Fundamental changes required in postal business operating to adapt to changed business and consumer expectations and win in emerging service markets
Brussels & Amsterdam, 03 May 2012 – With consumer and business habits irrevocably changed, the postal industry requires fundamental transformation to take fullest advantage of the great opportunities these new realities offer the postal industry. While many operators have already taken significant steps in this direction, many more still need to, and the time to act is now, as the window of opportunity to thrive in the future is ever narrowing.
This is the major finding of a new seminal annual report on the postal industry: Focus on the Future. Developed in collaboration by International Post Corporation (IPC) and The Boston Consulting Group (BCG), this forward-looking report uses analyses of the current market situation and coming trends to look at future prospects of the sector and make recommendations as to how postal operators can succeed in a digital world. A new departure in annual assessments of the postal sector, throughout its six chapters Focus on the Future makes recommendations on the best business case posts can make out of the changing market environment to take full advantage of the era of consumer control.
E-commerce is just one of the key areas addressed by the report. E-commerce is a critical growth area being targeted by the postal industry, as the parcel market will soon be bigger than the mail market, and in some markets already is so. It is thriving, demonstrating seemingly crisis-proof exponential growth. In order to claim critical positions in the e-commerce value chain to maintain their positions and grow into the future, the report urges operators to act quickly to retain their market relevance. The report recommends that postal operators go beyond adapting their cost structure and portfolio, to build new business models that put the consumer in control. It advocates rigorous, proactive restructuring in the letter segment, so that it remains profitable to finance quality improvement and build business capabilities. Posts, the report states, are uniquely positioned with the capabilities to establish a strong position in this area of spectacular growth, but they need to transform from a domestic mail operator into a regional, consumer-centric, marketing and e-retailer service provider.
Similar analysis and recommendations are to be found throughout the report, addressing all areas of the postal business, from how posts need to find a new core and embed that core in the digital economy, to thriving in the marcoms market. Some of the other key recommendations:
- Operators need to be prepared for a double-dip recession and accelerated substitution; most operators have up to three years to change their delivery models to avoid going into the red due to the decline.
- Posts need to work on transforming the regulatory context to be allowed to deliver what the market wants.
- Marketing effectiveness needs to be put forward for marketing mail as digital channels set this as the standard.
- Direct mail needs to be adapted to market needs and consumer expectations: a targeted day-certain delivery of an interactive multi-channel campaign appears to be much more effective than single channel broadcasts.
- As partnerships are key in setting up digital platforms, posts need to decide on building their own platform or building connectivity to others. The best option varies widely by operator and platform.
- Postal operators need to focus on business imperatives to build their business; synergy with mail is a secondary consideration. They need to take ownership of control points for selected segments such as SMEs or international to avoid commoditisation of the B2C parcel position.
- Posts need to shift their ambition from growing with the e-commerce/parcels market to actively driving transformation of the retail market.
- Posts need to identify and resolve barriers to growth for online shopping, based on barriers by customer or product segment, not by general prioritisation of barriers. Consumer research conducted by BCG indicates that 60-80% of purchases would be made online if barriers across the search, purchase and delivery process were removed.
- Posts need to develop multi channel (B2B/B2C) supply chain capabilities. Multi-channel retailing is the winning channel for most categories: multi-channel retailers have grown 50% more quickly than pure e-tailers in 2010 .
- Posts need to decide which trade routes are key for the online shopping supply chain and build international standards and connectivity, sales forces and partnerships to collectively become the global market leader in parcels. Already around 30% of online shoppers indicate they buy goods from foreign websites.
- Postal operators need to integrate the post office retail network into other retailers’ networks and focus their retail network on B2C parcel business. Mail-related services should be brought online or migrated to self-service.
The report is relentlessly upbeat about opportunities available to the postal industry and its positive future. However it also emphasises the need for posts to move quickly, what the report terms the acceleration ‘from evolutionary to revolutionary’ transformation. There is, the report claims, little time left to accommodate revenue decline from increased substitution and seize the window of opportunity in e-commerce. All functional strategies and capabilities need to be adapted in line with business transformation requirements going from stakeholder management to sales and marketing, HR, IT and finance. Posts need to show leadership and use quick wins to gain credibility and cash, make some radical changes early on and build a new structure, team and culture to drive accelerated change.
Focus on the Future combines the deep industry knowledge, breadth of experience and richness of data of two principal thought leaders in the postal sector, IPC and BCG, to provide insights and recommendations for the industry’s leadership. Focus on the Future is an industry report that considers the postal sector as a whole, rather than individual postal operators, and recommendations are made to the global industry as a whole. Due to market and portfolio differentiation, some recommendations may not be applicable to individual postal operators, many of whom have already done much to drive the transformation of their own organisations. The full report is available for download here.