By Julie Hyman

The Washington Times, March 3, 1999

Blake Averill doesn't know how many competitors he has, but it can sometimes seem like they are everywhere.

Mr. Averill, the co-owner of Laser Courier in McLean, recently encountered messengers from 46 competitors when he took a team of account managers to visit potential clients from North Rockville to Chevy Chase.

If four national consolidators are successful, there will soon be fewer courier services in the Washington area and in other major cities throughout the country. But their efforts have been plagued with problems as they struggle to unite independent entrepreneurs in what one consolidator refers to as the "largest mom-and-pop industry left."

While solid local numbers are lacking, nationwide there are between 4,000 and 6,000 same-day courier companies. But that will change, said Gil Carpel, head of Washington operations for one of the consolidators, Dispatch Management Services Corp. in New York.

"Somebody is going to be the same-day FedEx or UPS," Mr. Carpel said.

In the Washington region, as in other metropolitan areas, national companies are competing with local firms in a race that some say will drive smaller couriers out of business. But for an industry without a conspicuous image, it's difficult for any size company to make a name for itself.

CONSOLIDATION'S CHALLENGES

Four national companies have gone public as consolidators since the early 1990s. Dispatch Management Services, Corporate Express Inc., Dynamex Inc. and Consolidated Delivery & Logistics Inc. all have a presence in the Washington area.

These companies were formed by tying together independent, regional players and each has stumbled in creating a consistent image and business strategy.

"All of them seem to have stubbed their toes," said Kevin Dyches, an analyst with Prudential Securities.

But Mr. Dyches said the consolidators' business will eventually even out, with the strong surviving. And he said the overall industry is growing at a rate of 6 percent to 7 percent per year.

DMS, which went public in February 1998, has experienced problems ranging from repeated resignations by top executives to lower-than- expected earnings.

Mr. Carpel is optimistic about his company's future, however. He seems to see the problems DMS has experienced as par for the course.

"We're a company in turmoil. Birth is messy," he said. "Every operating division now has a budget and a plan for 1999. We're taking lots of steps to reduce costs."

Mr. Carpel said the company had $6 million in revenues in the area last year, with couriers running 2,000 deliveries a day.

Another consolidator, Dynamex of Irving, Texas, has had similar problems, including executive-level resignations and changes. Its stock price has reflected its turmoil, falling off a $10.13 six-month high to close at tk on Friday. Likewise, Corporate Express' stock has fallen from a high of $12.06 to tk in the last six months.

One analyst, who didn't want his name used, said many of the national companies' problems stem from their failure to enact a national brand- name strategy. DMS, for example, has retained 41 brand names from the companies it has bought, including Washington Express.

The analyst said it is also difficult to manage a business that is so fragmented and regionally driven, and that consolidators may have paid too much for local companies.

Drew Kronick, vice president of sales and marketing for Consolidated Delivery & Logistics, said his company went through a rough period after its initial public offering in 1995. Same-day delivery now comprises about 12 percent of the company's total business. Most of its business comes from logistics - scheduled transportation of packages using a truck fleet - and air delivery.

"We just had some wrong business. We had some issues in our leadership. Some of the original roll-up companies should not have been part of it," he said.

While there may eventually be fewer independent companies, industry watchers believe they will always be a factor.

"I think there will always be a market for the small guy who can stay real close to the customer," Mr. Kronick said.

THE INDEPENDENTS

Lonnie Tabron is one of the small-business operators who could get pinched should a consolidation effort succeed.

Mr. Tabron owns Le-Tabron's Courier Service in Vienna, employing only six drivers.

A U.S. Capitol policeman full time, Mr. Tabron has hired a manager to help him run his business. He said he uses several tactics to set him apart from the pack of messenger companies. He requires his drivers to wear dress shirts and ties and pays them salaries instead of employing them as independent contractors.

"The business is very competitive and hard to get into, no matter how good you are," he said.

Mr. Averill of Laser said his company retains its independent foothold through a combination of size, technology and customer service.

