June 18, 2004Package Pickup & DropoffDHL is going after the express and ground shipping business dominated in the United States by FedEx and UPS, which together control about 80 percent of the market. Courier targets rivals with $150 million ad campaign World courier giant DHL launched a $150 million U.S. ad campaign this week to tell shippers it has trucks, people and something to prove. DHL is going after the express and ground shipping business dominated in the United States by FedEx and UPS, which together control about 80 percent of the market. The campaign, including print, Internet and network and cable TV spots, will run over six months. The first TV ad, which began airing this week, shows FedEx and UPS couriers stopped at a railroad crossing while a train loaded with DHL trucks speeds past. A.G. Edwards analyst Donald Broughton questions DHL's thinking. "You can spend over 100 million on ads if you'd like; that in and of itself doesn't change marketplace conditions," Broughton said. "FedEx had some success in expanding its ground efforts because there wasn't an alternative to UPS on the ground. Customers like alternatives, but DHL is missing the point because the incremental value of alternatives drops rapidly when you already have alternatives." DHL estimates it controls about 8-9 percent of the domestic express and package market. "We don't need to increase our market share to reach our financial goals in the U.S.," said Baker. "But obviously, we want to have a strong third choice in the market." If DHL is successful in providing competitive service with competing prices, Broughton expects UPS will feel the loss more than FedEx because UPS dominates the ground market. "I'm sure FedEx will give DHL the attention it merits, but I don't suspect it's going to cause many sleepless nights for Fred Smith," Broughton said. "DHL is a minor player." The struggle for DHL is perception, said transportation analyst Satish Jindel with S & J Consulting Group. "They do have something to prove and that is that the service and choices are better than what customers had with Airborne," he said. "The perception is that Airborne was not as good as UPS and FedEx." DHL, the largest international courier, started in San Francisco in 1969. It began its plan to reassert itself in the United States last summer with the purchase of the ground portion of U.S. air cargo carrier Airborne. It has spent the intervening months integrating its network. "Now that that is complete, it is time to come out and announce in a big way that we can provide service in every Zip Code in the country," said DHL's Baker. The air operations became ABX Air. DHL will rely on ABX and ASTAR, formerly DHL Airways, to provide its express network, although it owns neither. FedEx and UPS hotly contested the legality of ASTAR, arguing that while the airline is owned by American interests, the management decisions are made by majority owner, Germany's Deutsche Post. Under U.S. law, at least 75 percent of a domestic airline's voting stock must be owned or controlled by Americans. The carrier's operations also must be controlled by U.S. citizens. The Bush administration in mid-May found that ASTAR was not controlled by foreign interests, allowing it to fly in the United States and dealing FedEx and UPS a bitter blow. "While DHL may have a new paint job, this is not a new competitor," said FedEx spokesman Howard Clabo. "Customers have been choosing FedEx over our competitors, including DHL and Airborne, for the last 30 years because we've proven time and time again that we are absolutely, positively the best choice for virtually any transportation need anywhere in the world." Last week, the U.S. Postal Service selected FedEx Express as the transportation and delivery carrier for its Global Express Guaranteed operations, its premier date-certain delivery service in more than 190 countries. DHL, which had held the contract since 1999, says it lost money on the deal due to low volume. FedEx will begin the contract July 1, carrying overseas U.S. mail to 194 countries. "It's big for us because we are working with the U.S. Postal Service internationally," said FedEx spokeswoman Lourdes Pena. commercialappeal.com - Memphis, TN: Business Posted by Craig at June 18, 2004 02:02 PM |