Posts need inspiring and inclusive leadership that listens, encourages ideas, leads by example, focuses on long-term growth and rallies employees and customers alike via an articulated, concise idea or vision that ignites excitement and expresses what the company wants to be.

 

Posts continue to face major change in the midst of a digital revolution. Many Posts will undoubtedly continue to hold a steady course trying to stay aloft on their way to irrelevance. Others will continue to do less – reducing, restructuring and reorganizing. Some will continue to do more – enhancing, extending and evolving products. A select few will grasp that customers just want to communicate more than ever before – but differently and that a new tack is required if you want to weather this storm.

These Posts are realigning their organizations toward the market shift by dealing with customers in the way that they want to be dealt with. They are transforming their traditionally hierarchical and political postal culture into an innovation culture. They are becoming operationally fitter and faster. They are focusing on precision logistics and speed of delivery. They are partnering with major e-retailers. In short, they are becoming an active player in the new communication game. We already see this at Itella (Posti), SingPost and Australia Post.

This article appeared in the 2015 “Reinventing the Postbuilding a sustainable future“.

Sustainable Business Models for Posts in an Increasingly Enabled Digital World by Frank Cianciullo, Leapfrog Business Consulting

 

Introduction

John F. Kennedy said, “Change is the law of life and those who look to the past or present are certain to miss the future.”

This is particularly applicable to Posts which have been faced with economic stress, declining letter mail, upwardly spiralling costs, increasing online activity and the impact of the tablet, growing competition, accelerating privatization, progressive deregulation, globalization, calls for profitable operations and the underlying customer market shift toward more and faster e-communication.

Now eMarketer states that 2 billion consumers worldwide will have smartphones by 2016 and over half of mobile phone users globally will have smartphones in 2018.

The availability of affordable smartphones and tablets will facilitate Internet access. Money transfer and mobile banking will be facilitated and will benefit the developing world. Online education will grow. Social media and new apps will fuel m-commerce by making online ordering much easier. A growing middle class in emerging markets will access the Internet almost exclusively through smartphones and will fuel product demand. People will realize that they can buy products that are not available locally and have them delivered through the Post. How can Posts prepare, adapt and benefit from this change?

Greater Availability of Affordable Smartphones

The leaders in the smartphone space are Samsung, Apple, Nokia, Blackberry, LG, Huawei, HTC, Motorola and others. Nokia and Blackberry already offer smartphones at less than $200 (USD). However, China’s contenders (Lenovo, ZTE, Xiaomi, Quad Core, etc.) are selling smartphones for as low as $47 (USD).

According to Statista, China is set to dominate about one third of the world’s smartphone market by 2017 when “an estimated 34% of the world’s population will have a smartphone, a figure that was at less than 10% in 2011.”

This eMarketer research chart shows that by 2016 India will exceed 200 million smartphone users, topping the US as the world’s second-largest smartphone market. By 2018, Indonesia will pass 100 million smartphone users, firmly established as the fourth-largest smartphone user population.

GfK’s market research forecasts show that, “worldwide, the smartphone continues to grow strongly, in terms of volume of sales, increasing by 18% for 2015. But there is significant shift in which countries will see those growth opportunities, with the emerging markets dominating.” At the top of the list are India, China, Indonesia, South Africa and Brazil because of low prices.

Internet Access in Emerging Markets is Mainly through Mobiles

The proliferation of affordable smartphones creates an enormous audience that accesses the Internet exclusively through mobile technology.

According to Dezan Shira and Associates’ China Briefing, there are over 600 million Internet users and over 500 million mobile Internet users in China. The Chinese government has a target to connect 1.2 billion people (85 percent of the population) to mobile Internet by 2020. Clearly this is an enviable market. Internet access has allowed buyers in lower-tier cities to shop for international luxury brands. Around 55% of China’s smartphone users have made a mobile payment and a KPMG study found that respondents said that the last item bought cost an average of $243 (USD).

“Chinese people use the web differently than U.S. consumers do. ‘Compared with U.S. people, Chinese people prefer engaging with others through social media and mobile,’ says Sun Baohong, a professor at the New York City campus of Beijing-based Cheung Kong Graduate School of Business.”

New Mobile Apps, Social Networks and Online Marketing will grow m-Commerce

Tesco has set up virtual grocery stores in metro stations in Korea. People use smartphones to grocery shop while waiting for the train and have it all delivered. Other apps (RedLaser, ShopSavy, BuyVia, etc.) allow users to do price comparison and manage loyalty programs.

