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DHL sees growth beyond metro, aims to penetrate into smaller cities

With government granting infrastructure status to logistics, the sector is poised to see solid growth and will remain a sunrise industry. Country Manager of DHL Express India RS Subramanian speaks to BestMediaInfo.com on his plans to expand in smaller cities, the growing e-commerce business and creating a strong brand in India

'More Indian than you think', the tagline of Germany's largest airline Lufthansa, fits equally well on another German brand that's probably bigger than the airline in India.

Around last Rakhi, German logistics company DHL Express reached out to Indian consumers by promising sisters that it will deliver rakhis to their brothers across the globe.

The company, which operates international courier and logistics brand DHL Express and the domestic courier service Bluedart in India, thinks that a diverse market like India can be won only through localisation. But the service standards have to be international.

The company gets majority of its business from the B2B segment. Now with high penetration of e-commerce in India, the B2C segment is also contributing significantly.

RS Subramanian

Talking about the company's marketing and business plans in India, RS Subramanian, Country Manager, DHL Express India said, "With the Rakhi ad, there was a chance to be visible to someone to whom we will otherwise won’t." The company majorly focuses on BTL in India and does very restricted advertising in India, though it has tied up with Indian Super League to reach out to its desired audiences. In TV, the brand relies more on regional and TV news advertising.

Explaining why there is restricted coverage on television, Subramanian said, “If you are asking whether we are available on the sitcoms? No. That is not where my audience is. Shows like Bigg Boss and KBC are not necessarily important to me. Our audience will be people working in businesses, owning businesses, decision makers, influencers and the common man too. But B2C and C2C (common man) is a small segment for me and hence our big focus is the B2B audience through news and regional genres. Only threshold level of ATL marketing makes sense to us, we are not a telecom or FMCG brand.”

TV, for the company, is a platform that gives them brand focus, brand visibility and brand recall to certain extent. Subramanian lays stress on the importance of being able to speak directly to the customer.

“Every year we set up SME clinics, (70 per cent of our business comes from SMEs), so we do direct outreach to them. We have touched almost all key clusters in last three years. It brings relevance to them when we interact with them in a bidirectional way with sector-wise programmes like pharma, fashion and others. This is more sharp and focused.” It is a combination of various media platforms that the company looks at.

DHL Express operates four companies in India and globally. DHL Express is their international courier service operating in the Rs 8,000-crore sector and Bluedart is their domestic express courier services in the Rs 20,000-25,000 crore market. Their other two business units are DHL Global Forwarding and DHL Supply Chain.

Claiming to be the leaders in the Indian market for both their brands, DHL Express and Bluedart, the company has a strong focus on the Indian market. “India business will be among the top 10 markets for DPDHL Group globally, alongside China, US, UK, France and Germany. And will easily be among the top three to four important growth markets for the future. It’s a no surprise that India is an important market. It has been among the fastest growing economies for the last 10 years, and promises to be so for the coming 10 years too. In last two years, despite the GST, demonetisation and everything else, we continued to invest and expand in India. Our capabilities are being increased every day. 10 years ago, we had 16 facilities in 12 cities, today we have 53 facilities in 28 cities across the country. Our footprint is expanding in India as we are building network. We have, over the years, seen strong and sustained volume growth in the international trade between India and the rest of the world. To support this high growth, Deutsche Post DHL Group has earmarked €250 million (US$268 million) toward future investments in India by 2020.”

The company is aiming at increasing its penetration in the smaller towns of the country and as fast as it can. The partnership with ISL is also an attempt in the same direction. Globally, too, DHL Express has always tried to be supportive of the sporting events like partnering with Manchester United, Bayern Munich, Formula One, Rugby and many other football clubs in different parts of the country.

“ISL is a mass, but it gives us visibility in the right audience set. In India, you need something that will take you to tier I, II, III towns. You can’t be a metro-only brand. ISL gives us the reach, now more so, with expanded footprint reaching nine cities and for a longer duration – spanning across five months, giving us threshold level of visibility for a longer period. In the sports category, football is an important sport. Cricket is too expensive in India and Kabaddi, we haven’t yet thought about. This is our third year with ISL and we have got the results that we expected last two years,” said Subramanian.

Logistics companies mainly have two forked business ops – B2B and B2C. About 80 per cent of the international (import-export) express of the Express market will be B2B. B2C or e-commerce, which is one of the fastest growing segments, would be around 20 per cent of the market. Within the domestic market, Bluedart has about 40 per cent coming from e-commerce (B2C) segment.

While Fedex is the biggest competitor to DHL Express globally, the other players in the industry are Aramex, UPS and TNT, among others.

The growth in e-commerce is also helping the courier, parcel and logistics industry to grow rapidly. Subramanian opined, “While B2B too has a huge online marketplace and that is also e-commerce. But B2C is growing faster because there is a larger customer base. If there are 100 businesses, there are a 100 million people and the consumption of individuals is higher. Though B2B is also smarter in the e-commerce solutions options.”

Talking about the competition from big e-commerce giants setting up their own logistics verticals, Subramanian said that these companies will always need a combination of service providers and their own system. “Big focus is on last mile delivery and there is so much volume that there is room for many players. It is a make or buy decision. If you have viability and density then you will be able to service it yourself. Where there is less density, you will be dependent on more suppliers. I also feel that managing the last mile customer delivery is an expert’s job, there is a lot of value to be added here at the customer interface. It is also a high investment vertical.”

Speaking about the ease of doing business in India and the impact of GST and demonetisation on the business, Subramanian said, “Between five years back and now, we as logistics industry are far better. Many systems are working, a lot of things are getting automated and transparency and digitisation is increasing. Simplification is happening. Overall, we have only progressed.”

About GST and demonetisation, he added, “Everyone has gone through their levels of discomfort. The hurt we feel is the accumulation of the hurt our customers will feel. As they start picking up, we started picking up. We have turned the corner. I see our customers improving.”

Having spent about 14 years in FMCG sector and the next 13 at DHL Express, Subramanian has had a vast experience of two completely different industries. Giving a sneak peek through his experience’s lens, he named FMCG as the evergreen industry, while the logistics industry is a sunrise industry for him.

“As I said earlier, India is attractive for many business verticals because of low per capita consumptions and hence FMCG is having a great time here. Logistics is a sunrise industry – highly underpenetrated. Organised logistics is very small in domestic, while unorganised sector is small in Express (global) segment – this gives huge headroom for growth for players like us. In trucking, however, the unorganised sector would be about 70 per cent. Infrastructure and demands are not sophisticated yet, but they are improving now.”

Info@BestMediaInfo.com

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