Postnet runs into state juggernaut Careful tread of expansion mired in bureaucracy and monopoly's fears of competition

By POSTAL SERVICES Jamila Zhou Postnet, a United States-based company that provides postal and
business services, is continuing its careful tread to expand in the
mainland despite the government's close watch. The company has seven outlets in China, including three in Shanghai
and one each in the cities of Dalian and Guangzhou. It has plans to
open 3,000 franchises in China over the next three years and is
negotiating with Shanghai's Lianhua Supermarket chain, the
mainland's top retailer, to put the franchises into supermarkets. But there is a risk in all of this, because it could be stepping on
China Post's toes, and China Post is one of the last great state
monopolies in China, one that has moved at a snail's pace in
reacting to market changes. When the company hit Shanghai's shores last year it immediately ran
into interference from government departments. James He, chief executive of Postnet China, explained that the
excessive attention they got from state media did not make their
inroads any smoother. The local media referred to Postnet's first outlet as a "foreign
post office" and "US post office" causing a panic in the post office
administration, and the Shanghai postal department refused to
co-operate. To make matters worse, Shanghai's Industry and Commerce
Administration said the company was violating China's postal law and
that some of its services such as the "mailbox" and even the name
"Postnet" were misleading. The penalties prescribed included stopping the mailbox service and
use of the Postnet name. The company filed for a re-examination of the penalties but still
has not received a reply. And the company's annual licence review by the administration has
still not been completed. These actions stopped all progress and made franchising difficult in
Shanghai. The company has only three outlets in Shanghai, not nearly
as many as it had in mind in its original plan. Mr He said it was unfair to say the company was trespassing on the
postal monopoly's territory and that he could not understand why
selling stamps and envelopes in small local shops was a convenient
service while Postnet shops were violating the law. Postal law does not outlaw rented postal boxes.
"The whole thing turned into a ridiculous word game in the end," Mr
He said, meaning that no word with "post" or "mail" in it was
allowed. The company would rather not go to court with the gigantic state
monopoly and hopes that people, especially post office officials,
will see that Postnet is not a competitor but a potential partner
for the Chinese post office department. But, in order to start
playing by what appear to be post office rules, Postnet decided to
transform itself in several ways. The Web site www.postnet.com took
the place of the name "Postnet" above the door of the outlets. And,
the colour photocopying, money remittances, stamp sales and
envelopes were abandoned. The sensitive area of "mailbox service" was given the designation
"safety deposit box service" instead and is not available in all
outlets. The outlets on the mainland opened only after lengthy negotiations
with government departments, Mr He said. They had to notify post office departments ahead of time and explain
that what they were doing was postal-related business, not a postal
service. Mr He said their outlets could help the post office department cut
costs because it would not have to open up outlets everywhere. The company could provide services at both ends of the postal
delivery line while the delivery service itself could still be
handled by the post office, he explained, adding that there was
potential co-operation in that. Postnet's fate still hangs in the balance while the lumbering giant
comes to terms with the age of change. Mr He remains confident about the company's future in China.
Copyright 2001 South China Morning Post Publishers Ltd.
Source: World Reporter (Trade Mark) – Asia Intelligence Wire.SOUTH CHINA MORNING POST, 22nd August 2001