Finally, there are numerous smartphone electronic payment apps (Google Wallet, Apple Pay and CurrentC).

Mobile “Buy Buttons” on Twitter, Facebook and Instagram make it very easy for smartphone users to buy goods or make donations directly from their smartphone.

The market is saturated with techniques such as flash sales, deal-of-the-day and mid-day-dash used by Gilt Groupe, Neiman Marcus, Groupon, LivingSocial and more. However, some players, like Zulily, have succeeded by concentrating on a niche market and focusing on customer service, loyalty and a sense of community.

Tomorrow, retailers, e-retailers and social networks will know so much about our interests that they will increasingly suggest new products to us through our smartphones. We will go to brick-and-mortar stores to showroom (see a product) and will increasingly use smartphones to scan the UPC code and get instant comparison pricing. We will increasingly make use of digital coupons. The product will be ordered and paid-for online; we will track the delivery progress on our phone app. and it will be delivered to our desired location within 24 hours.

The future is speed. In e-commerce, there is a global race to build an as fast-as-possible delivery service for online orders that will compete with brick-and-mortar stores.

E-Commerce Giants and Competing Models

Large e-retailers like Amazon, Alibaba, Zalando, Rakuten, Kobo, Wuaki, Flipkart, eBay, Google and others, each have their own business model.

Amazon sells merchandise that it owns to its own customers and also operates a marketplace. It owns and operates warehouses. Its profits and margins are slim as all funds available are put toward a growth strategy – TV and music streaming, e-books, grocery delivery, drone delivery, video content and buying up companies like Zappos. However, Amazon’s Fire smartphone failed because it was too expensive and didn’t put the customer’s needs first.

Alibaba, on the other hand, provides online marketplaces where other retailers sell their products. It has few warehouses by comparison. Yet, its business volume accounts for 80% of e-commerce in China. One of its sites, Taobao, has 7 million merchants. Alibaba’s AliPay has $87 billion (USD) in assets. It allows users to buy theater tickets, pay for taxis and even invest in the money-market fund (Yu’e Bao). Alibaba is now expanding into the smartphone business with a $590 million (USD) investment in the start-up Meizu.

These large e-retailers have increasing impact on Posts. According to its press release,on Singles Day (11 November 2014), Alibaba sold $9.3 billion (USD) worth of goods resulting in the delivery of 278m parcels which were dispatched within one week by their fourteen partner delivery companies including China Post.

What Major e-Retailers Want from Posts

Ms. Xing Yue, Director of the Public & Government Affairs Department of the Alibaba Group, speaking at the APPU Postal Business Forum held in Bangkok in November 2014, called for more cooperation with the Posts and between the Posts to offer a global seamless delivery service and to enhance both visibility and traceability of their services.

She said that Alibaba needs an optimised solution with track and trace, moderate prices, acceptable transit times, access to customer service and flexible delivery options. Ms. Xing Yue also stressed the need to cooperate on customs in order to facilitate import customs clearance.

Participants at the forum highlighted the importance of the lower-value, cross-border, light-weight packet requiring a low-cost, tracked and reliable global delivery service of around a week to ten days. We know that the UPU and Posts are working to re-engineer rules as well as regional and global network operations to enable more stream-lined and effective cross-border e-commerce.

Tired postal strategies have not worked!

Posts have generally responded in one of three, lack-lustre ways:

Do Nothing – Wither, Wane, Waste: Ride out the storm and take a wait and see attitude. Try to improve, defend or extend the life of letter mail.

Ultimately this strategy can only lead to lower sales, a shrinking network, bankruptcy and irrelevance.

Do Less – Reduce, Restructure and Reorganize: Give the impression of leadership, continue to cut costs, shrink the organization, automate mail sequencing, restructure routes, close owned post offices particularly in rural areas, decrease post office hours, switch to alternate-day delivery for mail, eliminate Saturday delivery, eliminate door-to-door service, consolidate plants, privatize or franchise, use pricing leavers, reduce pension liabilities and initiate regulatory changes to reduce service or reduce delivery speeds of products.

This very traditional strategy will buy the Post time but remember that no organization ever shrank to greatness.

Do More – Enhance, Extend and Evolve: Try to keep above water. Introduce more and new retail products (magazines, stationery, pens, gifts, etc.) to capture incremental revenue; diversify (financial / banking services, parcel or logistics space, retail services or customised delivery by industry); position the Post as the low-cost delivery channel for online parcels and wait for that third-party business to come.

