The postal sector has been going through waves of change since the onset of the digital economy in the early 1990s and the response to these challenges can be characterized in three phases:
- 1990s-2005: Productivity and diversification
- A focus on automation and consolidation of operations in the context of significant re-regulation. Start of diversification into data document and digital services.
- 2005-2015: Digital to core
- Continuing automation with increased emphasis on building digital interfaces both with customers and with delivery workers. The connected receiver and delivery worker are critical to future innovation.
- 2015 onward: Digital as a mindset
- Digital is no longer an additional process but is fundamental to all aspects of postal product offer and delivery.
The Covid impact
As in many other industries, the pandemic has acted as an accelerator and has advanced certain trends by upward of five years. Below are my expectations for the medium-term development of the postal sector.
Mail and documents
Mail decline has accelerated, and although there will be some recovery, this is a structural shift. Transactional mail will continue to fall, while direct mail may be more robust as it is seen as a way to break through ‘consumer digital clutter’. However, intensive innovation in mail processing will be required:
- Universal Service Obligation to move to variants of reduced day delivery in the absence of government subsidy
- Digital notification of physical mail to reduce loss of service
- Adoption of machine learning to enhance production planning
- Growth in alignment of labor resources to workflows but on terms that do not turn the industry into another part of the ‘gig economy’, where business risk is transferred to labor
- Networks to become parcel led, resulting in changes in networks and sorting technologies
- Increased focus on delivery innovation to include focus on route consolidation, increased use of vehicles, dynamic routing, expansion of consolidated drop points, increased integration of e-commerce and mail into a single delivery flow
- Continuing innovation in upstream document/data management
The growth rates of the last 12 months are unlikely to be sustained but there has been a structural shift to e-commerce. Although there may be some environmental pushback against e-commerce, the direction will be growth. Innovation will need to center around information management, receiver preferences, intelligent routing and inflight routing. The markets will be competitive and posts will need to define a price-quality position in the high-volume parcel market segment.
Probable innovations include:
- Increase in robotics and automation in parcel processing
- Continued innovation in receiver apps and integration with operational systems
- Development of services to support innovation in emerging areas of e-commerce, e.g. dark warehousing-same day, new subscription services and local-to-local e-commerce.
- Many posts will continue to move upstream into fulfillment services
- E-commerce regulation will become increasingly important. The shift from mail to parcel will heighten issues of cross-subsidization
Arguably, to facilitate economic participation there should be increasing concern about universal access to broadband services and e-commerce delivery rather than mail.
The divergence in postal retail models will continue. There are three business models:
- Logistics, where postal retail simply becomes service-point-based franchised agencies
- Mixed provision of a range of services as an intermediary through a franchised network
- Banking-led, which drives the retail presence and other services are secondary
Innovations will focus on customer management and integration of digital and physical customer experience. Potential innovations will include:
- Systems to capture customer preferences and transactions to develop tailored offers
- Postal apps that create account relations to postal services and are an access point to other services linked to digital identity and verification
- Integration of online experience and physical experience to create a seamless customer journey
- Integration of multiple data sources to feed business intelligence tools to improve operations
In the next five years, posts will continue to face significant changes to revenue streams. This will require innovation in operational processes and product offers, and customer management innovation will need to focus on restructuring operational networks to match the new traffic profile and to increase the data element of the product.
The posts’ competitiveness and relevance in the next two decades will rest on achieving these changes and aligning and implementing them within their social and regulatory context.