Costs are increasing for all Posts. Cost-cutting alone cannot assure long-term viability. Posts are looking at a variety of solutions: franchising and other privatized models, self-serve solutions, partnerships and more.

POST OFFICE

Postal Administrations are a core part of a country’s economic and social infrastructure and their retail sector plays a key role. However, with the burden of political regulations, few, if any, are seen as operating effectively as they want to or at the top of their game.

Posts face economic stress, declining lettermail, substitution of advertising mail, increasing online purchase activity, growing competition, accelerating privatization, increasing customer expectations, increasing health care and delivery costs, union collective agreement pressure on wages, pressure to innovate products and services, dramatic changes in consumer behaviour, growth of social media, progressive deregulation, rising cost of USO obligations, globalization and calls for profitable operations.

Posts must redefine the postal consumer experience and reinvent themselves to survive, because continued cost-cutting alone cannot assure their long-term viability.

In today’s economy, Postal Administrations are using traditional strategies to control upwardly spiralling costs. They are cost cutting by route restructuring, automated mail sequencing, downsizing and consolidating plants.They are looking to cut costs in operations, labour, administration, customer relationship management and supply chain. They are improving productivity. They are finding new sources of revenue through digitalization, improving reporting and real-time analytics, maximize pricing, increasing the value of products and services and expanding into agency services in the convenience segment – telecommunications, travel, energy or insurance.

Some Posts are also seriously looking at an array of legislative and regulatory changes aimed at maintaining viability by reducing service by trying to close rural post offices, decreasing post office hours, switching to alternate-day delivery for mail, eliminating Saturday delivery, eliminating door-to-door service or reducing delivery speeds of products.

Lego-Village-Post-Office

They are also using the traditional strategy of capturing incremental revenue from existing Retail foot traffic and leveraging the corporately owned and operated bricks-and-mortar post offices by offering customers a myriad of more products and services. Posts are trying small business direct mail, product samples, flat rates, financial services, transportation and other logistic services, truck advertising, hybrid mail,  simplified advertising products, impulse items and gifts, printing, business supplies, meeting / conference space, government services, electronics, appliances, lotto tickets, greeting cards, vehicle registration, drivers licences, hunting / fishing / professional licences, tax forms, tax  / fine payments, e-commerce offering, PO Boxes, agency services such as telecommunications or insurance, travel services, consumer products, document digitalization, banking,  passport services and more.

However, these traditional growth strategies may not be sufficient. Posts will need fundamental, paradigm-shifting change to secure future sustainability.

  • As an example, The United States Postal Service’s Contract Postal Office (CPU) retail program is not working. These “approved postal providers” are housed in host businesses in urban areas. Earning lower than 10% gross walk-in revenues, they are simply not viable and have been slowly declining. The CPU model has basic flaws and the ongoing support just isn’t there. Moreover, the USPS’ Approved Shipper program, which allows vendors to mark-up or add additional fees and resell USPS shipping products, simply confuses customers  as well as diluting and weakening the USPS brand. The USPS should follow the recommendations in the GAO report* on postal service. It stated, “While USPS has taken steps in the past year to generate ideas for modernizing its retail and delivery networks, the experiences of foreign posts suggest that it will be critically important for USPS to fully develop and implement similar outreach, communication, and labor transition strategies.”  Without an effective model of viable and privatized post offices, the USPS cannot lower its cost-to-sell and, relegated to using corporate post offices, will continue to pay more than twice the cost-to-sell that it should.

