DHL: The Demise of Domestic Delivery

Only a few days after the announcement that DHL U.S. Express will bow out of U.S. domestic shipping, analysts are dissecting its demise.

In the last five years, since the company bought Airborne Express, DHL lost nearly $10 billion. Even closing down its U.S. domestic shipping branch will still mean a $4 billion loss for the year. It seems that DHL and its parent company, the German-based Deutsche Post World Net, decided to finally throw in the towel.

"We are entering unprecedented economic times. We see risk everywhere," John Mullen, chief executive of DHL Express told BusinessWeek. "We think it's critical to take action now."

The Economist wrote that, from the beginning, FedEx and UPS unleashed all their weaponry on the Belgian upstart. DHL came into tthe market with the other two companies already in a vicious death-match and already practiced in ruthlessness. The two competitors stole any idea that DHL came up with -- including using the U.S. Postal Service to handle deliveries. That competitive edge also helped to propel the USPS to No. 3 in the market . . . beating the still-struggling DHL.

So it wasn't a surprise after DHL announced the end of its U.S. domestic shipping, only minutes later both UPS and FedEx were waiting to pounce on their customers. UPS went one further by immediately putting up a "Welcome Center for DHL customers" on its Web site just after the announcement. DHL still plans to continue international shipping.

The three biggest U.S. domestic shippers will benefit from DHL's drop out of the market. According to analyst David Ross from Stifel Nicolaus, DHL's demise frees up another $3.4 billion in revenue that can be divvied up among the remaining survivors.