Head to Head: Jean-Paul Bailly
Mail & Express Review editor John Modd caught up with La Poste chairman and CEO Jean-Paul Bailly for an insight into the workings of the French company. Let’s begin by looking at La Poste’s strategy for dealing with the current recession, and responding to the impact of technological change.
Faced with a drop in mail volumes and turnover, La Poste intends to maintain its operating income by reducing its costs. Our Letters division has been working on this since the start of 2008 and now the process is being extended to the entire Group. In addition to the specific projects managed by each major business (Mail, Parcels & Express, Banque Postale and Retail) the La Poste Executive Committee is supervising a programme to optimise cross-disciplinary processes to generate more synergies and shrink costs. For instance we are streamlining the purchase process of studies and consultant services, setting up improved management of personnel and wages, and enhancing management of rental property stock.
The structural downward trend in mail volumes is set to continue over the coming months. On the other hand, the fall off in parcels and express sales has slowed since April. Good growth in the banking sector should continue. Overall, the Group expects to see its Business Divisions’ activity fall by around 3% over the full year 2009, in line with the performance posted in the first half.
It is hard to tell what is GDP related and what is the result of technological substitution per se. In mail the trends seen in 2008 have strengthened in the first half 2009: the decline in the economic volume of mail (excluding subsidiaries of our Sofipost holding company) amounted to 6.2%. This reflected a 4.4% fall in volumes, a 0.7% negative calendar effect (one business day less) and a 1.1% negative product mix effect.
Substitution is now definitely a fact for businesses and their customers who use the healthcare chip card (thus sending fewer letters), e-billing, and so on. Large mailers use lower postage rates and as they want to shrink their carbon footprint they use less paper too.
We estimate that mail volume could fall by 30% by 2015. However, mail is still a special medium and people continue to appreciate reading their direct mail.
That said, any crisis creates opportunities for companies that know how to respond to the new behaviour of consumers and companies. The current crisis has accelerated the outsourcing trends by companies of all their mail operations, which creates an opportunity for La Poste to offer them comprehensive solutions, covering the entire mail value chain, not just franking: scanning and archiving, managing the address, design and production of letters, management of returns etc. This represents 10% of our revenues currently, and we intend to reach 20% in the near future. Outsourcing implies even tighter relations with our customers, when such relations involve hard copy information in the end.
One final comment on the recession. The image of incumbent postal companies emerges relatively strengthened by a crisis which is mostly a crisis of confidence. Trust which is our major asset places more value on our mixed economy model, perceived as a protective alternative to the pure free market model.
La Poste through GeoPost/DPD is a major player in parcels. Do you now feel you have the optimum network in place with the necessary geographic coverage? How do you differentiate yourselves from a range of powerful competitors?
Our geographic coverage is already quite wide. As Europe’s second largest parcels and express operator, GeoPost / DPD is consolidating its position in Slovenia, Croatia, Rumania and Serbia. In Russia, we are opening three new hubs in major industrial centres in Siberia and Orenburg, a town at the crossroads of Europe and Asia. GeoPost is continuing its progress in Western Europe by opening a superhub in Oldbury (UK). In Africa, five subsidiaries are now connected to the DPD network. DPD has a foothold in over 40 countries or territories around the world.
We have a good pricing policy and we are also an investor in people. Men and women from GeoPost are driven by values that bind them beyond borders and markets where they work, the better to serve our customers. Solidarity, accountability, receptiveness and respect are essential elements in our network activity.
As our large mailers are using deferred versus premium more than before, we also benefit from this drop in positioning thanks to our mid market range on Parcels and Express.
In July 2009 we signed an agreement to join the Kahala Posts Group (KPG), an alliance of leading posts providing an international express mail network. The connected network allows express mail and air parcel packages to be delivered more rapidly in the ten member economies (Australia, China, France, Hong Kong, Japan, Korea, Singapore, Spain, United Kingdom and United States).
We are also responding to the continuing growth in internet generated consumer deliveries (B2C) with reengineered parcel hubs and adapted rates that are amongst the lowest in the market. We also plan to launch an evening delivery schedule for parcels on a subscription basis.
In retail, how is La Poste balancing its social and commercial roles? Tell us something about your wider range of products and services, particularly in the finance sector.
Our retail brand represents one of our public service missions and our values of proximity and capacity to offer access to all.
We have a network of 17,100 post offices. This includes 6,000 agreements with mayors mostly for counters situated in rural areas and small town halls, and 1,500 post offices in shops. We have to obey legal rules to offer access to the post office network to all citizens.
At least 90% of the population of a given region must be located within five kilometres and a twenty minute drive of the nearest La Poste outlet. La Poste has exceeded this obligation as 96 % of the population is located less than five kilometres from a postal outlet.
La Banque Postale, renowned as everyone’s bank, is now entitled to offer a complete range of accessible banking products and services at reasonable rates. This is especially true with the new authorisation we received last year to provide individual customers with personal loans and home and car insurance contracts. This is in addition to our sophisticated range of securities and life insurance products that meet the needs of people from all walks of life, including family asset management with special advisors guiding our customers.