*(Foreign Posts’ Strategies Could Inform U.S. Postal Service’s Efforts to Modernize to the Ranking Member, Subcommittee on Federal Workforce, U.S. Postal Service and Labor Policy, Committee on Oversight and Government Reform, House of Representatives – GAO-11-282)

  • Pitney Bowes is a strong brand best known for selling, leasing and servicing mailing equipment to customers across North America. Conversely, one of Pitney Bowes’ key challenges is its brand perception and people’s ability to see them doing something unrelated to postage meters. Pitney Bowes has a tradition of innovation and is clearly up to its latest challenge – the rapid decline of traditional, physical letter mail. It is focusing on innovation, making software and services acquisitions, actively building partnerships and strategic alliances and meeting the needs of the growing small business market. The Pitney Bowes partnership of its “Mail & Go” postal kiosk with ByBox, the UK parcel locker company, positions Pitney Bowes well to reinvent itself as the global automated post-office master-franchisor, cooperating with various postal administrations – providing both retail sales and the growing same-day consumer e-parcel delivery/pick-up ability.
  • With the dramatic growth of online sales, the future will be a parcel, same-day delivery play. There are a growing number of same-day, parcel-locker delivery aspirers – Amazon, E-Bay, Google / BufferBox, Wal-Mart, USPS, By-Box, etc. FedEx, UPS and Purolator will have to dramatically reduce their operating costs and change their operational processes if they are to capitalize on the growth of online sales/delivery. UPS already has an effective Retail network. Although sparce in some areas, UPS can provide customers with parcel pick-up points. Fedex and Purolator will have to seriously reassess their ability to lower their operating costs and find a viable option for a retail network that addresses consumer demand for new and faster delivery options.

Posts and Post look-alikes in developed economies all face the question of how to provide customers with continued postal services at a lower operating cost.

Posts must primarily restructure their operations and lower their “cost-to-sell” while deciding what role they will play in an increasingly social-media society and what fully integrated multichannel (bricks-and-clicks) customer experience and  products and services will work in their environment.

The need to become more customer centric is also a given. Time-starved consumers want from Posts more services and more convenient locations that save them time. However, with respect to operational infrastructure, there are seven key strategies that will lower the cost-to-sell, increase customer access and enable Post networks to be profitable.

1) Focus on the customer experience

Posts generally continue to manage their physical and digital strategies separately; refusing to see that customers want one seamless experience – online, mobile, in-store or call centre.

The change required is not just technological but a change in operations and organization. In multi-channel interaction with customers, one has an intimate understanding, a master file, of the customer no matter which channel the customer chooses to interact with.

Post offices, by and large are still relics of the past and are very product-centric rather than customer-centric. They still rely on the clerk knowing the customer or assuming that the customer always wants the lowest-price shipping service.

Like other progressive retailers, Posts require integrated supply management systems, integrated marketing programs and operations and all-encompassing key performance measurements.

2) If you must keep high-cost corporate post offices open, then operate them as efficiently as possible

In many countries, Posts are mandated to keep operating a certain number of corporately owned and managed post offices. Changing this may be highly political and lengthy even if it makes business sense.

Faced with such constraints, Posts often use the strategy of adding more and more trinkets and trash products – books, greeting cards, magazines, pens, stationery, etc. to the postal mix, in order to leverage the real estate and increase the sales-per-square-foot to make the corporate post offices appear more viable.

While complementary shipping products and money-transfer services are brand coherent; selling odds and ends takes focus off upselling the Post’s core products and has dubious financial value in the long term.

From a business perspective, it is inefficient to operate using corporately owned and managed post offices. With rising real estate and labour costs, corporately owned post offices are just too expensive. The cost-to-sell through a corporate owned post office can be more than twice the cost of a privately operated or franchised post office.

Downsizing any corporate post office to the minimum hours and space required and minimizing labour costs, by using optimization analytics matching the number of staff to the level of work, will reduce the operating costs to the required efficiency level, while still giving service to the public.

3) Franchised post offices offer the best cost and service option to Posts and Post look-alikes

Franchising any business is an optimal business strategy. The International Franchise Association (IFA) states that in North America:

  • There are now over 1,500 franchisors in 120 industries;
  • There are over 828,000 franchisees, each employing 8 to 14 people;
  • Franchises represent 50% of the retail industr;
  • Franchises directly and indirectly support 18 million jobs; and
  • There are more than 300 franchises sold every week in North America.

The most common type of franchise is the business-format or package franchise, where the franchisor provides to the franchisee a complete plan (operations binder) outlining the management and operation of the franchised business.

