Consignia relies on brand identity to deliver success

Consignia relies on brand identity to deliver success
From NEW MEDIA AGE, September 20th, 2001

There can't be many plcs less than a year old, that can boast brand
equity dating back hundreds of years.

Consignia, formerly the Post Office Group, became a publicly listed
company in March, inheriting the august brands of Royal Mail, the Post
Office and Parcelforce Worldwide.

But with its new independence comes a newly deregulated and competitive
market, and all, including Consignia, agree it's going to be tough out
there. The Postal Services Act last year stripped the Post Office of
its monopoly on collecting and delivering post (though post costing
less than £1 is still covered). In June, three other postal operators
got the go-ahead from regulator PostComm to tackle Consignia's
business.

Since its first day in operation,Consignia has been steadily expanding
its activities to embrace e-commerce fulfilment, billing and customer
management, logistics and warehousing. Repositioning its product
portfolio and brands from offline icons to trusted electronic
identities is the company's most critical strategic push to date.

Will Consignia's brand heritage and distribution experience give it the
clout to dominate its market to the exclusion of all others, or will
its sheer bulk count against it, making it too unwieldy to respond
rapidly?

Consignia hasn't had an easy time of it recently. The internal
restructuring required to reinvent the public sector monopoly as a plc,
meant workforce changes which so incensed staff that unofficial
industrial action took place costing the Post Office around 60,000
working hours in 2000/01.

This culminated in the massive disruption to mail delivery in May,
which was hardly a public relations coup for the new company –
especially given the perceived sanctity of the British postal service.
In his annual report statement, chief executive John Roberts said that
resolving this was a "key priority" and pointed to an independent
review with the Communications Workers' Union. But July's announcement
of 2,100 job cuts, amounting to 1% of its workforce,isn't likely to
help employee relations – though the streamlining exercise will be an
important step in cutting costs and giving Consignia greater dynamism.

Nothing is exempt from review as the company repositions itself – KPMG
was called in to help improve efficiency last year, and the reports are
that even the sorting and delivery could be outsourced, potentially to
German tech firm Siemens.

Consignia has undergone rapid international expansion, acquiring a
number of European parcel operators, including the French Extand and a
share in Poland's Szybka Paczka Sp-Ika. It's the controlling partner in
General Parcel, an integrated Europe-wide delivery network, and has
European Commission approval for a joint venture with Singapore Post
and TNT Post Group, owned by the Dutch postal service TPG.

Such geographical expansion is fairly unsurprising from a company
wanting to shore up its previously unchallenged position in the face of
new competition. But Consignia is also diversifying its product range,
not only offering its old services (for example package delivery) in
innovative new ways, but also expanding operations into allied areas.

The future of communications, and business transactions, is electronic –
and much of Consignia's strategy is a concerted push to 'go virtual'.
This takes two strands: supporting e-commerce with its distribution
expertise and developing its own online offerings.

Through its subsidiary Viacode, Consignia is developing secure digital
identities or 'e-signatures', which the Post Office network will take
the lead in promoting and which are expected to be ready for release
next year.

With its partner Retail Futures, Parcelforce also operates the World Of
Shopping retail Internet channel, through which British-themed gifts
and collectibles are sold, taking advantage of the group's global
delivery expertise (70% of the custom comes from outside the UK).
Consignia is also in the process of developing a transactional portal
where customers will be able to access all its brands: the Post Office,
Royal Mail and Parcelforce Worldwide.

"I'm trying to grab opportunities for us to be as well established in
the virtual world as we are in the physical world," says Mark Thomson,
Royal Mail's MD for e-commerce. Although still led by the three brands,
the portal will be a one-stop shop, showing all that Consignia, the
group, has to offer. Services such as parcel-tracking or purchases
across a virtual Post Office counter, will be possible – foreign
currency for example. "It'll be like the Post Office in your home,"
Thomson says.

Online bill payments to utilities, such as that offered currently
across real post office counters, will be a major feature. The site's
technology will allow real-time banking transactions in a bid to
attract the 500m bills paid into Post Offices every year. The portal,
says Thomson, should be ready to launch in November. However, the Post
Office is by no means the first provider of such an online service –
has it lost an edge by not being first to market?

"You can't push forward on all fronts at the same time," says Thomson.
"And sometimes being a follower has advantages because you have a
better opportunity to appraise the market. There are players out there
offering online facilities that may cross over elements of ours, but
there's not a lot of activity going on and we're not particularly
troubled."

Competition in the wider arena of Consignia's activities will, he
concedes, be intense. "It's going to be an interesting and exciting
next few years. Everybody out there is facing competition, and we've
had competition in many guises for many years. The telephone is in
competition with consumer mail, for example.

"But because Consignia covers such a wide spectrum, that also means
just about everybody is our client and there's a fine dividing line
between competition and partnership. We welcome competition but we're
not about squeezing people or about abusing our position."

Accusations that Consignia is taking advantage of its monolithic status
in the mail market have recently been levelled at it by the direct
marketing industry. Consignia's expansion activities have included
buying a £2m stake in Bristol mailing house Mail Marketing
International. The move sparked concerns that, as mail delivery was
deregulated, Consignia would expand into direct marketing and use its
monopoly to dominate the market. Concerns were even expressed about its
potential use of cross-subsidies to underline its push into direct
marketing – a move which regulator PostComm stated would be illegal.

The ruckus over Consignia's MMI purchase came hot on the heels of it
being attacked for using the Royal Mail logo on consumer lifestyle
surveys carried out by its data hygiene operation, the Postal
Preference Service. Using such a well-known brand on the PPS surveys,
it was argued, would give the PPS data an unfair advantage in the
marketplace. The Office of Fair Trading threw out the complaint against
Consignia – but it points to a strong degree of nervousness about the
company's potential power.

