Fighting the duopoly: DHL has a long path ahead as it tries to make inroads into the US express delivery market. It will be fighting for market share from new headquarters in South Florida

South Florida CEO, May, 2004 by Rochelle Broder-Singer

* In one of the largest corporate relocations to South Florida in a decade, delivery and logistics company DHL moved the headquarters of its western hemisphere operations--DHL Americas, which includes the familiar delivery brand DHL Express and the company's logistics operations--from California to Plantation just over a year ago. The move promised to bring about 400 new DHL employees here. It took on more significance after DHL completed a $1.05 billion acquisition of ground shipper Airborne Inc. last August, announcing in October that Airborne's Seattle headquarters would also move here.

[ILLUSTRATION OMITTED]

From his new base, DHL Americas CEO John Fellows faces a huge task as he tries to move into the US express delivery market. Outside the US, DHL--based in Brussels and owned by Germany's Deutsche Post World Net (DPWN)--is the No. 1 player in nearly every country. "The domestic market in the US is the largest single market for express distribution," says Fellows. "So if you're going to be the No. 1 player everywhere else in the world, you should at least have a credible position in the US." Right now, that's something DHL doesn't have in a market dominated by UPS and FedEx. Airborne Express, the No. 3 carrier before DHL purchased it, had little more than a 2 percent market share of US ground delivery, while DHL itself had about a 1 percent share.

"We expect to grow significantly, but that doesn't mean we will overtake our two giant duopolists." Fellows says. In fact, analysts expect DHL's US operations to lose money for several years. Fellows says he will compete by taking advantage of DHL Americas' small size, which allows it to adapt quickly to changing demand. "Within the US. our competitors are very inflexible and often arrogant. We'll ensure that our brand is flexible," he says. DHL already has an 18 percent share of international express parcels leaving the US, a customer base the company hopes to move to its domestic side.

Buying Airborne's operations was a quick way to ramp up US ground capability. Fellows has integrated the two corporations: he now has about 40,000 employees and associates (outside contractors) in the hemisphere, 1,500 of them in South Florida. Increasing ground and air capacity in the US are top priorities, as is bringing the DHL brand to life, through what Fellows says will be "significant promotional expenditures over the next few years."

One hurdle, at least, has been crossed. Prior to the Airborne Inc. acquisition, DHL was challenged in court by Fedex and UPS. They argued that DHL was unfairly helped by its parent company's monopoly on Germany's postal service. They also argued that DHL Airways, the company's main air carrier, in which DPWN owned a minority stake, was not a "US citizen." (Federal law requires airlines in the US to be majority owned by US companies.) DPWN sold its stake in DHL Airways to former Burger King CEO John Dasburg (who renamed it Astar Air Cargo), and in January the airline had its US citizenship confirmed by a federal judge.

It's a matter that Fellows is relieved to put aside, as he concentrates on building the business. In the past, the US was not a priority for DHL. The company, originally founded in San Francisco, first looked westward, building a strong base in Asia, and then eastward to Europe. Its acquisition by DPWN reinforced that trend. Only in the past year did the company begin to focus on the US. Moving headquarters to South Florida was part of that, giving the company better connectivity to the US and Europe, and the opportunity to take advantage of the Latin American headquarters already in Plantation. Right now, DHL is subletting space and co-locating with the Latin American operations in Plantation and Miramar. By the end of the year, says Fellows, a final location will be selected for what he expects will be a $300 million corporate headquarters.

No matter where in South Florida DHL finally locates, having another corporate headquarters here can't hurt. "Forget what the amount of jobs are and the capital investment. That kind of thing in South Florida makes a statement," says J.T. Tarlton, president of economic development organization The Broward Alliance. "To have that kind of organization here raises the bar for everyone and sends a message to everyone about what's in Southeast Florida.... People say, 'Hey, DHL has its headquarters in South Florida. What do they know that we don't?' It attracts the interest of other companies."