Interview – Pablo Ciano sees ‘Limitless Growth’ for DHL eCommerce

DHL eCommerce’s CEO, Pablo Ciano, discusses the international parcel operator’s ‘limitless growth’ strategy, top priorities for acquisitions, partnerships and investments, and outlines market trends and decarbonisation steps in an in-depth interview with CEP-Research.

The strategic expansion plans reflect DHL Group’s overall M&A strategy, which focuses on smaller ‘bolt-on’ acquisitions with a mid-sized budget rather than any billion-euro mega-deal, such as a bid for DB Schenker.

And they come after DHL Group’s international parcels business achieved a solid performance last year despite weak consumer demand and challenging trading conditions in many parts of the world.

In 2023, DHL eCommerce increased revenues by 2.8% to €6,315 million, although this was a 5.6% increase when excluding negative currency effects of €174 million. Europe is the biggest region with revenues of €3,465 million (+7.1%) in 2023, followed by the Americas with €2,190 million (+0.1%) and Asia with €659 million (-8.5%).

Volume figures are not disclosed, although DHL Group noted in its 2023 annual report that volumes decreased slightly in some markets last year on account of “geopolitical conflicts and the marked increase in the cost of living”. EBIT declined by 24.9% to €292 million in 2023 due to higher costs and network investments.

CEO Interview

Speaking at the recent opening of the new DHL International Logistics Centre in Poznan, Poland, Argentinian-born Ciano gave a broad overview of the international parcels operator’s recent developments, its competitive positioning around the world and some of the planned next steps.

CEP-Research: You've been CEO of DHL eCommerce now for about a year and a half. Where does the division stand now and where do you go from here?

Pablo Ciano: “I think that in the last 18 months, we have succeeded in clearly articulating the DHL eCommerce strategy, which consists in becoming the preferred domestic parcel delivery company for e-commerce and also what we call deferred cross-border.

“We operate today in 15 countries. But, of course, it doesn't stop there from a long-term perspective. We have a very ambitious inorganic agenda in our roadmap that, from here through 2030, will very likely incorporate more countries to the portfolio.

“The cross-border deferred vision that we have today is mainly executed intra-Europe where we cover the entire continent with our network of dedicated companies and partners. But our cross-border deferred ambition is not stopping there because we are developing cross-border services outbound from India, Turkey into Europe and cross-Atlantic as the next phase of cross-border expansion.

“Our strategy is called Limitless Growth because that's the potential that we see for these two segments (domestic and cross-border deferred).

Investments

“The last 18 months have also been very good in terms of finishing the investments that we started two or three years ago. The Poznan hub is an example where we are investing in capabilities to support our domestic and deferred cross-border business but it is not the only one. We have upgraded 18 hubs around the world, including eight in the US, three in the Netherlands and two in India.

“We have also put a lot of focus on our out-of-home network, in particular in Europe. Today, we have 125,000 PUDO locations. That is absolutely critical in terms of capabilities for growing in B2C.

Turkey acquisition

“Of course, a very important development in the last 18 months is that we added one more country, Turkey. We acquired a leading company, MNG Kargo. It’s a great business, great management, a lot of customer centricity, growing at 40% year over year, and we plan to continue investing in Turkey.”

CEP-Research: What about the branding in Turkey?

Ciano: “We are still making up our minds. For sure, we're going to co-brand the business. The DHL brand is a very well-known brand in Turkey. It’s very, very strong because of the other business units in the market.”

CEP-Research: And what about investments in Turkey?

Ciano: “We are going to double the capacity. Right now we have 20 sorting centres. We are going to automate some that are not automated yet. We're going to expand capacity from here to 2026. We are going to have the ability to process 1 million shipments per day in Turkey…Today, we're doing 500,000.

Turkey-Europe deferred service

“What’s also very important is that we're going to be developing a cross-border Turkey to Europe deferred service. Today, the majority of the merchants in Turkey need to fly in order to meet reasonable transit times. We have unique capabilities to develop a deferred cross-border service from Turkey to Europe.

“We have the MNG capabilities but we also have the ability to do (customs) clearance on the road while driving from Turkey to here (Poznan). In this building we have a bonded area where we could also do the clearance. And this facility can connect not only to Germany but also to all the rest of Europe.”

More M&A to come

CEP-Research: MNG was the first significant acquisition for some time. How do you see the need to potentially make acquisitions in order to strengthen your operations and activities in certain markets?

Ciano: “The current portfolio is pretty strong: 15 countries, over €6 billion revenue, 2 billion shipments approximately. But of course, the potential is much bigger. There are some areas where we could benefit from a stronger presence. Eastern Europe is on the radar. We don't rule out eventually some type of participation in some other countries in Latin America.”

CEP-Research: What's your thinking about different kinds of partnerships?

Ciano: “Partnerships are a critical part of our strategy. We operate a hybrid network of our own assets and third-party assets. We believe that we don't need to own everything everywhere. There are many places where strong partnerships will give us what we need.

