My interview with DPD chief executive Dwain McDonald coincides neatly with yet another milestone in the parcel carrier’s rapid growth over recent months.
“This week we had our eight millionth person download our app in the UK,” he tells me excitedly. “I’ve got more people than Tinder!”
He has good reason to be as infectiously enthusiastic as he comes across. Aside from concerns over the impending “car crash” of Brexit, which he fears could cost the company £100m, it’s fair to say he’s pretty happy with how business is looking right now. In fact while most of the wider transport sector has been furloughing staff and hoping to ride out the storm, DPD is investing heavily for the future.
“It’s the most challenging year I’ve ever faced but I’d much rather be here than in the hotel sector,” he confides. “My B2B volume has still not recovered, it’s about 85% of what it was pre-Covid. But my B2C has doubled.”
McDonald joined DPD – or Parceline as it was back then - in 1988 as a 22 year-old sales executive. Since then, he’s enjoyed a meteoric rise up the greasy corporate pole and was appointed chief executive in March 2008.
In truth, he’s so refreshingly down to earth that it’s more like talking to a bloke in the depot than the head of the company. He laughs that he’d never even heard of the word furlough until things started getting interesting back in March. At the peak of the crisis, there was a week where it became a consideration, he says. “But then it was literally like a switch clicked and within four days we were back to pre-Covid levels - and then we just went up like a space shuttle. It’s been as high as plus 75% on pre-Covid volumes!”
Rather than furlough staff he’s now doing just the opposite, hiring 6,000 extra people to cope with the surge in demand for home deliveries. Pre-Covid, the parcel market was growing at 3-4%, but he’s quickly had to revise his calculations.
“We came through Easter incredibly busy, but then it always drops down back again,” he explains. “But on the Wednesday after the May Bank Holiday we delivered more than we did on cyber Tuesday the year before. So we were like, ‘wow!’ - I was opening four depots, I’m now opening 12.”
Long-standing DPD customers include Amazon, ASOS, M&S and John Lewis, but he also includes relative newcomers in the list – food retailers like Hello Fresh, Gusto and Mindful Chef. “I’m not sure consumers are going to go back to how they used to buy,” he says. “Since the start of Covid we’ve delivered to a million homes that we’ve never delivered to before.”
DPD is investing about £200m this year to expand its next-day parcel capacity, including £100m on vehicles, £60m on regional depots and the remainder on technology. “We’re going to see up to three-and-a-half years of growth in nine months,” he says. “That’s not easy. I’ve employed 3,000 additional drivers since 1 April. I’ve got to grow that again by another 3,000 by 1 November.”
But McDonald has also been keenly aware of the need to keep his established staff happy through such challenging times. It’s not every company, for example, that sends its workers curry sauce to boost morale.
“Yes, our revenue and profits have improved but oh my God, we paid millions to our front line workers,” he reveals. “I’ve sent a goodwill gift to every single one of my 15,000 team every month since April and that will cost me over a million. Gifts like barbecue sets when it was nice weather, and in October it’ll be National Curry Week so I’m sending curry sauces to people’s houses. It keeps them connected because it’s difficult when they’re working from home.”
Rates and surcharges
That said, DPD, hasn’t been without its critics during the crisis, some claiming that it has been either upping its parcel rates or dropping poor profit customers because it’s so busy. It all sounds like a bit like the Covid surcharges introduced by UPS and Fedex in the US, aimed at easing pressure on the hubs. But with DPD’s drivers getting more drops done per day than ever before, some say its rates should be coming down not going up.
“No, it’s bullshit,” McDonald counters. “Our pricing strategy is the same as it was before. What we don’t do is have to take any crap traffic; if somebody comes here and says they’ve got a garden shed I wouldn’t take it before and I certainly won’t take it now. We carry nice boxed parcels, it’s what we’re known for, we’re not a freight carrier.”
He’s not heard about the UPS and Fedex surcharge, he says, but what he will admit to is “a little clean up exercise this year” to make sure customers comply with their original contracts.
“There’s no increased surcharge,” he says, “but imagine people don’t send us the 30 parcels they’ve agreed to, they send four. So we said to these people, ‘you signed a document saying you’d send 30 parcels, I need you to send at least 80% of the 30 a week. If you don’t I’m going to have to increase your price, because at the end of the day you’ve committed to something that you’ve not achieved,’ and I don’t think that’s unreasonable.
“Everyone gets a unique price at DPD, it’s not like a tariff rate. We ask them to achieve their profile. If not we give them a new rate associated with their actual volume. That’s the deal.”
Electric fleets
Another major talking point for DPD is its commitment to electric vehicles. The company has already beaten its target of having 10% of its couriers emissions-free five months ahead of schedule. More than 700 of its van fleet are now electric and it aims to deliver over 10 million parcels on its green fleet by the end of the year.
