DHL Express takes a price hike amidst a slowdown. Here's why it is not unusual

It is an exercise that few service providers may dare, or manage, amidst a slowdown.

DHL Express India, the largest courier service provider in the country, has not just hiked its shipment rates for 2019, but reiterated that its 10 year-old practice is a reflection of the space it has created for itself in the market.

"We are not cagey about it. We announce the hike and discuss it with our customers. They understand that the pricing is a function of value that they get," RS Subramanian, Senior Vice President & Country Manager, DHL Express India, told Moneycontrol in a recent interaction.

The company guarantees time-bound deliveries.

"If we don't take the price hike, then it will hit me. Then you will play the price game, and won't have the quality or the capacity that the customer needs," said Subramanian.

DHL Express had late last year announced the 6.9 percent hike in the shipment rates. The change became effective from January 1.

"The average shipment price increase will be 6.9 percent. However, this increase may go up to 15 percent for shipments of cross border e-commerce, owing to higher costs of delivery," the company had said in a statement.

The company has hiked its rates every year, since 2010.

"Coming out of the recession, we said we needed the pricing improvement every year," recounts Subramanian.

It was important because the company was exposed to the vagaries of currency and crude rates. "Every year, the currency is slipping by 3-4 percent. Dollar was at Rs 40, about 10 years ago. And now it is Rs 70," said the senior executive.

Over the last 10 years, most of the hikes have been in the region of 6-7 percent. A couple of times, the company hiked rates by 8-9 percent, and once, the increase was in double digits.

The increase comes at a time when the overall logistics industry in the country is sluggish business, with many pulling back investments and toning down targets.

Market dominance

While DHL Express has been present in India since 1979, till 2002-03 it operated as a franchisee. It enjoyed the first-mover advantage in the express delivery space, and continues to dominate the market.

The dominance has only grown in the last 10 years. The company, which handles about a million shipments a month, now operates four dedicated inter-continental freighters for international air express, as compared to one, a decade ago.

Every day, DHL Express operates 67 international and 80 domestic commercial flights. That is higher than some of the civilian airlines in the country, and even comparable to some of the bigger ones. Vistara, for instance, operates about 200 flights a day.

The India unit of the global services major now employs 3,200 people (1,500 in 2009) and has a customer base of 60,000, up from 35,000 earlier. Its network of facilities have increased from 23 in 2009, to 55 now.

Globally, the company has a market share of a shade less than 40 percent. In India, added Subramanian, the market share is "significantly better" than the global dominance. He declined to share further details on DHL Express India's financials.

The growth in India has made the local unit among the top three for the company globally, after China and the US. "In terms of looking ahead in the next 10 years, India is up there," stated Subramanian.

DHL Express India is one of the six units of Deutsche Post DHL Group in the country. The other five include Blue Dart, DHL Global Forwarding and DHL Smartrucking.