Deutsche Post Tests Drop-Off Boxes to Spur Online Retail

Deutsche Post AG is testing secure boxes installed at people’s homes to enable a drop-off even when the recipient is out as the German mail service seeks to boost deliveries of food and consumer goods in its home market.

The company, Europe’s largest mail service, is also upgrading its handling hubs to speed deliveries, and may team up with major retailers to expand the business, Chief Financial Officer Lawrence Rosen said in Frankfurt yesterday. The company is testing the boxes first in Bonn, where it’s based, he said.

“Online grocery shopping in Germany is starting and growth is very fast,” Rosen said in an interview. “We think it’s going to be a strong business.”

Shoppers in Europe’s biggest economy are embracing Internet purchasing after previously lagging behind the U.K. and some U.S. locations such as New York, Rosen said. Deutsche Post has a 40 percent share of the wider Germany parcels market, handling 970 million items there in the past four quarters. Demand is likely to grow by as much as 7 percent a year, led by web-based buying, the company estimates.

Deutsche Post is pushing online shopping partly to help offset declining demand for traditional letters. In the U.K., people make 11 percent of clothing purchases online, according to market leader Marks & Spencer Group Plc, which said May 8 it would speed up deliveries as it targets 1 billion pounds ($1.6 billion) of e-commerce sales by 2014.

Tesco Switch

In the food business, Tesco Plc, Britain’s top retailer, said last month it would scrap 100 supermarket developments and focus on expanding Internet-based grocery transactions that rose 13 percent last year, together with convenience stores.

Deutsche Post is spending 750 million euros ($965 million) on automation in preparation for handling more food and medicine and to move toward one-day deliveries. It’s also helping smaller retailers get online via its Mein Paket shopping portal, and owns a stake in web-based supermarket

Away from the postal business, Deutsche Post’s DHL unit is benefiting from a 40 percent share of time-definite express shipments in Asia after FedEx Corp., United Parcel Service Inc. and TNT Express NV failed to invest sufficiently there, Rosen said.

“We’re adding new routes to allow for faster service,” he said. “We aren’t resting on our laurels. We are basically doing everything we can to build on that leadership position.”

Profitability at DHL’s express business last year was three times that of the bigger supply-chain unit, and twice that of the cargo-forwarding division, which competes with Kuehne & Nagel International AG, the No. 1 sea-freight forwarder.

M&A Recedes

“Kuehne has done a better job on efficiency,” Rosen said. “They consistently have higher operating margins. We’ve begun to work on that and are making significant progress.” Advances include improved computer systems and structural changes, he said.

Acquiring mail companies abroad would make little sense for Deutsche Post, given the lack of operating synergies, according to Rosen, who said there are few acquisition options in the more attractive express market.

Atlanta-based UPS, the world’s largest parcel-delivery company, scrapped a 5.16 billion-euro attempt to buy TNT Express of the Netherlands in January amid European Union opposition.

“There are four major players in international express.” Rosen said. “There doesn’t seem to be anything on the horizon that suggests further consolidation.”