This is a traditional strategy of leveraging (stuffing) the bricks and mortar. This strategy gives the semblance of true innovation. It can be compared to treading water – like “Do Less”, the Post is splashing about but not really getting anywhere very fast.

A better response strategy for Posts in industrialized markets

Do Different – Change, Capitalize and Connect:

Change: Move from a traditionally hierarchical and political culture to an innovation culture. Posts need inspiring and inclusive leadership that listens, encourages ideas, leads by example, focuses on long-term growth and rallies employees and customers alike via an articulated, concise idea or vision that ignites excitement and expresses what the company wants to be.

Capitalize: E-retailers are selling and shipping products to China and Asia. Help them sell, ship more products abroad and the Post will make more money.

China Post and TOM Group operate ule.com. The site offers a very wide range of products to Chinese consumers on behalf of retailers from China and worldwide. China Post’s over 50,000 post offices also provide over-the-counter sales, services and a dial-in service hotline for Ule. Australia Post, New Zealand Post, Post Denmark Deutche Post, Poste Italiana and others already have agreements with China Post.

Posts in France, Australia, Singapore, Italy and others signed agreements with Alibaba. The Australia Post agreements with Alibaba allow e-retailers to sell via Tmall.com more easily and Australian consumers to use Alipay gift cards from Australia Post on Tmall.com and Taobao alike. The strategy helps the Australia Post parcel business both ways – outgoing and incoming.

Connect: Connect warehousing, logistics, delivery and customer service capability. Speed-up the delivery process, increase delivery options, provide real-time tracking and lower overall cost for customers. Partner and integrate with a major e-retailer.

China Post signed an agreement with Alibaba to boost Alibaba’s presence in lower-tier cities. The two opened up their warehouses, processing centers and delivery resources to each other, building an e-commerce logistics platform in an effort to develop new business and new markets.

Finnish postal operator Posti Group (Itella) has been investing in warehousing, automated e-commerce fulfillment process and delivery systems. It formed a partnership with e-commerce marketplace Mitäsaisiolla.fi (MSO.fi), a grouping of 200 e-commerce merchants. The alliance will offer online merchants a market platform and logistics service as a single solution including better customer service and faster delivery times.

According to Postal Technology International, Alibaba and SingPost formed a strategic partnership in June 2014, which included Alibaba acquiring a 10% stake in the group allowing SingPost to accelerate its transformation into a regional e-commerce logistics specialist to pursue a market forecast to be worth $1 trillion (USD) in sales by 2020. Now Alibaba is now looking to increase this to nearly 15%. Alongside this, Alibaba will invest up to approximately S$92m (US$67.9m) in QSI for a 34% equity stake in the subsidiary. SingPost will hold the remaining 66%. Alibaba will also make use of SingPost’s cross-border e-commerce logistics services, including delivery of products into the postal company’s expanding network of self-service parcel locker terminals called POPStations.

A better response strategy for Posts in emerging markets

Where mail volume is very low, the post office can’t just mimic Posts in industrialized markets. It must chart its own course and become the connecting infrastructure for the delivery of postal, retail and other relevant agency services that benefit its people.

Do Different – Expand, Extend and Earn:

Expand: Networks are typically too small, keeping costs high and inhibiting economies of scale. Posts in emerging markets must grow their networks quickly through micro-franchising, thereby opening many more low-cost post offices in small businesses as well as gaining visibility and relevance. In June 2015, Carel Alexandre, Director General of L’Office des postes d’Haïti (OPH) and Bishar Hussein, Director General of the UPU, announced that Haiti would expand its network of post offices through franchises.

Extend: Offer new retail products and services that people need, want and are willing to pay for. Provide agency services on behalf of other organizations (Government Departments, banks or money transfer institutions, NGOs, utilities and telecoms); sell FedEx and UPS products and sell products on behalf of NGO’s and retailers (solar lanterns and radios, water purifiers, reading glasses, health products, mosquito nets, etc.). Provide online buying and pick-up at the post office. Promote e-commerce by adertising key products.

Earn: The goal of any organization must be to become viable, sustainable and profitable. It is important to have attainable targets and a growth plan that will enable the Post to reach its goal.

Conclusion

“Only those who dare to fail greatly can ever achieve greatly.” Robert Kennedy

Questions for Thought and Discussion

How should Posts respond to the challenges of the digital world? How much of these strategic options is about business models and new technologies and how much is about leadership, change management and innovative ideas?

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