Postal services should focus on reliability, not speed, says IPC

The world’s postal regulators are concentrating on the “wrong parameter” to enforce postal delivery standards, according to a new benchmark industry report from the International Postal Corporation. The Focus on the Future report says regulatory regimes are forcing postal operators to focus on the percentage of their mail that is delivered next day – which it says customers do not necessarily care about.

Instead, the report suggests reliability of service over a two- or three-day speed is more important to postal customers, who ultimately want a predictable rather than an overnight delivery.

Produced in partnership with the Boston Consulting Group, the report says the concept of the universal service obligation is not adapting to this “market reality” – and in some cases the situation is getting worse.

The IPC report looks into a range of issues to provide guidance on how the world’s postal services should be transforming themselves in the light of current market trends, most notably e-substitution and e-commerce.

With its major recommendation that postal operators need to transform their business models and do so very quickly, the report has a number of suggestions for how postal services will shape up in the medium to long term.

If two-day speed was allowed by regulators, posts could streamline their networks to change to as little as a three-day-per-week delivery schedule, allowing the optimisation of sorting centres in the light of considerable decreases in volumes.

Jane Dyer, IPC’s director of markets and communication, told Post&Parcel in an interview that the report offered recommendations for posts to pick and choose, but the bottom line is the urgency that all posts need to bring to their response to changing consumer behaviour.

She said the universal service obligation was now “largely irrelevant” in modern society – and that these days broadband or Internet access should be the new USO.

Commenting on the suggestion that posts should no longer be required to push for high delivery success rates in overnight delivery services, Dyer said: “We think it’s important to understand what customers actually need.

“Is it speed of delivery or is it reliability that customers are looking for? Actually, a lot of the time, I think customers are looking for reliability.”

Educating regulators and governments on the modern needs of postal customers is now important for the financial stability of postal services, the IPC report suggests.

Dyer, who is a former USPS executive, also said regulators now need to provide posts with much more pricing flexibility, since even postal monopolies now have to compete with the Internet as a communications and marketing channel.

Customer power

The issue of what customers want – and particularly consumers these days considering the big opportunities for posts in e-commerce – is a strong central theme to the IPC report, which was produced in collaboration with IPC members, who include postal operators that collectively deliver 80% of global mail volumes.

The report notes the importance of direct mail in the survival of a smaller traditional mail segment in future, but stresses the importance of highly targeted communications, relevant for consumers or even opted-in.

Parcel services will also need to become more driven by consumer choice as e-commerce continues to become a more dominant force.

“That’s really a big message – the consumer is really in control,” said Dyer. “That is something we really need to pay attention to. The recipient is really in charge – and we need to delight the customer on behalf of the business mailers.”

The IPC report takes a “relentlessly upbeat” outlook on the challenges faced by postal operators, emphasising the real opportunities that posts have in current consumer trends like direct marketing and e-commerce.

It also includes predictions, such as that the next big trend for consumer communications will be the widespread move to mobile communications, and the general progression of parcels to become the big money-maker for postal services, rather than letters.

“There will come a tipping point where parcel revenue will overtake mail revenue – we believe that is a reality,” said Dyer.

“E-commerce is in its infancy right now… It’s a huge upside for the physical delivery of goods, and there’s nobody better placed to reach every business and consumer in the world than the posts.”

Central to the report’s message to posts is that the “future is here now”, and that there really is no choice other than to commit to rapid transformation.

With a view to the report becoming an annual publication, Dyer said next year it will focus on how postal services should be transforming themselves. “We’d be looking at all of the challenges and working with our members on how to do it,” she said.

“There’s a lot of tremendous opportunities for the posts – but they really need to get going.”