Historical postal operators are already too late in the game

This is an opinion article by an external contributor. The views belong to the writer.
Historical postal operators are already too late in the game

Belgium national post Bpost has recently announced that it will get rid of around 30 percent (or 4,000) of its iconic red mailboxes, located all around the country. At the same time, the company proposed a two-tier system of mail delivery which means customers could pay more for a priority (next day) deliveries or less – but not less than the current rate – for a later delivery time.

Letters are dying

Even though street post boxes are a symbol of the nation’s history (Belgium has them since 1850s, being among the first in the world), trends in letter-delivery business are not working in favour of keeping them. Bpost, for example, recorded a 4.3 percent decline in revenues coming from a domestic mail segment last year. Especially significant has been a drop in transaction mail such as utility bills or invoices which is somewhat obvious since business are increasingly moving towards paperless billing.

Similar trends are in no way Belgium-specific. Globally, there has been a 4.2% decline in mail volume. Mail now accounts for 38% of global industry revenue, down from 49% in 2011, according to the report from International Post Cooperation.

One of the latest indicators of this new reality for post offices comes from New Zealand. Their media reported that NZ Post delivered around 500 million letters last year which is down from 1 billion letters only 10 years ago. The volume is forecasted to drop further by almost 15 per cent in the following year, costing the state-owned service about 30 million dollars a year in lost revenue.

Ecommerce is fuelling logistics

As letter delivery becomes increasingly obsolete, mega trends are setting the pace of change for postal operators. Urbanization and digitalization are especially consequential. People are moving to cities in larger numbers than ever. They are comfortable utilizing cheap and powerful communication technology while a big proportion of them is already confident enough to use internet for shopping. Sooner or later, all the others will join as well. Global internet retail is therefore set to grow 20 percent annually which will in turn drastically increase demand for parcel services.

Even though parcels are usually more expansive to manage in comparison to letters, postal service providers have almost no alternative other than to set foot into this complex and hardly profitable business. In most cases strategic shift is already evident in financial reports. Bpost, for instance, increased their parcel delivery revenues for 110 percent to almost 800 million euros last year, parcel volumes for POST Luxembourg increased by 15%, and Norwegian Posten Norge already creates more than 60% of their revenue with the logistics services.

The awakening of the posts

In addition to optimizing (shrinking) processing centres, dropping unnecessary services and introducing alternate day deliveries, some “ahead-of-the-curve” postal operators are also tapping into other, previously unknown territories.

Canada Post, for instance, developed a Drive-thru parcel centre which utilizes self-service and automation technologies. It includes 24/7 access, kiosk, vending machines, drive-thru for parcel pick-up and a fitting room to try on online purchases.

Swiss Post has adopted an even more futuristic mindset. They claim to be at the forefront of drone development and deployment for logistics. The post already transports special healthcare consignments in various regions of Switzerland, substantially decreasing transport times. It is nevertheless very unlikely that drones will replace “traditional” parcel delivery any time soon, but they will probably complement it.

Many posts also look for growth opportunities in new business areas by investing and acquiring technology start-ups, mostly within the parcel and logistics segments. According to data from International Post Corporations, posts around the world made 238 purchases in 2017, 50% more as in 2014.

British Royal Mail made several acquisitions in the last years, from a mobile fashion app to a company selling software for online retailers in China. POST Luxembourg invested in Eurosender, one leading digital shippers in Europe, while bpost acquired a strategic participation into the start-up Parcify in 2016, then bought 100% of the shares in 2017 to integrate it into its own platform Bingr.be. Bpost has also ventured in new businesses, such as Belgium Bubble Post (software for eco-friendly deliveries) and U.S.-based fulfilment company Radial. In May this year, Bpost and DHL announced a collaboration aiming to stimulate cross-border e-commerce and offer e-tailers a global logistical solution.

Posts are late in the game. Too late already?

There is no easier way to explain the current situation as to say that the market has shifted and the value proposition of post offices (being able to physically deliver mail to every place in the country, five days per week) is no long longer valuable.

It is also reasonable to say that 90 percent of postal operators started reconsidering their market position (too) late in the game. The competition on parcel delivery segment (where posts are now shifting to) has become extremely tough. Global integrators (DHL, UPS …) are expending their services, e-commerce giants (Amazon) are investing heavily in logistics capabilities while start-up are inventing new business models for on-demand and last-mile services.

Getting rid of post boxes is therefore not just a business decision, but also a symbolic milestone: the posts will never look the same.

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