A view from the top: Claude Begle

Claude Begle took over as chairman of Swiss Post earlier in 2009, after a distinguished career with a number of leading organisations, including TNT, Deutsche Post and La Poste. He spoke to Post&Parcel’s sister publication, Mail & Express Review. We began by asking him to summarise his organisation’s overall strategy.

Since it is difficult to grow further in sectors where we used to have a monopoly, such as in the parcel and letter markets (in which volumes have on the contrary declined steadily), we are developing new businesses in segments where we can leverage our existing competences. These include the extension of financial services and developments in the area of substitution technologies such as secured internet solutions. It may also imply a certain international expansion. In particular, we continue to pursue our efficiency and cost reduction programmes.

All the major posts are indicating significant reductions in physical mail volume. Part of this is the result of GDP decline but there is also an increase in the rate of technological substitution as a result of recessionary pressures. What is Swiss Post’s experience, and how are you responding?

We still handle over 15m items every day, but in the past few years  addressed letter volume has been declining by an average of around 1.5% per annum. In the second quarter of 2009, however, the number of addressed letters dropped by 4.8%, which is significantly worse than in the same period last year. If this trend continues, we will face a decline in letter volume of  around 15-20% by 2015. For the time being, it is hard to tell which proportion of the current decline is GDP related and which is the result of substitution.

It is a time of change for the company, straddling both innovation and tradition. Swiss Post has to find a balance between many extremes : between a public service mission and financial imperatives; between youth’s increasing use of modern technologies and  the older generation’s use of  traditional post offices.

If we fail to  embrace the innovation challenge, someone else will and we will lose market share. On the other hand, if we go down this road, for example through electronic letter transfer, we risk speeding up the demise of one of our traditional activities, basically shooting ourselves in the foot. It makes sense to consider going down this road mainly abroad.

We then discussed how one of Swiss Post’s business units is addressing the digital challenge

The Group unit Swiss Post Solutions (SPS) provides national and international customers with efficient and timely processing of physical and digital documents thus enabling them to maintain a dialogue with their customers. It expands traditional letter related services right into the heart of a company, taking over internal mail, scanning, electronic processing and archiving as well as printing, customer specific packaging and the sending of documents. The unit enables the conversion of physical and electronic information for its customers. SPS’s dialogue solutions range from direct marketing campaigns and card based customer retention programmes to telephone marketing. With its ebusiness solutions, SPS networks companies, supports them with invoicing, electronic payment transactions, identity signatures and electronic archiving.

Swiss Post Solutions thereby accounts for developments in the digital world, while allowing physical and electronic information carriers to be used side by side. The goal is to simplify communication between customers and their end customers , whether in the form of physical documents for customer solicitation and retention, electronic archiving solutions or comprehensive consulting tools for customer management.

Swiss Post has a well developed international strategy. The Review asked Begle how Swiss Post is positioning itself to create  a viable niche in the face of some major global competition

It is too late to enter some segments such as express and parcels at a European or a global level. Today the barriers to entry would be too high. Nevertheless, Swiss Post has some interesting cards to play.

Swiss Post is active in twenty  countries worldwide. It launched its first activities outside Switzerland in Italy in 1994. Today some 8,000 Swiss Post employees work abroad, providing services in the cross border letter and parcel market, in postal related activities,  and in public transport.

The cross border mail business is operated by Swiss Post International Holding Inc. This wholly owned subsidiary was established in 1996 and is number five in the global cross border letter market. Initially, the unit grew primarily by setting up its own subsidiaries abroad. Since 2003 it has been placing greater emphasis on franchise partners and sales agents in order to tap into additional markets.

SPI provides the full range of postal products and services required by private and business customers in their international postal communication with Switzerland. Through its foreign subsidiaries  it also provides specialised services  from business mail processing and direct marketing services, via complete delivery services for newspapers and magazines and subscription management, to small consignment shipping.

The previously mentioned Swiss Post Solutions, established in autumn 2007, is also set up internationally. The MailSource Group, the GHP Group, the Swiss subsidiaries DocumentServices, yellowworld and SwissSign, as well as parts of the former DCL Data Care AG, have been brought together under the SPS  umbrella.

PostBus Switzerland Ltd is also expanding abroad, particularly in France, where it won several new tenders for bus networks this year.  In the next three years, PostBus will invest around CHF100m in its bus fleets abroad.

We then moved on to discuss Swiss Post’s retail and financial activities

The network consists of 2,380 contact points, comprising 2,154 post offices and 226 agencies, plus 1,123 home delivery services, ensuring  a good coverage of the national territory.

The Swiss are deeply attached to their post office system, placing upon it more than just a commercial or operational value. Swiss Post believes in maintaining a dense network either through traditional post offices or agencies. In this way it aims to ensure a customer friendly service whilst  at the same time optimising and reducing the number of postal outlets. In this regard, the company has just announced a politically balanced strategy, which includes  analysis of 420 post offices and the reinforcement of an independent assessment commission representing local communities.

