New Zealand Post looks forward to continued success

World Mail Review recently interviewed John Allen, the CEO of New Zealand Post, about his business. John has been in charge of the organisation since 2003, having previously been Chief Operating Officer. He is a lawyer by training.

We started the interview by asking for a few facts and figure about New Zealand Post.

The New Zealand Post Group of companies is a very diverse one.  We are involved in the traditional mail business, but also have interests in the express courier, data management, and retail banking markets.  New Zealand Post is an important part of the fabric of the country.  We handle approximately a billion mail items each year, have over 450,000 banking customers and employ nearly 10,000 people.  We operate in a liberalised market, face competition in all areas of our business, and yet still generate good returns for our sole shareholder, the New Zealand government.  In 2005/06, we generated an after-tax profit of NZD 68.7 million.

What are the key dynamics of the mail and parcels markets in New Zealand?

In the first six months of the 2006/07 financial year, our domestic letter volumes declined by 2.9%.  The way individuals communicate is changing, thanks to email and text messaging.  But people still like to receive letters and, in an increasingly cluttered electronic world, mail is a key medium for businesses to communicate with their customers. We are carrying more parcels than ever before, driven on the back of Internet trading.

How is New Zealand Post regarded by its customers? Do you have any measures of success you could share with World Mail Review readers?

New Zealand Post is generally well-regarded.  We work hard to deliver good performance for our customers: 95.9% of mail was delivered on time in 2005/06.  In the same period, 49% of all our customers rated their experience with us at least 8 out of 10.

What is happening with competition, particularly in letters?  What have you done differently to respond?

There is strong competition in all our markets, from letters and parcels, through to banking and data management.  In letters and parcels, our competition comes from private operators in the physical mail market, as well as other media.  The Internet – as well as television stations, radio stations and newspapers – are all in the business of selling communications – and are in direct competition with us for direct mail and transactional mail such as bank statements.  We have responded by showing our customers the value of mail as a communications medium.  In responding to our competitors in the physical mail market we have been focussed on keeping quality high and making our products simple to use.

Tell us something about your relationship with the government.

Our relationship with the government is positive.  The Minister of Finance and the Minister of State Owned Enterprises own the company on behalf of New Zealanders and we have returned nearly a billion dollars to the government in taxes and dividends since New Zealand Post was established as a company in 1987.  The fact that we are owned by the government does not mean we get an easy ride because we have a separate regulatory minister.  The Minister of Communications is responsible for the postal regulatory regime and for setting universal service obligations, which New Zealand Post is required to meet.

Could you give us two or three recent examples of real innovations for the benefit of customers?

The biggest innovations for our customers in recent years have been the establishment of Kiwibank, and the creation of new services through our partnership with DHL in the express and logistics business.

We recently introduced the ‘Prezzy Card’ – a prepaid Visa card with a credit balance designed as a gift.  Another new service is ‘Shipbuktu’.  This is a service where customers can arrange to have items purchased in the USA shipped to a US address and then sent on to New Zealand.  This has made it easier for our customers to undertake their business, because many Internet retailers in the US refuse to ship goods offshore themselves.

You mentioned Kiwibank a couple of times. It is seen as a great success story. Tell us more about it.

Kiwibank has been a stellar performer for New Zealand Post.  The idea of establishing a bank developed when it became clear that New Zealanders were dissatisfied with the services and charges offered by our big banks – all of which are owned offshore.  Kiwibank has changed the face of banking in New Zealand by offering great services at lower prices.  We now have over 450,000 customers (out of a total population of around four million), and our mortgage and deposit books are growing.  The bank’s growth has exceeded our expectations, and it became profitable after its third year of operation.

We’ve talked about the digital threat. Does New Zealand Post offer digital services?

Digital communication is a reality and we’ve been keen to adapt our business to that.  Our Datamail and ECN businesses have interests in the market for digital communications and we are working to build these. These interests complement our core physical delivery business, because they allow us to offer a suite of products to suit all aspects of our customers’ needs.

You’ve also mentioned the joint venture with DHL. How is that going?

We formed a joint venture with DHL to manage our domestic express, courier and logistics businesses.  It’s been going really well, and we have learnt a lot from our colleagues in DHL.  Our service has improved, our customers are happier, and the business is growing.  It has also given us scope to call on outside expertise to help develop our logistics business, for example.

Where do you look to learn from best practice? 

We look to learn from leading companies around the world, in the postal/courier sector, but also in other business areas..  For example, we learned a lot about retail banking from Bendigo Bank in Australia.  In the past year or so, we have looked at companies from around the world, including Europe, Asia, the Americas and Australia.  I am keen to make sure that New Zealand Post keeps up with world best practice

As Europe faces probable full letter market liberalisation in 2009, what messages would you send to your fellow CEO’s who are perhaps concerned about the future?  Have you had a problem maintaining the USO for instance?

My key message is that competition already exists, even in those countries in which posts have a legal monopoly on the carriage of letters.  The availability of cheaper and faster networks to deliver much of what is in the mail, and increasing competition from television, radio and other media for marketing messages, make it critical that postal businesses are not complacent.  If you have a competitive price and an outstanding service, then I believe posts can survive in a liberalised marketplace.  There are real opportunities to leverage our trusted brands and established networks into new, value-adding areas of business, as well as continuing to provide a universal nationwide mail service at an affordable price–as we do.

Finally, what as the CEO gives you the most pride in what you’ve achieved?

The fact that, despite competition in all markets, New Zealand Post continues to grow,  and to establish new businesses (such as Kiwibank), new partnerships (such as with DHL), and new services for our customers.  This is a real tribute to our team, which works extremely hard to deliver and innovate for our customers.  The future for our company is very positive.

John, many thanks for your time.

John Allen is a keynote speaker at Triangle’s 2007 World Mail & Express Europe event.