Switch off your computer; the weekend is no time to be working!April 16, 2015 9:30
Aramex vs DHL
The Arab upstart battles the German giant, seeking to become one of the world’s top five courier companies.
When DHL entered the American market five years ago, the German-owned transport and logistics firm dealt a blow to the fledgling Aramex, the Middle East’s own express courier upstart. Aramex had made important inroads in the US, and these were cut down in no time flat by a major DHL acquisition.
How things change. Things haven’t gone so well in the US for the logistics behemoth with the unmistakable red and orange trademark. DHL’s American unit has been bleeding cash. Meanwhile, though relatively tiny Aramex poses no global threat yet, it still dominates the business in the Middle East.
DHL, a company active since the late 1960s, remains dominant around the world outside the US. As such it remains Aramex’s chief regional rival.
Founded in 1982 in Jordan by entrepreneur Fadi Ghandour, Aramex is aiming to be one of the top five global courier companies by 2010. That’s soon – and there’s a lot it needs to do to achieve that goal.
DHL had high hopes when it entered the American market in 2003 with its purchase of Seattle-based Airborne Express for $1.12 billion. The German-owned global express courier, an arm of Deutsche Post, had long been on one of the leading brands in the global courier business. When you needed to get something to somebody fast and an e-mail attachment won’t do, for business people around the world, DHL has long been one of the top three brands that come to mind.
The other two at the top, of course, are FedEx and United Parcel Service (UPS), two American giants that are well-established on their home turf. It made perfect sense, then, that DHL would want to cut into its rivals’ domestic market share by buying America’s third-largest courier company, Airborne Express.
Alas, DHL’s foray into American is now foundering on the rocks of the US economy. The German bosses are looking at options as the company’s DHL Express business in the United States continues to suffer losses to the tune of $1.3 billion, though executives have been quick to deny they are thinking of pulling out of the US. Some members of US Congress aren’t glad to hear it, but there is now talk of a UPS-DHL link-up, a move that would eliminate a key competitor that has been keeping margins low for years.
Founded in 1969 by three partners named Dalsey, Hillblom and Lynnas, DHL was originally a courier service that zipped goods back and forth from Honolulu to San Francisco. The company was never actually that huge in the US. Instead, it expanded in the Pacific Rim region and into Europe until it was purchased by Deutsche Post in 2001.
(Here’s a colorful aside: Airborne Express, the company Deutsche Post/DHL probably regrets buying, also started on the Hawaii route from Hawaii. Founded in 1946 as the Airborne Flower Traffic Association of California, the company originally flew flowers – nothing but flowers – from Hawaii to the mainland US.)
Despite its relatively weak foothold in the world’s largest economy, DHL owner Deutche Post World Net claims it is the “the world’s leading logistics group.” With its multiple areas of business, it is difficult to compare DHL/Deutche Post’s sales data with that of its rivals, though one estimate puts yearly revenue at about $97.7bn – way ahead of both UPS and FedEx.
DHL is dominant in nearly all non-US markets. According to Bloomberg data (cited in a recent report on Aramex by Shuaa Capital), Deutsche Post/DHL has about 6 percent of the global supply chain solution market – far ahead of UPS (3 percent), FedEx (2 percent) and TNT Express Worldwide (1 percent).
Aramex, meanwhile, with 2007 operating revenue of 1.8 billion dirhams ($490 million) ranks a distant 30 in the world in terms of market capitalization, 43 in terms of revenue and 37 in terms of net income. Although Shuaa forecasts double digit growth through 2010, Aramex has a long way to go before it reaches number five by any of these standards.
Still, Aramex is the dominant courier throughout the Middle East and has a first-mover advantage here. In total, it operates 307 offices in 195 cities, with 7,000 employees and hubs in Dubai, Hong Kong, Liege, London, New York and Singapore. Significantly, it is also one of the key players, along with Toll Priority, in the Global Distribution Alliance (GDA), a cooperative alliance of 40 independent transport and logistics providers in over 240 countries.
Aramex is one of the first Arab firms make sustainability a promotional keyword, and it seeks to paint itself as a “good company” to work for. Ghandour, like the company he founded over 25 years ago, is a poster child for Arab entrepreneurialism.
Here’s the irony about DHL’s American woes: When the German giant bought Airborne Express in 2003, the deal had the potential to hurt Aramex badly. The old flower company had actually been a partner of Aramex’s in many key non-Middle East markets. Suddenly, DHL had access to a wealth of information on little Aramex’s offerings. Yet thanks in part to its ties to GDA, Aramex not only survived the blow but has thrived since then.
Sometimes Goliath, not David, is the one who gets hurt when least expected.
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