In the Swiss retail market, PostFinance provides professional and personal financial services  for payments, investments, financing and retirement planning. Standardised and modular services are being systematically expanded, particularly in the electronic environment. PostFinance is the leader in payment transactions, especially electronic services, with more than 2.5m private customers using postal accounts and the PostFinance Card. With 60% market share, PostFinance is number one in payment transactions, and with 1.1m E-finance users  it is also number one in this sector.

Retail products such as prepaid cards for mobile phones, lottery tickets and gift vouchers continue to sell strongly.

Swiss Post has also been investing heavily in technology to transform its operations. The chairman provided some insights into recent developments

Swiss Post’s internal procedures and processes are improved continuously and the company invests heavily in new technologies. We need  to process lower volumes more cost effectively through the use of the latest technologies and ongoing process optimisations, while also being able to react promptly and flexibly to new customer requirements. Private and business customers are displaying increasingly diverging patterns of customer behaviour. The latter expect ever greater flexibility and individuality regarding mailing or delivery times. At the same time Swiss Post needs every minute it can get to ensure optimal logistics service provision.

Alternative delivery concepts have  been tested at three sites in Western Switzerland with early morning delivery for all customers in business districts and letter delivery in residential areas  extended into the later afternoon. The centralisation of collections has also  been tested.

The feasibility of automatic sequence sorting is being trialled in the St. Gallen region. This means postmen are handed consignments already sorted into correct order by house number and letterbox. The tests will show how the efficiency of delivery can be improved by more advanced presorting.

As a final point, it is impossible these days to imagine making a delivery without the use of hand held terminals. Not only do they enable us to track consignments accurately, they also allow us to manage the delivery process.  On the display, the carrier can see which steps need to be taken for which consignment. This significantly reduces the risk of delivery mistakes. The full address entering system which is planned will enable us to incorporate the wishes of individual recipients into the delivery process.

Swiss Post has invested a lot of time and money in developing its web portal. This suggests it is very  important in the provision of services to your customers

Today’s work and life habits are characterised by greater mobility and increasing use of the Internet. Swiss Post is taking this change in customer behaviour into account and making many of its services accessible online: for instance forwarding orders, address changes and the ordering of postage stamps or products from the online shop. The company’s main reason for doing this is to make it easy to do business with Swiss Post.

In light of this strategic goal, we are implementing customer proximity on the Internet. We have  just recently upgraded our  portal in a bid to move away from the static offering of products and services and reach out further to our customers.

More than one million visits per month to the portal highlight the importance of having a well designed and properly organised website. Through ongoing analyses and user surveys, we have identified the 120 most requested Swiss Post products and transferred them to a 3D structure, the reason being that customers prefer to have their basic questions answered as simply as possible. At the flash technology supported virtual post office counter customers can find the answers they need quickly: http://www.post.ch/en/post-startseite/post-privatkunden/vps-virtueller-postschalter.htm

There are a lot of developments affecting Swiss Post’s regulatory structure, not to mention postal liberalisation. In the final part of the interview we asked Begle to explain what is going on

Swiss Post is mandated to provide an adequate universal service (post and payments) throughout the country on an equal basis, with a good quality standard and at reasonable prices, and available to all sections of the population within a reasonable distance.

Only Swiss Post is permitted to offer reserved services, currently letters up to 50g. Non-reserved services must be offered but the market is competitive.

We  expect policy makers to fully open the postal market by around 2013 at the earliest.  During this year’s winter session, one of Parliament’s two chambers,  the Council of States, is scheduled to  debate the revision of Postal Legislation which comprises two separate laws. While the Postal Act governs the market, the Postal Organisation Act is effectively a company law.

Upon promulgation of the new Postal Organisation Act (comparable to a corporation’s articles of association) Swiss Post is to be turned into a public company under special law, owned at the level of at least 51% by the Swiss Confederation. At the same time, PostFinance will be spun off into a public company majority owned by Swiss Post and placed under the supervision of the Financial Market Supervisory Authority. In terms of tax legislation Swiss Post is to be treated on a par with private providers and its state guarantee will be abolished.

However, this law fails to allow PostFinance to independently offer mortgages and loans and thus enter the lending business.

The financial arm of Swiss Post already manages aroundCHF50bn in customer deposits. It now needs to obtain a “light” banking license in order to sell higher value products such as loans to small and medium sized enterprises, mortgages and credits for syndicated loans. It must act offensively and defensively at the same time to develop business and to ensure customer loyalty.

In order to be able to react quickly to changing market conditions the infrastructure mandate, as provided for by the Federal Council, should be set out in the Postal Act and Postal Ordinance. It is important that the basic service can be financed by Swiss Post in the long term. Complete deregulation of the letter market should, therefore, only take place once the implications of the new postal legislation are sufficiently known.

It is also important that the new legislation provides us with a broad enough enterprise goal so that we can invest, not only in traditional postal sectors, but mainly in new growth areas.

This article is featured in Mail & Express Review’s November 2009 issue. To subscribe to the industry’s leading publication, click here.