As Postal Technology International celebrates its 20th anniversary in 2016, Brody Buhler, industry lead of the Post and Parcel Business at global consultancy Accenture, provides his view on the postal industry of the past and what the next 20 years hold
NB: Extracts from this interview first appeared in the Postal Technology International 20th Anniversary Showcase. To view this issue, click here
Which technology has had the greatest impact on the postal industry to date?
The smartphone. These devices have become the command centers of our lives and have the potential to bring on the next wave of opportunity and disruption. Mobile advertising models are just starting to mature and pull spend from print. As companies develop effective mobile advertising platforms, our research shows those will eventually disrupt advertising mail.
On the parcels side, mobile commerce is radically changing consumer behavior driving an ‘anytime, anyplace, any product’ expectation that extends to delivery. In our most recent global consumer survey, we found that 94% of consumers consider delivery part of the e-commerce experience. Smartphones are going to radically change the way we monitor and receive deliveries.
What were some of the biggest missed opportunities of the past 20 years?
Not expanding into global express and logistics. Accenture’s study, ‘Adding Value to Parcel Delivery’, determined that B2C will continue to grow in significance across geographies over the next five years. By 2020, B2C will surpass B2B in terms of parcel volumes in Asia and in North America. B2C will continue to grow revenue at an estimated 6% per year in North America, 5% per year in Western Europe and nearly 14% per year in Asia-Pacific, between 2015 and 2020.
This shift from B2B to B2C is also leading to high volatility in demand. The UK saw a 39% increase in parcels and an 86% increase in cross-border shipments on Cyber Monday in 2015, compared with 2014. China experienced a similar spike on Singles’ Day in 2014, when 323 million shipments were delivered, more than 10 times greater than the average daily shipping volume.
What will be some of the key technologies that impact the postal sector over the next 20 years?
Autonomous vehicles: By 2020 many car makers have announced they’ll have autonomous models for everyone to buy. It will take a few years, but by 2034 I’m certain driving will be a service and most last-mile delivery won’t require a person. When you combine that with obvious advances in artificial intelligence you get self-optimized delivery networks that operate with efficiency and personalization, which we can’t begin to envision today.
3D printing: While adoption is slow, this feels like a technology that will eventually become ubiquitous and many of the items we order now will simply be printed in your home.
Virtual reality: This technology will likely eliminate the retail experience as we know it today. Going to a store will become a virtual experience, trying on or testing a product will be done at your home through new interfaces that haven’t even been invented today.
Blockchain: We’re at the very beginning of this new technology, but it has the power to transform every transaction we conduct today. It will absolutely disrupt postal banking but I believe it will be much more extensive, fundamentally changing every transaction we conduct today.
Internet of Things (IoT): As the cost of sensors declines and the value of sensed data grows, IoT presents a significant opportunity area for posts. Using the ubiquitous presence of their retail and delivery networks to capture sensor data and then monetize those streams presents real opportunity for posts.
Analytics: Posts have always had an abundance of data but new technologies such as cloud computing and advanced analytics software allows new insight from data that simply wasn’t possible or economical in the past. For example, we’ve helped organizations use analytics to optimize operations and routes using cloud solutions that provide on-demand computing power. In these models, you pay only for the computing power you need, reducing the costs of these solutions while more immediately demonstrating value.
What new areas do you see posts diversifying into and how?
Logistics: Our research shows this is the most successful diversification area, with 80% of what we define as ‘high performers’ having logistics as their primary area of diversification. Posts have natural labor and technology capabilities in this area that makes it a natural extension of their business. We see increasing investments into warehousing, fulfillment and transport capabilities and, although historically a low margin business, these new capabilities improve utilization of existing assets and tend to drive additional volumes into posts’ last-mile networks.
Retail: Some posts have clearly identified their retail network as their primary asset and are driving new services into their branches. Successes in banking, consumer goods and telecommunications services are abundant in the industry and our research indicates that they drive good profitability. We are starting to see these organizations begin to invest in identity solutions and government services in their latest efforts to leverage this asset.
Delivery: This is the least developed area of diversification, but one that may hold great promise. Several posts have experimented with new services their postmen could offer on their routes. Although these have struggled to grow in scale, research shows advances in IoT may offer opportunity. As the cost of sensors drops and the value of data develops, posts can use their ubiquitous presence to capture and monetize this data in new ways.
Which areas need to be addressed to improve service levels?
The first is cross-border delivery. Research we conducted with Aliresearch [the research arm of Alibaba]in 2014 indicates cross-border e-commerce is growing at 27% per year and over 75% of that growth is driven by new consumers. These new consumers have a very different expectation for the delivery experience that is faster and more consistent than what exists today. Posts will have to invest in solutions that provide a total landed cost and offer delivery duties paid capabilities if they are to compete effectively in the cross-border market.
Second, our recent retailer research shows that 79% of consumers rate providing easy and affordable returns as one of the top-three criteria when selecting a delivery provider. This area continues to grow in importance as retailers transform returns from a necessary evil to a competitive differentiator. As we talk to these retailers, it is clear that their returns needs are becoming much more sophisticated and they will need delivery partners that can offer dynamic, value-added services to improve the returns experience.
The last improvement area is around the consumer experience. Posts have historically focused on the sender as the customer and the consumer experience has remained a lower priority. Our research indicates that developing a relationship directly with the consumer and then enabling their control of the delivery experience is the most important capability a post can be focused on to retain and grow parcel market share. As new competitors enter the market and retailers increase their investments in delivery capabilities, lack of consumer insight and antiquated consumer experiences will put posts at a significant disadvantage. The time to act is now.
How will the last-mile delivery experience change?
Last mile is the next battle ground for posts. In 2015 we saw US$1.2bn in venture capital flow into supply chain and logistics startups. By the end of the first quarter in 2016, we had already seen US$1.7bn. These new startups operate on very different models. Traditional posts are sender and efficiency focused with fixed costs and capacity. These new entrants are receiver and customer experience focused, with highly variable cost and capacity. As consumer expectations change and e-commerce continues to grow, the last-mile delivery experience will transform to be faster, more personalized and digitally enabled. Postal organizations that develop a relationship with consumers and then use that data to create differentiated delivery capabilities will have an advantage with e-tailers.
November 30, 2016