Postal change out of Asia: the impact on the international direct mailing industry

James Thornton, CEO Mailing Lists Asia
Changing status for Hong Kong and Singapore

For some years now the international direct mail industry (including large U.S. and Canadian mailers) has been taking advantage of competitive printing, personalisation and letter-shopping efficiencies and rates on large volume mailings out of Asia. These are posted regionally and multinationally (and also back into Canada and the USA), reliably and at favourable postal rates, especially through Hong Kong and Singapore Posts.  This is all about to change.                                              

By the end of this year Hong Kong Post, Singapore Post and Emirates Post (through Dubai) will all enter a transition period when they will acquire interim Industrialised Country (IC) status within the Universal Postal Union, prior to receiving full IC status by 2012.   These postal administrations will as a result soon have to announce higher per item and per kilo rates effective beginning in 2010 in order to cover their higher terminal dues obligations for mail delivered to other IC countries, including most of the countries of Europe and North America.

As at this time of writing (early July) Hong Kong and Singapore Posts have each been waiting for the other to announce new international postal rates first.  (Neither of the Postmaster Generals was willing to be interviewed for this article.)

 Impact on bulk mail costs

One of the more contentious issues confronting both posts under their shortly to be acquired interim IC status is whether bulk mail delivered to IC countries such as the UK, France, Germany and Japan will continue to be subject to bulk mail penalties on volumes of more than 1,500 items per day or 5,000 items within a two week period.  IC countries tend to be quite punctilious about such penalties because they claim their costs of delivering such mail are higher than the terminal dues they receive in compensation from the non-industrialised Developing Countries (DC’s).  The word in the market place is that Singapore Post is actively lobbying IC countries to exempt it from bulk mail penalties during the forthcoming DC/IC transition phase.

As always, my heart is with the interests of large international mailers who are ultra-sensitive these days to any significant increases in their costs. The big question that needs to be asked on their behalf is: ‘What should be their next move?’.  The postal cost is the single biggest cost in international direct mail and mailers everywhere are all under ever increasing pressure to keep new customer acquisition costs down as low as possible.

Are there any replacement Mailing Points in Asia?

The most obvious question is whether, with the loss of DC status by Hong Kong and Singapore, there are other candidate full DC postal administrations in Asia that can offer competitive rates and be fully trusted to ensure that bulk mail is delivered in full to the destination countries required.  In my view (and based on a lot of negative experiences in the past in this respect) the simple answer is “No”. There are no other reliable DC postal administrations in Asia handling international bulk mail competitively who can guarantee full delivery worldwide with absolute certainty.  Having said that, service quality is said to be improving at certain postal administrations, which do have bilateral agreements in place enabling mailers to avoid bulk mail penalties.

Such alternative bulk mail postal options would need to be explored and tested, and, once identified,  postal staff would need to be carefully trained by one or more postal consolidators.  I understand there is one particular consolidator out there who has perceived it to be in its interests to begin now with the process of research, detailed discussion and trialling in this respect.

Growth expected in Alternative Delivery Systems?

A further development likely to unfold in Asia will be, of course, alternative delivery systems or ADS.  Delivery of cross border mail through non-postal channels has become an art form in Europe (after a lot of practice) and it is expected to become more sophisticated and reliable out of Asia in the future.  This will include hybrid mail (using both postal and non-postal channels) and it is in the interests of larger postal consolidators to make this happen in an efficient and reliable manner.  A lot will depend on the quality of relationships established with individual members of any delivery network. Trust and efficiency will need to be fine tuned and built up over an extended period of time.  Postal savings at the expense of uncertain delivery is a completely unacceptable trade-off for any serious mailer.

Currently many mailers arrange for their item weights to be under 20gms to conform with postal rate breaks in order to secure the most competitive rates, but this would not be necessary under private delivery systems where heavier weight items are more competitively priced.  A good example is the heavier “dimensional packages” used successfully by the fundraising industry to acquire new donors.  The overhead cost of privately delivering a heavyweight package is almost the same as the cost of delivering a lightweight package, especially where bulk mail penalties are no longer an issue outside the postal system.

DHL Global Mail (owned by Deutsche Post) is probably the leading postal consolidator in the Asia Pacific region right now.  They are vocal advocates of what they call “the intelligent channeling” of mail internationally. Swiss Post is also making solid efforts in this region.  Direct Link (owned by Swedish Post) has in the past been a significant user of Emirates Posts through Dubai but is seen to be scaling down somewhat in the Asian region.  Spring in AsPac is now wholly owned by Singapore Post.

Mailing options back into the USA will continue

For some time now large U.S. mailers (especially fundraisers) have been taking advantage of lower printing, personalisation and letter-shopping costs out of Asia (as well as cheap, easy access to premiums out of China), and then simply mailing back into the USA using Hong Kong Post lightweight 20gms mail which is not subject to any USPS bulk mail penalties on entry into the USA.  Heavier weights (such as fundraiser dimensional packages) are shipped by sea or air to U.S. West Coast sortation facilities where they are fine sorted to qualify for work share and other discounts before being injected into the USPS for marginally less than the full 16% discount earned from the very mechanised, automated and efficient fine sorting processes available to mailers.

Final thoughts

Another trend out of Asia affecting the international direct mail sector may be the phasing out of cosy bilateral agreements such as the one between Hong Kong Post and Royal Mail where HKPO has in the past been exempted from paying bulk mail penalties to the U.K.

Despite all these changes, Developing Countries around the world (bless their hearts) will continue to deliver mail received out of Asia faithfully since, in many instances, the terminal dues they receive from any international mail are more remunerative than income received from local mail lodged at local postal rates.  It is for this very reason, I believe, that response rates mailers receive from DC delivered mail tend to be significantly higher than response rates from equivalent lists mailed in IC countries.  Such DC’s receive less mail and the mail they do receive from overseas is delivered to addressees with greater care and respect.  Many large mailers out of Asia (and elsewhere) still have a lot to discover in this respect.