them growing much more. With the advent of the internet, drop-shipping, and cost cutting due to competition, their entire market is shrinking as well as their share in it.

    I don’t think you can grow a business simply by beating your competition on price unless you have volume through a near monopoly (Microsoft) or you are the only game in town (Walmart).

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