“I had a eureka moment half way through 2019,” McDonald says. “I wanted to be the UK leader in sustainability. We want to start delivering city specific. The first we’ll trial is Bristol. I’d like to think that by the end of the year we’ll be delivering to the whole city on electric. By the end of the next three years we’ll have 25 cities in this country which are fully electric.
“It’s very different for tractors but for vans, fleet electric will be the future and you can see the car market moving at lightning pace. I don’t have to sell the idea to my drivers, who are very sceptical people. I’ve now got a waiting list a mile long for electric vans.”
So what’s the plan for trucks?
“I’m not a trucker,” he laughs as he admits he has other people in the business more qualified to give me an answer.
“You can eat me alive on that type of stuff, it’s going to be a big thing to move away from diesel. We’re constantly reviewing everything. I’m just not that well informed to be honest.”
Technology
As far as other emerging technology goes, he warns companies they need to be careful with their investment. In DPD’s case, this has meant cutting edge optimisation like parcel engine Quantum.
He’s quoted as saying he takes his inspiration from Steve Jobs and Apple, but he’s heavily distrustful of the kind of knee-jerk adoption of new systems that end up being a bad fit: “You’ve got to invest heavily, but don’t just bring in tech for tech’s sake,” he warns. “Some of our competitors launch stuff and it’s rubbish and will never be used.”
So what’s his view on current industry buzzwords like blockchain, AI and 5G?
“It’s just bullshit, don’t take any notice,” he says. “I’ve stopped going to meetings in London where they talk about blockchain and AI and this, that and the other. Show me a business use for that technology.
“Listen, we’ve got AI,” he continues, “I’ve got the most unbelievable Chatbox which will handle 75% of transactions successfully. It saves me a lot of money. I think people just listen to business bullshit. We’ve built it because it’s got a business use for it.
“You’ve got to have a business problem that you then throw your best business brains at. You create a technological response to it. By 2033 we will be completely in the Cloud, full GPC - Google Cloud platform. That makes me excited, it makes me go faster.”
McDonald is critical of Royal Mail which he says “hasn’t responded well” to the upturn in parcel volumes. “I take on people who have 25 years plus experience in Royal Mall. I can’t believe they’re letting these people go.”
Asked who his main competitors are, predictably Amazon is top of the list – “because Jesus Christ they can do scale. We must have taken on 12 good quality Amazon operational people, because they like what we do. We love to learn from other people. We don’t fear anyone, we respect everyone.”
But he won’t be drawn into a comment on Pall-Ex’s stated aim to take a bigger slice of the parcel sector. “I don’t talk about pallet people, we’re totally different. It’s alien to what we do.”
Brexit
Turning to Brexit, he admits the threat of no deal is keeping him up at night as the clock ticks down to 31 December. “I have £300m of export business,” he says. “We don’t know how to get parcels across the Irish border.
“It could be catastrophic if we’re not careful. We’ve had a massive problem for UK plc with the Covid crisis. To put a hard Brexit on top of it doesn’t even bear thinking about.”
Europa MD Andrew Baxter claims fears of chaos at the channel ports have been heavily exaggerated, but McDonald takes a different view: “He’s not moving 100,000 items a day requiring tax and duty,” he argues. “He’s moving full trailer loads in one movement. To us, it’s the B2C courier market that we are absolutely at the forefront of now.
“I've got a team of at least 60 people working on it every day. It’s very expensive and very concerning. With Ireland, how the hell am I going to have something built, tested and IT ready when I don’t even know what it looks like? Brexit is like a jigsaw with 10 pieces but four are missing.”
He’s also worried about how consumers will react to suddenly getting an email from couriers, clicking on a link and having to pay a tax. “How weird is that going to be? I’m going to have to pay millions and millions and millions in tax unless people change the rules.”
He’s supportive of the government – “they’ve had an awful year with the pandemic that nobody could have dealt with any better” - and says the best case Brexit scenario is that people “see sense” and approve a 12-month extension – “worst case is six months, worst-worst case is we just crash out in January.”
He concludes with a prognosis for the wider transport sector as the pandemic continues: “If you’re a B2B parcel or pallet carrier you’ve got a problem. If you’ve got a foot in both camps, you’re ok.
“Adidas are saying 60% of their global traffic is now going to be DTC - direct to consumer. They’re ignoring all those other supply chains in future. That’s the point, I’m on the track that’s going forward.
“It’s not easy, but we started this journey in 2008 and by 2020 we are running it exceptionally well. I’m not sure other people can jump ship as quick. If you’re in the freight business or you’re in heavy industrial B2B, that’s a problem. You’ve got to diversify quickly from there. But I’ve been doing both forever and all my acceleration is now in B2C.”
