Middle Eastern postal market poised for growth

Postal operations in the Middle East have the potential to generate significant value, but they have limited time before regulatory liberalization and the spread of Internet commerce start to erode their competitive position, according to a new white paper Oliver Wyman, a leading international management consultancy.

• Middle Eastern postal companies today are like their European counterparts during the 1990s in facing abundant growth opportunities.

• The sector has begun to liberalize, slowly opening opportunities for new entrants.

• Immigrants in GCC countries are demanding value-added services.

• Low computer and Internet usage in GCC countries gives postal companies an additional advantage.

Middle Eastern postal companies can take advantage of several trends that Oliver Wyman expects to feed expansion and cross-selling opportunities in the region:

• Large existing post office networks and strong, recognized brands, such as UAE Post

• Large local populations and growing immigrant populations, which require basic services usually available at the local post office

• Regulated markets, which allow Middle Eastern postal companies to set barriers to entry much higher for new entrants as deregulation occurs. Bahrain already has a fully liberalized postal market and Egypt has committed to liberalization by 2009.

• Low penetration of PCs and the Internet at present, heavy reliance on cash transactions, and skepticism about online security • Middle Eastern postal companies today are like their European counterparts during the 1990s in facing abundant growth opportunities.

• The sector has begun to liberalize, slowly opening opportunities for new entrants.

• Immigrants in GCC countries are demanding value-added services.

• Low computer and Internet usage in GCC countries gives postal companies an additional advantage.

Middle Eastern postal companies can take advantage of several trends that Oliver Wyman expects to feed expansion and cross-selling opportunities in the region:

• Large existing post office networks and strong, recognized brands, such as UAE Post

• Large local populations and growing immigrant populations, which require basic services usually available at the local post office

• Regulated markets, which allow Middle Eastern postal companies to set barriers to entry much higher for new entrants as deregulation occurs. Bahrain already has a fully liberalized postal market and Egypt has committed to liberalization by 2009.

• Low penetration of PCs and the Internet at present, heavy reliance on cash transactions, and skepticism about online security

‘These factors have created favorable conditions for postal companies to expand profitably,’ says Manny Hontoria, a Director of Oliver Wyman and co-author of the white paper.

The Middle East situation today is not unlike that of some European postal operations a decade ago, and the region’s postal companies they can benefit from the experience of European markets to avoid common mistakes and understand which strategies are most likely to succeed. The German postal company, Deutsche Post World Net (DPWN), for example, has successfully grown various divisions globally. It now has revenues of over €60bn and has positioned itself as an integrated logistics services provider.

To capitalize on the trends mentioned above, postal companies will need to organize their business in a way that ensures top-tier performance and reliability, without also adding process inefficiencies or running up costs.

They can build on their ‘last-mile’ capability, which makes them of prime interest to a wide range of third parties:

• Telecom operators and airlines recognize that postal networks can be used as retail channels for distributing their products and offering customer care services.

• Government agencies understand that postal companies can be effective intermediaries between citizens and government.

• Global and third-party logistics companies are interested in the ability of local postal offices to provide pick-up and sorting services.

• Insurance companies see the selling of policies as a natural extension for postal companies with an existing banking base.

• Global money transfer companies view extensive post office networks as an ideal source of leverage.

• Private businesses are considering outsourcing mailrooms to postal companies in order to lower overheads.

‘The key for Middle Eastern postal executives is to understand which options and business designs can provide the best route to growth,’ says Manny Hontoria.

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