Could Our Parcel Duopoly Become a “Triopoly?”

In the world of parcel shipping, FedEx® and UPS® have been the “Big Two” for a long time. All  of that could soon change with the introduction of a third option—or a reintroduction, in this case.

But first, let’s start with a rewind.

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Many may remember when DHL became part of the American parcel ecosystem in 2003; it was purchased by the Deutsche Post in 2001 and from there set its sights on the American market. Despite successfully crushing the competition in Europe, DHL wasn’t able to do the same in the US. As consumer demand went down and DHL’s attempts to innovate were squashed by the FedEx and UPS giants, DHL was eventually forced to withdraw from the US.

And now for the introduction: DHL is taking a mulligan at the US market. According to DHL’s press release, the objective is to exploit the rapidly expanding global B2C eCommerce market for cross-border shipments. The segment is expected to grow from $400 billion today to a worldwide total volume of $1 trillion by 2020.

DHL eCommerce CEO Charles Brewer has said there are very few industries that provide “such a promising outlook” as eCommerce. It is projected that one billion people will shop online and across borders by 2020. The US is predicted to be the most popular origin for 25% of web consumers.

The US has become comfortable with the current duopoly. The return of DHL means we could soon have a “triopoly,” as DHL has recently begun pouring money into its US operations to capitalize on the projected global eCommerce boom. To date, DHL has now invested $108 million to upgrade its US hub in Cincinatti, OH; moved its Memphis-based express operations to a larger facility in a $2.5 million move in January 2016; and recently announced the opening of a 38k square foot service center in Chicago. To capture a larger share of the logistics services for that market, DHL said their eCommerce group would build eight US fulfillment centers by 2020. The company will also enhance two similar facilities it recently opened in Columbus, OH and Los Angeles.

In other words, America’s parcel pie is about to get even bigger—and DHL wants their piece. Whether or not there is space in the US parcel duopoly for another competitor has yet to be determined, but shippers should understand the impact of a third option. This may even include the innovations their existing carriers may come up with to knock out their newest competition.

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