The Wall Street Journal-20080125-UPS Battles Traffic Jams To Gain Ground in India
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UPS Battles Traffic Jams To Gain Ground in India
Mumbai -- It's Friday night, and UPS deliveryman Imran Ayub's van is stuck between a pair of ragged men pushing carts through market-choked alleys.
"They never leave room," Mr. Ayub grumbles, sweating and honking his horn until the carts roll back just enough for him to squeeze the van through. Then, clinging to the steering wheel, he goes back to bucking, braking and charging through throngs of shoppers and stranded taxis.
United Parcel Service Inc. figures that if Mr. Ayub can just penetrate that maze, the company stands to make a lot of money. Despite its woeful infrastructure, India offers express-delivery companies an English-speaking market of about 1.1 billion people and 9% annual economic growth, with well-educated professionals and cities teeming with entrepreneurs trying to reach overseas markets.
"Sometimes it's difficult to tell the difference between parked vehicles and those that are meant to be moving," says Andy Connelly, the UPS senior vice president in charge of southern Asia. "You could be stuck in traffic and get overtaken by a cow." But Mr. Connelly says it's "absolutely worth the effort," adding, "We pride ourselves on our efficiencies, and we have to rewrite the rulebook" in India.
UPS, FedEx Corp., Deutsche Post AG's DHL and TNT NV are all seeking to offset anemic growth on their home turf by exploiting opportunities in emerging markets. But UPS, of Atlanta, arrived in India after its three big rivals and must grapple with some problems they have already addressed or avoided.
Take the airport here, the main gateway for express shipments of packages and documents into and out of India. Each year, for two months at a stretch, it closes its main runway for repairs for two hours every afternoon. For these two awkward months, the world's largest delivery company must make adjustments, such as reshuffling its schedule so that flights from Hong Kong will arrive a few hours early and depart before each daily runway closure.
Then, the UPS planes have to detour to the Middle East emirate of Dubai for a stopover that lasts just long enough for them to continue, on time, to Cologne, Germany. Each stopover in Dubai costs a few thousand dollars in landing fees. The runway repairs have much less of an impact on FedEx, DHL and TNT, because their flights don't coincide with the closures.
But all the players must deal with India's inefficient skies. Mr. Connelly notes that his planes fly in circles "pretty much every day, waiting for permission to land" at Mumbai, where encroaching slums have for years stymied efforts to enlarge the international airport.
Given their longer experience in the market, FedEx, DHL and TNT have devised workarounds. TNT secured full control over ground shipments by acquiring a dedicated road-delivery company last year. FedEx, seeking to streamline outbound deliveries from India, operates 16 facilities in different states where it clears goods through customs ahead of time. That geographic dispersal also lets FedEx's customers deal with customs procedures in their own language, of which India has dozens.
Market-share data are hard to find, but DHL appears to be the leader among the four biggest international express-delivery companies here. Analysts say FedEx and TNT are vying for second and third places, while UPS ranks fourth.
In spite of the vagaries on the ground and in the air, UPS guarantees three daily delivery times in India, and each deliveryman handles an average of 40 packages a day -- on par with his counterpart in China, where the infrastructure is much better, and only 20% fewer packages than UPS manages to deliver in the more orderly cities of Japan. World-wide, UPS moves an average of 15 million packages a day.
UPS estimates that the value of India's domestic express-delivery market was $580 million in 2005, and its international delivery market that year was an additional $390 million. This is small by comparison with China, where UPS values the international express industry alone at $4 billion. But demand in India is growing fast: UPS expects the markets for both domestic and international deliveries to more than double by 2010.
The reasons for this optimism include the demand from India's swelling middle class for imported goods, and flourishing new industries such as auto parts and pharmaceuticals, which are the vanguard of a once inward-looking economy now increasingly connected to the rest of the world.
Another attraction of India for international delivery companies is its relatively balanced flow of incoming and outgoing shipments. Unlike export-driven China, where an average of three fully loaded UPS freighters depart from the country for every one that arrives, the ratio in India is closer to three full departures to two arrivals.
UPS operated in India through an agent until 2000, when it decided that the market had enough potential to justify forming a joint venture with a local partner. "We knew we needed to work with someone who knows India well," says Dan Brutto, president of the company's international operations. The company paired up with an affiliate of the country's largest domestic airline by market share, Jet Airways (India) Ltd.
DHL, FedEx and TNT, meanwhile, were pursuing more aggressive strategies, each acquiring local delivery companies to expand their own networks. FedEx set up a wholly owned subsidiary here in 1997 and bought out a local air-express company in February 2007. DHL bought a majority stake in a domestic company even earlier, in March 2005.
UPS waited until this past November to take its next step: forging a strategic alliance with a local delivery firm, AFL Private Ltd. The arrangement, which takes effect this month, will make UPS's collection and delivery network in India eight times as big.
UPS and its competitors arrived on the coattails of multinational corporations, but their customer bases are swelling with small- and medium-size Indian firms such as Sahyog Exports Pvt. Ltd., a family- owned shoe manufacturer in Mumbai. Sahyog uses UPS to import Spanish insoles and linings for the women's shoes it makes and then exports to branded customers in Europe. "Time is more precious nowadays," says Prabodh Doshi, Sahyog's chief executive.
Stopping to collect a shipment from another client, White Lotus, Mr. Ayub, the UPS deliveryman, locks the van and darts into the warrens of a building. White Lotus sells reconditioned wristwatches over the Internet. Four employees perch on folding chairs and sip tea as Mr. Ayub counts out 23 bubble-wrapped packets destined for buyers in England. The 28-year-old punches the delivery details into his Diad -- the electronic tablet that UPS deliverers world-wide use to record data for each shipment -- and makes a brisk exit.
Almost every day, 37 brown UPS minivans like Mr. Ayub's lurch through Mumbai's congested streets. Two employees usually ride in each, one to drive and the other to jump out and complete deliveries, sometimes pushing a hand truck, whenever gridlock or traffic ordinances make further driving impossible.
Buildings in Mumbai often lack street numbers, so deliverymen ask passersby for directions. During seasonal monsoons in July and August, workers at UPS depots here shrink-wrap packages in plastic to keep them dry, and UPS rolls out its biggest trucks to navigate flooded streets that might swallow a minivan.
On the city's industrial outskirts, India's ubiquitous three-wheeled auto rickshaws swarm like bees into any gaps that open up between lumbering trucks and buses. When traffic seizes up at big intersections, child beggars mash their noses against closed car windows and sari-clad women hawk single cigarettes or paperback novels to frustrated motorists.
Just turning right on a two-way road involves an endless game of chicken that a driver wins only by alternately feinting and bulling his way through. Vehicles might share a thoroughfare with milkmen on bicycles and a street merchant pushing a cartload of bananas.
In deference to cultural sensibilities, UPS hires only men to make the rounds. They all wear the company's trademark brown uniforms, though UPS has made a concession to the country's sartorial modesty: "We haven't yet introduced the shorts," says Pirojshaw Sarkari, UPS's managing director for India. "But all our vans are air-conditioned."
