There will be little good news when the 20 members of Deutsche Bahn’s supervisory board sit down for their regular meeting on Wednesday. The businesses of the state-owned rail company are in poor shape, and its restructuring plans are still in their early stages.
But in the midst of Deutsche Bahn’s troubles, there is promising news coming from subsidiary Schenker Logistics. The company that handles freight traffic by air, sea and road will be getting into the parcel business in 2016 after letting the online boom more or less pass it by.
“Driven by e-commerce, the European parcel market offers excellent growth opportunities,” Schenker boss Ewald Kaiser told Handelsblatt.
Schenker believes it can reach a business volume in the hundreds of millions of euros, but doesn’t want to run the complicated business itself. That’s why the company is partnering with GLS, an Amsterdam-based parcel service and subsidiary of the United Kingdom’s Royal Mail. In return, Schenker will take over GLS’s general bulk cargo shipping business.
Schenker is entering a highly competitive territory as the parcel market is growing by at least five percent annually.
The Deutsche Bahn subsidiary will also offer the parcel service to its corporate clients, for which it has previously only transported cargo. This service is of interest to companies and shippers that send orders directly to end customers.
Schenker, however, is entering a highly competitive territory as the parcel market is growing by at least five percent annually. Between 2010 and 2014 alone, the revenue of express and parcel shipments grew from €14 billion to €16.6 billion ($15.9 billion – $18.8 billion).
The market is budding, too. Total shipments are expected to increase from 2.8 billion last year to 3.8 billion in 2019, according to German industry association BIEK. But it’s a fierce battle for customers, particularly in the extremely low-margin home delivery business.
Deutsche Bahn will surely run up against formidable competitors in the parcel service. In Germany, the Deutsche Post and its subsidiary DHL continue to be the market leaders, followed by GeoPost’s DPD, U.S.-based UPS and Hermes, a subsidiary of Hamburg mail-order company Otto. Those three companies together make up half of the industry revenue in Germany. GLS is currently fifth among parcel delivery services in the country.
Schenker, which will rollout its new parcel service across Europe at a later date, is not entering wholly new territory. The company has operated a parcel service in Scandinavia for many years. In Sweden and Finland, there are DB Schenker Logistics parcel stores, with some 1,600 in Sweden alone where companies and private customers can pick up and return packages. But only in Germany will GLS take over service with customers. Schenker will still operate its parcel service in Norway and Poland.
Deutsche Bahn acquired Schenker 13 years ago to boost its logistics business and not just its rail lines. DB Schenker Logistics is Deutsche Bahn’s largest subsidiary in terms of sales with €14.9 billion, and it employs 64,000 people worldwide, including 15,500 in Germany. Deutsche Bahn as a whole has €40 billion in annual revenue and 300,000 employees, including 200,000 in Germany.
Dieter Fockenbrock is chief correspondent on the Handelsblatt companies and markets desk. To contact the author: email@example.com