Money transfer is also a traditional activity. Mobile telephony is on our list and we successfully sell phone cards and mobile phone contracts. We are working on developments in this field. We offer also internet or text alert on cellphones informing customers about their banking operations, parcel deliveries etc.
What are La Poste’s major technology strategies in areas such as customer service and operations?
The internet allows us better to know our customers’ needs, in general and in a hyper segmented way eg according to economic sectors. We want to involve our customers more in designing the kind of products and services they want and in associate communications (co-marketing or ‘engagement marketing’).
Our website includes an e-shop allowing you to buy stamps, pre-paid envelopes, philatelic products and stamp books online.
Our postal banking services are available online too and you can access your banking and savings accounts and stock exchange portfolio. E-transactions pages provide a comprehensive at a glance view of all purchases and daily sales quotations, for example. Our website in English and Spanish is available on http://www.laposte.com/ It showcases our products and services. Information by phone is also offered. Online preparation for Coliposte normal parcels and Chronopost Express consignments is also possible.
In operations we have deployed delivery walk sequencing for quite a few years now and new machines are installed daily as part of our E3.4bn Mail Quality Investment Programme.
Our parcel delivery drivers use Hand Held Terminals to obtain addressees’ signatures. Our mail carriers also provide such new services as gas meter readings and nationwide medication delivery.
Let’s talk about mail liberalisation and also La Poste’s legal status. Is the need for special funding for the Universal Service obligation still an issue?
This question is currently being discussed in the Parliament. The 2005 Law organised the creation of a future compensation fund. New entrants and La Poste will pay for it. We would prefer a fee based on the number of items rather than turnover.
As the Review understands it, there is no suggestion of private equity investment in La Poste, but there may be changes to your legal status. Could you clarify the position for our readers?
Yes, with pleasure. La Poste Group, contrary to most other incumbents, still has a Public Utility Company status without capital. This represents a hindrance to our evolution. The new postal law will change our status and transform La Poste into a limited liability company. This will allow the state and the government owned Caisse des dépôts to inject capital up to €2.7bn. Employees may be encouraged later on to buy shares but these will not be opened to other private investors.
For La Poste and for all postal workers this government decision demonstrates confidence in our future and trust in our capacity to rally our troops so that we are ready when our markets are fully liberalised by 2011. The new status will give La Poste the means to modernise and develop.
Tell us something about your employee strategies, please.
La Poste has made responsible development the key point in its current strategy. For a Group with 300,000 employees this means adopting the attitude of a responsible employer through our “employer committed to developing its employees” concept. We are encouraging job quality, skills development and equal opportunity for all. It also means making a contribution to local and regional job creation. This is the only way to build the company’s confidence and performance inside and outside.
Let me outline some initiatives we took in 2008:
–more than 3,200 fixed-term employment contracts were converted to open ended contracts;
–over 4,500 Retail Brand postal workers and more than 20,000 mail carriers were promoted;
–a multi-Division job bank accessible to all over the intranet was extended to a broader number of employees;
–more than 5,300 applicants were accepted in accordance with the French Job and Equal Opportunity Action Plan;
–in excess of 2,700 people worked for La Poste as apprentices.
The unions are quite aware of our efforts. Just as most other incumbents we are negotiating constantly with the five most representative unions.
Finally, we talked about how M. Bailly sees the role of European postal operators evolving.
Some are expanding horizontally in express and parcels, and others are moving vertically by developing services with more added value and using new technologies. The first type of operator is more industrial and focused on express, consignment and logistics, as we see in the Netherlands and in Germany, for example. The second type is more focused on diversifying and developing local, personalised services, in particular banking services, as seen in Italy with Poste Italiane or La Poste here in France.
Operators are not simply diversifying their range of activities. They are also striving to optimise their operational and social models by modernising their mail production chains and adapting their work organisation. The various approaches are very different and I believe La Poste Group has a interesting alternative to offer.
As I said earlier, the image of “traditional” postal players is comparatively stronger after a crisis. This demonstrates the worth of a ‘mixed business model’ as an alternative to the purely deregulated system. It creates opportunities such as La Banque Postale’s safe image. I further believe that in mail we have to overcome three challenges:
–renewing mail by making commitments to contemporary public service that meet the expectations of all types of customers, to develop “Responsible Mail” and the “Customer Commitment Charter”;
–developing the mail sector so that it is profitable and reinvents itself by becoming the preferred medium for customer relations and the driving force behind the trust based Internet;
–achieving success together by building a shared, responsible social compact.
In parcels and express, as the number of B2C and C2C shipments increases, we need to foster the convergence of these dynamic segments with B2B.
In banking services, the Group is making investments to expand and round out its range of products and services. It will initially provide consumer credit and non life insurance to individual customers, and then enhance services to companies and regional and local authorities.
The increased awareness of green issues and global warming is also calling into question our postal activity (postal services transport letters and parcels, and therefore are seen as polluters) and the image of paper itself (and therefore mail). Reducing our carbon footprint is essential. We intend to cut CO2 emissions by 12% between now and 2012. Our “Clean Transport” plan has been launched on a national scale, 30,000 mail carriers were given ecodriving training in 2008, and the first more environmentally friendly sorting hub has been completed.
This article was featured in November 2009’s issue of the Mail & Express Review. To subscribe, click here.
