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Posts failing to make digital mail work commercially, says Accenture study

Wednesday, March 13th, 2013

The world’s top postal operators are struggling to make any material value out of digital mail, according to a new Accenture study out today.

The report entitled “Achieving High Performance in the Postal Industry” suggests that diversification of products and services is the key to postal survival, as it warns that competition from private sector operators could pose more of a threat to Posts than the long-term decline of traditional mail volumes.

Accenture‘s latest study on the top-performing national posts, and FedEx and UPS, states the belief that none of the top postal operators has really found the right business model to commercialize society’s move towards electronic communications.

The report claims none of the digital solutions in the market have resulted in significant profit or have achieved broad adoption.

Digital mail also acts as a “double-edged sword” in cannibalising physical mail volumes, the report warns, citing Post Danmark’s involvement in the e-Boks digital mail service, which has two thirds of the Danish population registered, as Post Danmark suffers greater mail volume declines than its postal peers.

“Accenture believes there are still significant questions that need to be resolved to create a viable digital mail solution,” the report states.

“Running out of time”

There has been a 15% decline in global mail volumes between 2008 and 2011, according to Accenture.

The good news is that an improved global economy appears to heave slowed the annual mail volume decline from a 10% decrease to just above a 2% decrease among the top 16 postal operators. However, Accenture warns that the improving situation has not created the volume increases to “save the day”.

Postal operators have been able to use price increases to drive some revenue growth in mail, with those in the study averaging a 1.5% revenue increase from mail since 2010.

However, the report suggests the volume decline will continue in the long term.

“Profit will only come as postal organisations shift to leaner networks”

“Traditionalist” postal operators highly dependent on the mail for revenue are for the most part failing to deliver revenue growth, and are now “running out of precious time”, the study warns, even while they experiment with new ways to stimulate mail volumes.

The secret to success in managing the decline of the traditional mail business has been for postal operators to diversify into new business areas, the study suggests, along .

Six out of the top 10 performers in the Accenture study achieved their success through diversifying into new areas like logistics, new parcel services and financial services, but the research suggests that geographic diversification for existing services has proven to have less growth potential than expansion into new products and services.

Brody Buhler, the managing director for Accenture’s global postal industry practice, said diversification was ensuring the survival of postal operators.

But he said it “remains to be seen” whether there is still a profitable business to be found in mail.

“Profit will only come as postal organisations aggressively shift their operating models to leaner networks that can quickly scale to shrinking volumes,” Buhler said.

Competition

The Accenture report does highlight the importance of e-commerce, and the potential for cross-border and mobile e-commerce to drive growth in postal organisations.

But it also points to the growing significance of private sector competition for the world’s top postal operators, and how increasingly liberalised domestic markets are applying further pressure.

The study warns that private operators could represent an “even larger question mark” concerning the commercial viability of existing postal players than declining mail volumes.

“As private players gain a competitive foothold, they create a new threat to mail volumes that can quickly erode the most profitable volumes, leaving the postal
operator with less market share and even lower margins,” states the report.

The Accenture study said private operators are now exploring last mile networks, forcing existing postal organisations to turn their optimisation efforts to their own delivery systems.

Source: Post&Parcel/Accenture

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