The plan spells out a step-by-step (when, where, how, by whom, etc.) format for the successful operation of the franchise. The plan tries to anticipate and account for most management or operational problems or issues and proposes solutions.

Posts and Post look-alikes should create a break-even, business-format, conversion-franchise, post-office, business model that is hosted in a strong-branded existing business to minimize costs and maximize benefits. The symbiotic relationship and the combining of 2 strong brands will benefit both organizations. Moreover, locating post offices where people combine their shopping – drug stores, grocery stores, retail centers, etc. makes logical sense.

The business model, together with all of the operating processes defines the Post’s franchise system.

For the franchise network to continue to be viable, each operator should be able to cover all of his annual, post-office, operating costs. Making a profit is not an absolute requirement for the success of this business concept but breaking even is.

The “real” value of this model is not profit making on the post office but the daily traffic that it attracts and in the fact that a large percentage of that daily traffic will buy in the host business. Both small independent and large retailers easily understand that Retail is all about traffic generation and the conversion rate of that traffic.

4) Promote a low-cost, customer self-serve, parcel-oriented, franchise model

The lowest cost-to-sell franchise model, has to be the fully-automated, self-serve, neighbourhood post office.

The future is all about parcel growth – buying online and having it delivered quickly but also – when, where and how you want it… and returning it too.

Ideally, these fully-automated post offices should be strategically placed at gas stations and convenience stores, with a self-serve postal kiosk and automated 24 /7 parcel lockers.

Customers can be notified by email or text message when they have a parcel to be picked up at the post office parcel locker.

For those who still want stamps, customers can buy stamps at any corner store.

5) Posts must partner with Government

Posts can lower their infrastructure costs by partnering with governments (municipal, regional and federal) to provide the presence and the service-network representation that governments need, particularly in rural areas.

Kiosks also can provide quick access to forms/applications or registration for government programs, recreational hunting permits and licences, car registration renewals or bill payment such as parking tickets, etc.

6)  When franchising, partner with the largest and best national and regional chain retailers

Define what customer base you are targeting. Different partners attract different customer bases and be cognizant of brand strength, qualities and synergy.

  • Major retailer locations are always in prime retail areas that attract consumer traffic with great. accessibility – plenty of parking spaces and the stores typically stay open longer hours.
  • Their stores are modern, visually appealing, properly managed, merchandised and the customer experience is enhanced.
  • They focus on the overall customer experience.
  • Major retail stores are well-managed with store managers and district managers. They also assign clear responsibility for the post office.
  • They train and motivate their people.
  • Post office services are flawlessly executed
  • They also understand the value of brand synergy achieved when 2 strong brands work together and Posts generally have a brand synonymous with honesty and trustworthiness.
  • Sales increase as both the Major Retailer and the Post both benefit from each-others customers.
  • They understand the value of consumer traffic – having a post office in their host business attracts a large number of weekly consumers that they could not get otherwise

7) Certain chains (i.e. office supplies) attract more business customers with higher average purchase and small business is the growth area for Posts and Post look-alikes

The average purchase of a small business is usually 3 times that of a consumer. Therefore it makes sense to locate post offices where small business shop and do business – print and copy shops, office supply stores, etc.

In conclusion, when we review other great innovations and reinventions, there are some key consistencies to remember:

  1. Great vision, commitment and leadership is always needed;
  2. Senior management and Board have to be aligned;
  3. Acceptance that the reinvention may take several years;
  4. One has to act quickly and make the jump or run the risk of disappearance;
  5. The process has to be clear;
  6. Clear communication to employees, customers, shareholders and other investors, the media, and the broader community;
  7. Mergers and acquisitions complicate matters;
  8. Acquiring or growing businesses complementary to what the company already has in place is an art;
  9. Companies in a reinvention phase often take significant hits to the profit line – accept the fact that it may lose shareholders who depend on the cash flow from the existing business for dividends; and
  10. Reinvention is always easier to do in a burning-platform situation in which the company’s survival is at stake and more difficult when you can’t see the upcoming precipice.

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