President of the Direct Marketing Association, Colin Lloyd, is more
understanding than some of his members. "There will be competition for
Consignia on many different fronts," he says. "You have to have some
sympathy for them, having had a monopoly for 150 years and now seeing
it erode. Investing in securing channels to market is obviously right."

While the DMA is nervous and attentive to the company's moves, as they
affect direct marketing, Lloyd says it's important to be realistic
about Consignia's likely direction. Moving into areas such as the
Postal Preference Service and Mail Marketing International, is the
action of sensible management to protect market share, he says.

The pressures brought to bear on the company from electronic
communication will be huge, Lloyd believes. He cites the US postal
service, which posted a $0.5bn (#340m) loss in the first quarter this
year, mainly down to email having cut into its core market. Electronic
communications will play an increasingly important part in direct mail
and coupled with deregulation, "there must be a loss somewhere down the
line."

The company's attempts to corner the e-fulfilment market are laudable,
but should have happened three years ago, says Lloyd. Now it faces
competitors from home shopping giants, notably Great Universal Stores'
logistics arm, Reality.

Consignia MD for home shopping David Taylor says the increasing take-up
of online retail will see the home shopping market double in the next
five years. Poor fulfilment has traditionally been a barrier to e-
commerce growth, and Taylor is keen that Consignia should help "crack
the problem" in the UK. The firm has introduced new delivery options to
suit buyers' lifestyles, including evening deliveries and most
recently, the "local collect" service where people can choose to have
their packages delivered to a handy Post Office. Other innovations are
in the test bed, such as secure collection points, or drop-boxes, which
can also handle returns.

But Taylor is working to ensure that Consignia breaks out of the
delivery-only perception. "We're not just about the last mile," he
says. "We offer other assets, like warehousing, so we can act as
dispatch facility – individual items can be packed, labelled and sent
out. We embrace the spectrum of customer management – for many
companies entering the market, whether they're a dotcom or a
traditional retailer, their expertise will typically lie not in
warehousing or even in marketing, but in the services they're
offering."

Consignia is selling itself as an end-to-end fulfilment expert says
Taylor, using its vast size to give the smaller operators the kinds of
economies of scale that were previously out of reach to them. The
service takes in all aspects of customer management en route, from
order processing to the moment the widget turns up on the doorstep. And
Consignia's clients can take the whole service, or jump in at any
point.

The company is well positioned to take advantage of the coming boom in
home shopping via online, says Taylor. He points out that 60% of goods
bought online currently get delivered by either Parcelforce or Royal
Mail. But getting hard data on this is difficult when packages are
posted directly by the supplier. Amazon is the most significant of
Consignia's e-commerce delivery clients, but it looks after its own
warehousing.

Although postal deregulation has brought the threat of Consignia's
European counterparts, such as the German-owned DHL, or the Dutch
parcel service TNT, the main competition will come from existing home
shopping companies. But Taylor points out that even for these, online-
driven purchases still account for only a small number of goods
delivered. As the entire market becomes more global, Consignia's
strategic interests in European parcel delivery will no doubt help
position it as a seamless, end-to-end solution internationally.

According to Forrester analyst and e-fulfilment expert Julia Woodham-
Smith, Consignia will have a fight on its hands to gain the kind of
market share in e-fulfilment that it craves.

"While Consignia is a huge player in parcel delivery to the home, it's
not huge in home shopping fulfilment, including the order processing
and customer service elements. Existing home shopping companies are the
main threat," says Woodham-Smith. "The GUS/Argos logistics machine
already delivers twice as many retail parcels to UK homes than
Parcelforce. European home shopping giant Ottover Sand, the largest
mail order company in the world and, after Amazon, the second largest
online retailer, is likely to claim a significant slice of the
fulfilment market when it ramps up operations in the UK."

"Consignia is one of the big guys in sending packets to domestic
addresses but they're not very big yet in online fulfilment and will
have to invest quite a lot to compete with the likes of GUS/Argos," she
adds.

Although Woodham-Smith is adopting a 'wait and see' approach to
Consignia's e-fulfilment push, she does point to definite strengths the
company has. Its well-developed infrastructure in delivering to
residential addresses is a bonus. In this sphere, its only competitor
of note is White Arrow, with express companies like TNT and DHL lacking
the density of traffic to compete on domestic delivery.

And unsurprisingly, another major plus for Consignia is its famous
brands. "They're trusted," says Woodham-Smith. "In terms of delivering
packages, people do prefer Royal Mail and to a slightly lesser degree,
Parcel Force. It's a gold-plated brand."

Company history

1635 King Charles 1 opened Royal Mail to the public.

1661 World's first date stamp is introduced on mail.

1793 Investigation dept set up to ensure mail security.

1840 Penny Black, first adhesive stamp, launched.

1853 Postal boxes introduced.

1919 Airmail service introduced.

2000 Postal Services Act strips PO of its monopoly on collecting and
delivering post.

26 March 2001 Post Office Group becomes publicly listed company
inheriting brands of Royal Mail, the Post Office and ParcelForce. It
rebrands as Consignia.

May 2001 Mail delivery disrupted by industrial action.

June 2001 Three postal rivals get go-ahead from regulator PostComm to
tackle Consignia's business.

July 2001 2,100 job cuts (1% of its workforce).

November 2001 Consignia's portal set to launch.

Copyright: Centaur Communications Ltd. and licensors

Page : 30NEW MEDIA AGE, 20th September 2001