Me to You

How has your company developed since it began operating in Kazakhstan in 2005?

When I joined DPD in 2009, it was a small company employing no more than 10 people. Over the course of a whole month, we exported just 60,000 tons. Today, in stark contrast, we can transport over 180,000 tons in one day, and have approximately 200 staff. For DPD, it has been an amazing time because the company grew as companies started to look for opportunities to minimize their transportation expenses. Previously, they would pay whatever it cost to use an air transportation company. Then, companies began to calculate costs, and DPD was mostly focused on road transportation, our core product. The most important considerations in logistics are price and transit time. DPD covers the major cities like Astana, Karaganda, and Shymkent, generally within two days, and in fact our service is comparable with air transit time, but far cheaper. We began growing rapidly in terms of the figures, albeit from a small base, growing four fold. In 2013, we grew by 70% in year-on-year terms. Now, the base is large and we are still moving fast.

How has your transport network expanded over the past few years?

In 2009, we had three branches, and the three additional branches we opened in 2013 give us total of 12. The other branches were opened over a period of five years. Today, we have one of the largest office networks in Kazakhstan. The majority of transport companies will tell you they will deliver to any city in Kazakhstan, but they don’t have their own offices there, merely partners and connections. We used to operate through partners, but then we saw the risk to quality and reliability, and therefore committed to opening our own offices. We invested in our network in 2011, and within just two months we already felt the results and business started to grow more rapidly.

DPD’s extensive investment in its network has clearly paid dividends for the company. What else contributed to the company’s success?

It is significant to stress here that our direct competitors send a truck from Almaty to Astana, for example, and tell their customers that they will deliver their package, but are unable to say what day it will arrive as they first wait until the truck is full. It may take a day or even three days to leave. We do not use this model, and instead tell the customer the exact transit time. It doesn’t matter whether this truck is full or not, it will still leave Almaty. This is the most important consideration because more than 60% of our costs as a company are transport related. If you are a private transport company, you never send a half-full truck, as it constitutes lost revenue. Once we committed to invest, the first six years registered a loss. At the same time, we were trying to establish a solid network and good service. And today, customers know that our transit time is the best in comparison to our competitors’. In this manner, for the past two years we have been making profits and creating dividends for our stakeholders.

Who are your main clients in Kazakhstan?

Our clients are almost 100% engaged in the automotive segment. All of the auto brands deliver their spare parts to Kazakhstan through us. We also have many retail customers, and the main brands at the shops in the major shopping malls are all delivered by our company—sports brands, fashion, shoes, many of the IT companies, and also the main internet shops. We have a number of segments, but do not transport perishables. We focus, rather, on transporting high-value equipment and objects.

What benefits does the “My DPD” online service, launched in October 2013, bring to your customers?

As a customer, you can now see the history of your shipments online, which makes it like your own tracking service. You can generate all kinds of reports, such as the price per kilo, when and where you sent shipments, and who received them. You can also place orders without calling customer services. We have yet to quantify what the advantage of this is in monetary terms, but we enjoy good customer feedback. In road transportation, no other company does something similar to this. International companies are focused on air transportation, but our exclusive focus on road transportation ensures superlative quality service that our competitors cannot match. I think that more than 50% of our customers are international, and in revenue terms, more than 80% derives from international business.

What are the strengths and challenges of the transportation sector in Kazakhstan?

The strength is that if you have consistency in terms of your assets, you can cover the majority of the major cities, weather permitting, in one or two days. However, there are issues regarding the conditions of roads. This is a particular issue in the Caspian region, where parts of the road network are closed during heavy rain or snow.

What impact will the Western Europe-Western China expressway have on the transportation sector?

It will have a great impact, as we are already observing positive developments. Kazakhstan will for sure play a larger role in the region. The Silk Road ran through here, and as we are located between China, Russia, and Europe we need efficient infrastructure to continue this legacy. The Customs Union between Russia and Kazakhstan today allows Russian customers to clear their goods in Kazakhstan and then transport to Russia without a border stop. In the future, our location will bring many benefits to our country.

How does DPD differentiate itself from its competitors?

We are ready to invest significantly in our business as we are customer- rather than bottom-line oriented, and are working today with an eye to the future. Even now that we are a profitable concern, business and logistics are moving from B2B to B2C. E-commerce is developing remarkably fast. We are also flexible and have moved into B2C, which is a completely different business. When it started, this business line was not profitable for us. Yet having started this business on January 1, 2013, it turned a profit after three months. Now we are close to becoming the number one in terms of e-commerce, and are servicing the largest international brands in Kazakhstan.

How do envisage your future development?

Our 2014 plan has budgeted for growth of over 40%, which is optimistic, but realistic. This year just 2% of our revenue stemmed from B2C, but for 2014 we have budgeted for a rate of 15%. We have forecast 2% growth in profitability of this segment, as it is a low profit business, although in terms of volume, it already accounts for 20% of our business activity. Previously, the average weight of our parcels was around 200 kg, but when we started to migrate to B2C, the average weight started to decrease dramatically. Next year, we are thinking that it will account for more than 45% in volume terms.

© The Business Year – February 2014