DPDgroup is focusing on delivering a successful peak season boosted by record volumes but as the second wave of the Covid-19 pandemic creates new operating challenges, CEO Boris Winkelmann told CEP-Research in an exclusive interview.
Like many delivery companies, the international parcels subsidiary of French postal group La Poste has seen B2C volumes soar since March as coronavirus pandemic restrictions generated dramatic growth in consumer online shopping and created a ‘continuous peak’ for parcel carriers. B2B volumes, however, have suffered from retail closures and weak demand.
B2C surge and B2B comeback
Last year, DPDgroup delivered a total of 1.3 billion parcels. This year, it saw an overall 26% rise to 425 million parcels from April to June 2020, when lockdown measures were a reality in most European countries. High growth has continued consistently since then despite an easing of restrictions, with a 30% rise in September, powered by a 68% increase in B2C volumes.
“June was a kind of peak, then growth stayed at high levels of 20-25% in July and August, and September picked up again,” Winkelmann said.
“But there is one difference. In September for the first time since the lockdown B2B is positive. B2B growth has come back at around 6% compared to September last year,” he underlined. This B2B recovery was initially generated by shops restocking inventory and then by a kind of post-lockdown ‘shopping spree’ in big city centres, he explained.
Meanwhile, DPDgroup is continuing to see “pretty stellar” B2C growth in many markets, including over 100% in the UK and Ireland as well as Brazil and “in excess of 50%” in Germany, he pointed out.
Agile B2B carriers switch to B2C
These market trends have meant big changes at some DPDgroup businesses. “I’m particularly pleased and to a certain extent positively surprised by the agility of our business units that were very much B2B before this crisis and their capability literally within weeks to adapt and find ways of growing in this 2C environment,” Winkelmann said.
As examples, he highlighted Italian subsidiary BRT, which has increased its B2C volume mix by 10 percentage points this year, DPD France, with 70% B2C growth in September, Brazil’s Jadlog and DPD Ireland.
“That’s one of the key strengths of this network, that it’s really built on entrepreneurs. They have the responsibility because we are very decentral. This gives them the motivation to act the way they do and it’s proving to be very successful. There’s no ‘one size fits all’," he commented.
Fresh food boom
One clear growth area has been online food deliveries, prompting the launch of new services in countries such as Belgium. “In this B2C surge the food segment is extremely dynamic. Be it food boxes such as for Hello Fresh or fresh food, which is going through the roof, so we are looking at extending that to other countries,” the CEO said.
DPDgroup is also seeing a surge in ‘circular economy’ shipments, such as low-value second-hand clothes sold through platforms such as Vinted. In response, it has launched an inexpensive C2C ‘shop-to-shop’ offer, enabling consumers who sell items online to take them to their nearest DPD parcel shop and have them shipped to the parcel shop closest to the buyer for collection.
Lockdown hits parcel shops
However, this year’s lockdowns “have not helped” deliveries to alternative locations such as parcel shops due to extensive retail closures in many countries. For example, about two thirds of the Pickup network in France had to shut down in March/April, and about one third now in November.
In terms of parcel lockers, Winkelmann said DPDgroup’s network “isn’t comparable yet” to compensate for the impact on parcel shops, although self-service terminals had “found their niche” in countries such as Poland and the Baltics. “Even though every market is different, there is surely something that we need to accelerate on locker deployments,” he commented.
Record volumes and delivery challenges
Looking ahead, Winkelmann said DPDgroup is expecting a record-breaking peak season during November and December with high B2C growth driven by the latest lockdown restrictions, the Black Friday/Cyber Monday online sale promotions in late November – early December, and then the run-up to Christmas.
Overall, DPDgroup expects to deliver close to 300 million parcels at peak 2020, up by a third on last year’s 220 million items. This will include 2 or 3 peak days, each with some 14 million deliveries, including on Cyber Monday (November 30) and in the week before Christmas. “That is 100% more than the current daily volumes. So, a doubling within the next weeks,” Winkelmann underlined.
In general, however, parcel carriers face tougher operational conditions than during the first lockdown in the spring, according to the DPDgroup CEO.
“As we move into the second lockdown, we expect a pretty challenging combination of things,” he explained. “The second lockdown is less severe on B2B than the first one. Many shops are open, more businesses continue to work. So B2B activities shouldn’t be as impacted as in March and April.
“The other big difference is that schools are open and many more people are going to work. That means more traffic and people are less at home. So while in the first lockdown you could handle a surge in B2C volumes in very favourable circumstances – empty streets and people at home – this time it’s not going to be that easy. So the overall conditions are much more challenging than in the first lockdown."
Capacity expansion for peak 2020
In response to this situation, DPDgroup is adapting operations, increasing capacity and workforce, and undertaking other measures. Contactless delivery, masks and social distancing will remain the norm to protect staff and customers.
Across the group, 22,000 temporary workers are being taken on, with 5,000 people in operational facilities and 17,000 drivers for collections and deliveries. Up to 400 additional international linehauls have been added for the peak period.
Operating capacity has been increased this year at 120 locations, including Amsterdam, Birmingham, Brussels, Budapest, Paris and Warsaw, in the network of 1,200 hubs and depots. These include short-term ‘pop-up’ depots in several countries purely for peak season.
“We think we are well-prepared as far as the means are concerned,” the DPDgroup chief said.
Close collaboration with customers
Moreover, DPDgroup is holding intensive talks with major customers to ensure both sides collaborate as much as possible to ensure smooth operations during the next two months.
“We are having extensive conversations with our customers, the large shippers, so we have good alignment of volume expectations, of volume corridors – minimum volumes and maximum volumes. We will have to be very well synchronised to make sure that everything works well,” Winkelmann said.
In terms of consumers, he noted that DPDgroup, like many others in the industry, is encouraging people to shop early for Christmas. “Of course we will fulfil our commitments within the capacity we have but if many more consumers come at a very late moment, it would be difficult for us, and the entire industry, to be able to cope with that.”
Peak surcharges in some markets
Meanwhile, some DPD units are introducing peak season surcharges in a range of €0.50 – €1.00 per parcel to cover their additional operating costs. DPD Germany, for example, is introducing a surcharge of €0.70 per parcel.
“We do have several countries that are implementing surcharges,” Winkelmann confirmed. “Where there are surcharges it is because we are way over capacity and the investments need to be compensated.”
He emphasised: “Because we cannot provide extra capacity to everyone, it is those who want the extra capacity who will have to contribute to this extra effort. So it is not extra margin, it’s compensation for the 22,000 extra employees, the linehauls, the pop-up depots and all that infrastructure that costs extra money.”
Overall, the DPD group chief concluded: “I want us to deliver a good peak in these unheard circumstances with a second lockdown two months before Christmas, safely and with good service quality to the highest number of customers possible.”
- CEP-Research will publish a second part of the interview, covering topics such as how DPDgroup plans to cope with the end of the Brexit transition at the end of December, closer collaboration with retailers as their business model is transformed, and moving faster on green urban deliveries.
