This article first appeared in The Edge Malaysia Weekly on November 18, 2024 - November 24, 2024

DHL Express, the express service arm of German logistics giant DHL Group, has managed to maintain its market leadership in Asia-Pacific, including Malaysia, even as competition intensifies, with more tech-savvy players such as Singapore’s Ninja Van, Indonesia-based J&T Express, Hong Kong-based Lalamove and Shopee’s in-house logistics arm Shopee Express engaging in a fierce price war to capture market share.

But other local incumbents have not been so lucky. Pos Malaysia Bhd (KL:POS) and GDEX Bhd (KL:GDEX) are still struggling to find their footing amid the major shake-up of the last-mile delivery market in recent years.

DHL Express CEO for Asia-Pacific Ken Lee believes the company’s focus on PGQ — people, growth and quality — plays a big part in its success. “We always believe that if you have good and motivated people, you will definitely be able to drive growth and quality. Many things we do today — be it investing in infrastructure or building up a good IT platform — are things people can easily do. But what we are proud of is that we invest a lot in our people because at the end of the day, whatever tools and systems that you put in place in a company, you need people to bring it forward.

“On that front, we have a training programme called ‘Certified International Specialist’ where every team member is educated on the company’s history, cultural heritage and the various functions. Our own senior managers facilitate and deliver these courses to our people. We do this consistently in every country [we operate in] so all our employees, regardless of nation, speak the same business language. At the same time, our customers, regardless of where they do business with us, experience the same high quality [of service]. I think that sets us apart from the rest [competitors],” he tells The Edge in an interview.

DHL Express employs more than 100,000 people across its international delivery network that spans over 220 countries and territories. In Malaysia, it has 1,300 employees.

“Today, we are the market leader for express service in Asia-Pacific and Europe, with a share of 57% and 51% respectively. As for the Middle East and Africa regions, we have a market share of 63%. Globally, we have a market share of 43%,” he says.

In the US, however, DHL Express has a market share of 21% as the express delivery market there is dominated by United Parcel Service (UPS) and FedEx Corp.

“The other two players are more focused on the US market, while we are more interested in cross-border shipping,” Lee says.

Malaysia is now among DHL Express’ top 30 markets in the world and top 10 in the region in terms of revenue. DHL Express is the leader by far in the local last-mile delivery market, with a dominant market share of 63%.

Another big advantage for DHL Express is its aviation network.

DHL Express managing director for Malaysia and Brunei Julian Neo Poh Choon says the company serves Malaysia via four dedicated aircraft that operate t wo flights to Hong Kong and Singapore from Penang and Kuala Lumpur, and also works with partner airlines including Raya Airways Sdn Bhd to provide over 60 weekly flights.

“It always helps when you have your own aviation network. It helps even more if you can design your aviation network in such a way that you can flex it up or down depending on the volume demand. But if your aviation network is not agile enough, then you are at the mercy of the volumes in the market. I am very proud that we have a robust aviation network globally where we are quite flexible in redeploying our aircraft from one part of the world to another if the demand from the other part is higher. That is one of our success factors,” says Lee.

“Let’s talk about seasonal demand, for instance. Sometimes, during the peak season, we might even have to charter a couple more planes to service our clients. Tomorrow, if there is a need for us to upgrade the Boeing 737 to a bigger aircraft (due to a surge in) volume, we have that capability. If you add up all the air cargo space of our own aviation network and partner airlines that we work with, we could well be the largest virtual cargo airline in the world,” he adds.

DHL Express (Malaysia) Sdn Bhd has proved a major beneficiary of the e-commerce boom during the Covid-19 pandemic. Its net profit crossed the RM10 million threshold for the first time in the financial year ended Dec 31, 2021 (FY2021) at RM14.9 million. Net profit grew further by 16% to RM23.8 million in FY2023, from RM20.5 million in the previous year, Companies Commission of Malaysia (SSM) data showed.

According to Lee, DHL Express sees continued growth in Malaysia as a beneficiary of the “China plus one” strategy and e-commerce sector, and recently invested RM300 million to enhance its operations at the Kuala Lumpur International Airport (KLIA). At 13,422 sq m, the new facility is three times the size of its previous premises at the Sultan Abdul Aziz Shah Airport in Subang, Selangor, and can handle four times more shipment volume. It has also set up two gateways in Kuching, Sarawak, and Kota Kinabalu, Sabah, to support businesses operating in and out of the two states.

“We have been investing ahead of the curve. We do not wait for the volumes to come before we invest. For instance, our gateways in Kuching and Kota Kinabalu may not be the biggest that we have, but at least we are prepared for the day when these places boom, we will be there early compared with our competition.

“How we invest is all guided by our customers. When we invest in a country like Malaysia, it is part of a network business. We actually built this new facility at KLIA not just for Malaysia but for the world that wants to do business with Malaysia. We don’t pick markets, but where our customers want us to go,” he says.

At the group level, DHL Group’s revenue has come off its record high of €94.4 billion in 2022, reaching €81.8 billion in 2023. Net profit fell to €3.7 billion in 2023 compared with €5.4 billion in the previous year. In the first half of 2024, revenue was €40.9 billion compared with €41 billion a year earlier, while net profit came in at €1.5 billion from €1.9 billion.

Lee says freight volumes have normalised after the years-long boom following the pandemic. “However, the group’s volumes are still above pre-pandemic levels.”

To Lee, start-ups like Ninja Van and J&T Express don’t compete directly with DHL Express, despite operating in the express service segment. He says the value proposition of the newcomers is very different as they focus on last-mile logistics, while that of DHL Express is on time definite international (TDI), which is cross-border transport and delivery service with predefined, standardised transit times; plus their customer bases are slightly different.

In Malaysia, national companies and multinational corporations account for 60% of DHL Express’ shipping volumes, with the rest coming from small and medium enterprises (SMEs).

“In terms of customers, 80% are SMEs and 20% corporate. The SMEs have been growing because we have been focusing on them in the last five years, helping them expand their business outside Malaysia,” says Neo.

“In the whole shipment process, some of these new players only focus on last-mile delivery. For DHL Express, we are most interested in TDI, which refers to someone wanting to send a shipment from Country A to Country B. It is a cross-border international shipment. The entire suite is done by our own people,” says Lee.

“Undeniably, there will be customers whose deciding factor is price. But what we want to do at DHL Express is to provide a higher service quality. For customers that really value transit time and reliability, they will still use us. And they believe that the price they pay for and the value that they get is worth the price.

“Buying market share [through price dumping] is not sustainable. You have to win market share. [Or] at some point in time, you wouldn’t be able to sustain that business model,” says Lee.

He is of the view that some people have underestimated the complexity of what seemingly appeared to be a simple industry. “How difficult can it be to pick up shipments from one end and go to the other end? Seems easy. But to keep that going and running, especially so for us in 220 countries and territories, the customs and local regulations may differ. You wouldn’t know until you get into it to realise how challenging it is.”

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