His company, with revenues of $24 million in 1998, employs about 130 in-house employees and 420 couriers who are independent contractors. Including a small office that Laser just opened in Atlanta, the firm' s couriers make about 4,500 runs a day. Though bike messengers are the most visible aspect of the industry, they account for 25 percent to 30 percent of the work force, with car and small-truck drivers making up the remainder.

Many of the larger courier companies like Laser use computers to track deliveries, using a countdown method for time-sensitive packages. Others use computers to enter jobs, then print them out and read them to couriers.

Michael J. Davidson, who owns City Express Courier Service Inc. in Laurel, said the fact that the industry is so segmented is to his advantage. His company's 163 couriers make 800 to 1,000 deliveries a day.

"Because it's so fragmented, you'll always be able to go out and grab a piece of it," Mr. Davidson said. "The messenger business for years is a very service-intense business. Companies that try to become real big lose that touch with the customer."

ROAD WARRIORS

One issue that faces national and local companies alike is the challenge of managing drivers and bikers, the highly independent contractors who staff courier companies.

Deborah Calloway, 46, who works for DMS, is just one example of the unique work force that makes up the courier industry. After being a bank officer, a computer analyst and a custom framer, she's found her calling.

"I prefer to be outside. I prefer to be casual. I've done the Brooks Brothers and the briefcase," Ms. Calloway said.

Like Ms. Calloway, Michael Atkinson has been driving for his employer, Laser, for 2 1/2 years. He was drawn by his enjoyment of driving and the pay it provides.

"The kind of money you can make here, somebody my age wouldn't normally be making," said Mr. Atkinson, 24. He said with a regular route, he makes $36,000 a year. Ms. Calloway said she makes $125 to $150 a day.

Every driver or biker determines his or her salary.

"I could spend half my day hiding from my dispatcher, but I wouldn' t make any money," Ms. Calloway said.

At most courier companies, dispatchers assign jobs to drivers. A client calls in and speaks to a customer-service representative, who then gives the delivery information to a dispatcher. The dispatcher calls the courier using a two-way radio, pager or mobile phone.

As independent contractors, couriers must buy or lease their own equipment. Ms. Calloway said she pays about $100 to $125 a month to lease her radio and pager, and also pays for a mobile phone out of her own pocket.

"They must make a large investment in order for them to do their job properly," Mr. Davidson said.

To manage drivers, many courier companies have liaisons that meet with drivers periodically.

"Overall, the whole philosophy is that we've got two sets of customers. You have to use customer-service skills when you're working with the drivers as well," Mr. Averill said.

DMS has tried a different method of managing drivers with its "free call" system. Instead of assigning jobs to couriers, dispatchers at DMS call out jobs and let drivers volunteer for them.

"You get a different kind of courier," said Mike Miller, vice president of sales at DMS. "They control their own destiny. This system levels the playing field."

WHERE TO NEXT?

The courier business is also seeing changes with the advent of the Internet. As more documents are transmitted electronically, couriers have turned to transporting equipment, pharmaceuticals, merchandise - even food. However, in Washington in particular, there remain businesses that are reliant on paper documents, such as law firms.

Consolidated Delivery & Logistics is leading the way to a new type of same-day delivery, referred to as logistics.

Because the Internet has decreased the amount of paper being transported, the company now relies on scheduled delivery of packages as its core business, using a truck fleet instead of independent drivers. For example, some companies are hiring messenger companies to deliver their materials on a regular basis, including office supplies and computer parts. Other courier companies are beginning to tap into this market.

Mr. Carpel of DMS suggests that in the future, some retailers and catalog companies won't have inventory. All of their products will be stored at central regional locations, and messengers will pick them up and deliver them quickly.

"[Third-party logistics] will be the biggest industry of the next century, and local couriers will play a huge part," he said.

Mr. Averill of Laser said his company has been in the logistics business for two years, but it doesn't use its regular couriers for those jobs.

The Internet has led to the growth in the logistics business, because "it made people used to getting things done quicker," Mr. Averill said.

But customers, especially in Washington, will continue to need to have original paper documents, and therefore will rely on couriers.

"It's such an old city, and it's been paper-driven with the government being here and the biggest, most powerful law firms being here," he said.