“A good example is what we did with Poste Italiane last year. An extraordinary collaboration there gives us a unique capability to utilise the 40,000 PUDO sites of Poste Italiane, with downstream access to all of their networks. And they are going to be selling our cross-border services. So they access our entire network and we leverage on their selling capacity. The last element of that partnership is a joint venture that we have established for lockers in Italy with Poste.

“In addition, we have a great partnership with Austrian Post for Austria but also for some countries in Central and Eastern Europe, which is something that we value a lot and we like very much working with them.”

CEP-Research: What about France? It looks like a big gap.

Ciano: “We have very good commercial partners there. We don't have any partners yet at a strategic level. For now, it's a market that we can serve for cross-border. We don't compete domestically within France and we're not planning to. For cross-border, we are good with the partners that we have.”

Focus on India

CEP-Research: Let’s look overseas. What's the picture in Asia?

Ciano: “In Asia, the focus is on India, where we have a fantastic business (Blue Dart). We are the market leaders by far on the domestic (air) express service and we are growing on the ground, both for e-commerce and B2B services. But we are open to inorganic moves in India. It's something that we have been evaluating for a while. Tremendous opportunity, great position, strong business.

“We have two other small operations, one in Thailand and the other in Malaysia. In those two markets, we are observing how the market landscape evolves because it is very competitive and overcrowded. You have six or seven strong players and all of them are losing money. We prefer to be a niche player for now. Beyond that, we don't have any plans in the short term to expand in Asia beyond those markets.”

CEP-Research: What is the situation with China?

Ciano: “Of course, the DHL Group has a big presence in China. But from a DHL eCommerce perspective we are not participating (in the market) and we are not planning to for now.”

US growth

CEP-Research: How about your home region of the Americas?

Ciano: “In the US, we have a very good presence with our business there. We don't do last mile, we inject downstream into USPS. We do the first mile and the middle mile. We have 19 sorting centres and we process 500 million shipments per year in the US. We are the second largest partner to USPS behind Amazon. It’s a great business with a very good value proposition to our customers. We are growing 20% year over year and there is a lot of opportunity. There's a lot of inbound into the US that is benefiting our services.

“We have a strong relationship with DHL Express and we are flying whenever needed on the DHL aviation network within the United States, which is something that the competition doesn't have the luxury of doing. And also leveraging on the Supply Chain contract logistics and fulfilment capabilities where we have a lot of customers in common. We can offer a bundled type of service: fulfilment plus last mile delivery.”

CEP-Research: Who are you competing with in the US?

Ciano: “We don't compete with FedEx. UPS has a similar product to ours that injects into USPS. There are two or three smaller players doing exactly what we do. But in our niche (USPS downstream access) we are leaders with 35% market share.

Eyeing Mexico + Brazil

“In Latin America we do not have a presence in any of the domestic markets. There are two markets there that are really worth exploring, Mexico and Brazil. We have both countries on our radar in terms of inorganic moves. If we do something there, it will be inorganic. We don't want to build it from scratch. It's not a priority for the next 12 months, but definitely is part of the of the roadmap.”

CEP-Research: You were in Chile but then pulled out. Wasn't it the right place or the right time?

Ciano: “I think that at that point in time, there was an expansion that in some markets didn't have a clear value proposition. And second, it was a matter of execution as well. The way growth was being executed in some of those markets was not ideal.

“In some of these markets, unless the markets are big enough, doing something organic from scratch is a huge undertaking. And we need to be willing to invest a lot of time and energy. Moves like the one in Turkey – where we buy a great company, make it better with capital, cross-border expansion, access to group resources – we are much better doing than an organic play in one small or very small country.”

CEP-Research: Let's move on to market trends and customers. And what about Temu and Shein?

Ciano: “In terms of market trends, there is an ongoing and accelerated trend towards Out of Home. That is absolutely critical in particular in Europe. That is even further accelerated by C2C marketplaces like Vinted.

“Another trend, of course, is what's going on with the big Chinese marketplaces. If you look at markets like the UK, the Netherlands, 30% to 50% of the market growth is because of Shein and Temu, mainly. Of course, we have a great relationship with those two companies. We do business with them in almost every single country, from US all the way to Asia. And we are likely going to continue doing so.

Decarbonising delivery

“The other big trend is decarbonisation of the last mile. We want to have linehauls with HVO that are decarbonised. A lot of customers want to have a customised solution that is decarbonised.”

CEP-Research: Do you have a green product as such?

Ciano: “We do offer a GoGreen product through certificates. It’s not insetting but certificates to decarbonise afterwards. As eCommerce, our emissions are much lower per parcel and the majority of the emissions are either linehaul or last mile. So we are more geared towards fully decarbonising our operations.

Internal collaboration

“Something else that has accelerated for DHL eCommerce recently is the collaboration with the other business units in the group. For example, our business inbound into Germany with P&P is growing dramatically. We are doing pickups and deliveries for Express in India through Blue Dart. This is very beneficial and gives us some capabilities that the competition doesn't have.”