Freight Snaps

DHL’s Strategy: Drop Free Shipping

Deutsche Post DHL Group posted a 22% year-on-year revenue uptick in its most recent earnings call. Melanie Kreis, CFO of DHL, credits the success to the company’s strategy towards e-commerce: eliminate free shipping and profit from premium goods.  

These days, free shipping seems to be the norm and is expected in order to compete with the Amazons, Walmarts, and Targets of the world; however, ultimately, the delivery cost comes back to bite the profits margins of companies. Hence, DHL decided to focus on premium goods and forgoing low-value items. 

Kreis said, “[DHL] would deliver a hand-sewn wedding dress or [other] high cost items…but not cheap apparel from China to the US.” The company’s decision to selectively choose is echoed by FedEx and UPS as these shipping juggernauts attempt to cut down on low-margin goods. 

The next business DHL, UPS, and FedEx is looking at is something Amazon has already rolled out in 6 cities: same-day delivery. Unfortunately, experiments for same-day delivery in Germany have shown lackluster results as “customer’s willingness to pay for it was rather limited,” Kreiss said. 

– Melanie Kreis (Source)