“The letter is still alive” – according to Jürg Bucher, chief executive of Swiss Post, which hosted this year’s lively World Mail and Express Europe conference in Geneva over the last few days.
With Swiss Post repeatedly named as the world’s most innovative postal service in recent years, the conference saw Bucher highlighting many of his company’s successful digital developments including the SwissID identity verification platform, the booming eFinance e-banking service, hybrid mail services and document processing solutions.
But Bucher also pointed to important opportunities in adding value to the direct mail industry in support of more traditional postal business.
“The question of whether Swiss Post would be more comfortable in the physical or digital world can only be answered with ‘both’,” said Bucher. “Postal organisations are well positioned to provide the link between the physical and digital worlds.”
But in his keynote address, Bucher, who retires later this year to be succeeded by IT industry veteran Susanne Ruoff, kicked off a relatively upbeat conference regarding the survival of the traditional letter business despite the pressures of e-substitution and economic woes.
“Letters are still Swiss Post’s core,” he said. “Last year, Swiss Post delivered over 2.3bn advertising items. The decline in letter volumes in Switzerland has been dramatic, but the letter is still alive. At the moment the letter is just trying to find its position in the market.”
Bucher said Swiss Post was running marketing campaigns about the effectiveness of the letter as an “attractive and modern communications channel”, while adding to the attraction with a new carbon neutral status, through carbon offsets at no extra charge to customers.
“In tough economic times, the decrease in volumes tend to be more dramatic, but letters will settle at a new level in a few years’ time. We need not let the letter business grind to a halt. Swiss Post will continue to invest in letters, even as it develops a policy of more customer choice with its hybrid mail services, offering the sender choice in how to receive their post – either in physical or digital form,” said the Swiss Post CEO.
Swiss Post CEO Jürg Bucher set a positive tone about the letters business within this year’s World Mail and Express Europe conference in Geneva
Noting concerns among other posts about digital innovations “cannibalising” traditional postal volumes, Bucher added: “If we do not use our extensive know-how and capitalise on the trust we have amongst the public, our competitors will do it instead.”
Other postal operators at World Mail and Express Europe were also talking up the letters business, with a sense that in the digital era, new technology in personalisation and targeting of particularly direct mail would bring big opportunities for stabilising mail volumes in the core business, especially with key opportunities in tapping the relatively untouched SME direct marketing arena through service simplification and local promotional activity.
Frank Appel, the CEO of the postal giant Deutsche Post DHL said along with his company’s clear vision for expanding global logistics and parcel operations, but he said his company was also investing hundreds of millions of euros in its traditional German letters business.
He said: “People said the mail was dead when the telephone was invented, and they said it again when the fax was invented, but it is still here. My children don’t know what a fax is. They also no longer really use email any more.”
Appel said that while Deutsche Post’s earnings before tax within its Mail division had dropped from EUR 2bn in 2007 to just over EUR 1bn last year in an increasingly competitive market, he believed it had stabilised over the last two years.
“We have strengthened our mail operations and continue to optimise the network, with second generation sorting technology – the buildings are all the same, but the equipment inside is totally different, with letters now sequenced for house numbers.”
Royal Mail CEO Moya Greene, who was perhaps one of the most sceptical voices at World Mail and Express Europe regarding digital mail, also highlighted the potential of direct mail for her business, although much of her growth plans appeared to be in parcels, both at home through Parcelforce and abroad through GLS.
Greene said: “We are achieving a GBP 1bn revenue from direct mail – direct marketing via the mail has the highest return for any marketing spend, and we believe it levers the core network beautifully.”
Greene said Royal Mail was building on its direct mail opportunity with a new Market Reach service, putting all the assets involved in direct marketing in one place to add value to the direct marketing chain.
“We think we can grow our position in that market now, so mail retains a larger part of national revenues,” said Greene.
Many posts at World Mail and Express Europe, particularly Correos and La Poste, spoke of the importance of diversifying services away from traditional core business areas in order to improve long-term financial sustainability.
However, there was also a sense that in the letters business, opportunities are still out there in cross-border and emerging markets, particularly with careful strategies.
Austrian Post, which has even sold up some of its parcel operations in Western Europe, discussed its big strategy of snapping up private mail businesses in Eastern Europe to capitalise on the once-in-a-lifetime opportunity of market liberalisation, which is set to be completed in a regulatory capacity in Eastern Europe in 2013.
Acquisitions since 2005 have included operators in Hungary, Slovakia, Croatia and Romania, and in recent months Bulgaria and Poland.
Andreas Dragosits, the senior vice president for Central and Eastern Europe (CEE) Mail at Austrian Post, detailed Austrian Post’s expansion strategy in the region, noting that his company is already handling almost as much unaddressed mail outside Austria now as it is domestically, with 3.4bn items in the CEE region compared to 4.1bn in Austria, while the tiny amount of addressed letters it is handling in the CEE region is expected to swell considerably from the current 100m items once markets are fully opened to competition.
“Liberalisation is a unique chance, this expansion is going to take place now, otherwise the window of opportunity will be closed,” Dragosits said.
The Austrian Post SVP said there was rapid growth in the CEE market despite the economic crisis because societies are developing, and within the mail market there was “room for innovation” since the region’s national postal operators were behind many western European operators in the development path.
“Austria Post went through the kind of transformation these operators are now beginning five years ago,” he said.
Dragosits said there was “big potential” in the addressed and unaddressed advertising mail market in a region of 90m population, and that Austria Post would position itself as an “economy post” in the region for business-to-business and business-to-consumer, generally avoiding the C2C market.
“Self fulfilling prophecy”
During an early seminar at this year’s World Mail and Express Europe event, Capgemini postal leadership consultant Dirk Palder detailed his thoughts on the “Postal Service 3.0″ concept, emphasising the importance of digital progress within postal operators.
But while he stated the belief that the future business model for postal services was already here – in the form of Internet giant Amazon – Palder also said he was “not too frightened about letters”.
Palder spoke of opportunities in direct mail, but suggested that with consumers throwing away large amounts of promotional material unopened, marketers needed more support in how to target their messages.
He also warned that posts were currently overdoing their warnings about the impact of e-substitution on mail volumes.
“Don’t tell people that substitution is killing the postal business – you are only extending it into a self-fulfilling prophecy,” he said. “In doing that, you are only talking up your own mismanagement and not your management ability.”
Source: James Cartledge, Post&Parcel