Making mail deliver

You can’t please all the people all the time. As expected, Consignia’s minority stake of £2 million in Bristol-based mailing house Mail Marketing International has caused mixed reactions.
The investment, claims Royal Mail, is part of an ongoing strategy to protect mail from cheaper, faster options, like email. By stumping up the cash, the delivery giant says it wants to ensure direct mail has a sustainable future. “The problem,” says Geoff Lambert, finance and commercial director at Royal Mail, “is how to make the industry relevant in a digital age. We’re putting our money where our mouth is. We’re willing to change and to share the risk.”
By risk, Lambert means taking time and cost out of the supply chain. Investment in MMI, he predicts, enables both companies to develop new ways of working, with the solutions they find to be shared among the industry.

Investing in direct marketing success

Not surprisingly, Graham Cooper, MMI’s divisional managing director, fully agrees. “Investing in efficient and cost-effective end-to-end mailing solutions is key to increasing the success of a medium that continues to play an important role in direct marketing.”
But while Lambert and Cooper have their advocates (John Burbidge, MD of SR Communications, says it rubberstamps Consignia’s belief that direct mail will continue to be profitable) not everyone is sure its intentions are quite so altruistic. The fear is that the move simply allows Royal Mail to re-establish its monopoly— that MMI is just the first of many. Paul Woolf, MD of Cramm Francis Woolf, which handles direct mail for clients such as BT, is concerned where this could lead.”The question is how far Consignia is allowed to go,” he says. “One mailing house is OK. Ten and we have a potential monopoly. So much depends on how it operates once it gets going.”
Clearly Consignia is in a tricky situation. As the deregulated market continues to open up, it will find itself facing increasing competition. “In a competitive market, more firms will be looking to get into the postal arena,”
says Mark Woodcock, sales and marketing director UK of TNT International Mail. He draws attention to what happened in Germany when deregulation took place: “There, more than 500 companies got licences to operate.”
While the UK market is a long way from this, it makes sense for Consignia to forge links with mailing houses quickly. But is it really for the good of the industry as a whole? For Consignia, Burbidge believes it’s a logical step:
“It’s protecting its interests, protecting its revenue for the future. Think about it: the direct marketing industry is the most profitable area for Royal Mail.”
Royal Mail certainly isn’t hiding its intention to make further investments. It says MMI and any other investments that follow will help the mailing industry develop. Why? Its partners will look
at iicw ways of solving problems. So what does this mean?
Lambert explains: “With MMI we will develop new products and services and try them out in situ. If they work, Royal Mail will roll them out.”
For good reasons, Lambert says he can’t elucidate on what these may be, but he says the industry must become more digitally based to speed up the process of creating a piece of mail to it landing on the doormat. Cooper adds:
“We’re going to be looking at direct mail delivery to reduce time and possibly cost. We’ll also be looking at ways of making using direct mail easier, making sure we’ve got the products appropriate to client needs.”
For many this is a satisfactory explanation. Burbidge says: “If Royal Mail’s initiative achieves its aim of reducing cost from the supply chain, it’s got to be good for us all. Attractive pricing will attract increased business.”
But does Royal Mail’s investment in just one of many large mailing houses skew what was previously a level playing field to MM I’s advantage? Andy Ruddle, director of enterprise solutions at Vertis, reckons it does. “It gives an unfair competitive advantage to MN!!. Royal Mail is going to be monitored and controlled, but if MMI puts in a hid it’s hard to believe it won’t receive preferential treatment.”
Burbidge is more concerned about the mailing house losing control: “We would all like a cash injection of £2 million but there’s a price to pay. Losing independence at a time of change could prove frustrating in the long run.”
Quick to refute it, Cooper says there is flO way he’ll get better treatment. "We have to be extra squeaky clean. We welcome investment but want to retain control of our destiny.”
According to Lambert, Royal N!ail has no desire to take control ofNlMI, or anyone else. “At the end of the day,” he says, “no one is saying we will dominate
the marketplace. We can’t do this but we can say that we will share the risks.”
As for investing in this particular house, Lambert says MMI came to him: “Everyone we’re intalkswith have come to us. Mailing houses are seeing we’re willing to invest.”
For the industry as a whole, the DMA has stated that it believes the investment is above board. David Robottom, director of development and postal affairs at the DMA, says: “Consignia is permitted to do this. That’s the point of commercial freedom. MMI won’t get privileges. It would be illegal and against Consignia’s licence.”
So what next? Further investment will happen. Lambert says: “We won’t necessarily restrict this to mailing houses. We’re interested in people with ideas covering the whole of DM.
“It’s difficult to see us in position where we’re linked with all mailing houses,” he adds. “Mailing houses wanting to create competitive advantage will make their own decisions to stimulate competition.”
Only time will tell exactly what benefits Royal Mail’s new involvement in the mailing industry will bring. It’s an encouraging move in many respects but it’s also one guaranteed to raise fears. Something needs to be done, however, to safeguard the future of mail.
As Cooper points out: “Unless close strategic alliances with suppliers to the direct mail industry are formed, our medium will be unable to offer better end-to-end solutions that will increase overall efficiencies and cost effectiveness.” And that’s what a lot of it comes down to.