Disruption in most forms brings equal part threat and opportunity. However, the latter can be achieved only if approached and leveraged correctly, placing the capacity for agility and, dare I say, creativity at the center of success. In a business context, this applies to both the mindset for navigating disrupted landscapes and the technical prowess for harnessing the opportunity that lies within.
The postal industry: Getting a financial grip
The postal industry is an example of a sector that has seen mixed fortunes in the last decade. With mail volumes declining as digital forms of communication proliferate, and many countries privatizing their postal assets to reduce sovereign debt following the 2008 credit crisis, transformation programs have focused on increasing efficiency in the postal networks with the primary goal of reducing operational costs.
More recently, however, the focus has shifted from saving costs to the more interesting goal of creating new revenue streams. The increasing popularity of online shopping and other forms of e-commerce, in addition to the continuous proliferation and preference for subscription-based services, have all been drivers of growth in parcel deliveries. The segment with the highest growth is cross-border e-commerce deliveries, with platforms such as Amazon, eBay, and Alibaba the leaders of this movement. While this has been a welcome opportunity for postal companies, it has also created a new set of challenges.
Meeting the challenge: Staying relevant in the digital age
The first challenge is the increased competition between postal companies and third-party logistics providers such as DHL, FedEx, and SF Express, with e-commerce providers themselves getting involved in parcel delivery. Amazon in the UK is Royal Mail’s largest parcels customer, even as Amazon is increasingly delivering its own parcels and eating into Royal Mail’s growth in parcel-delivery revenue.
To make things worse, Amazon is taking the easiest and most profitable deliveries, hitting Royal Mail’s bottom-line profit in addition to its top-line revenue growth. The situation is such that Royal Mail’s CEO Moya Green has said that its addressable market volume depends on expansion on Amazon Logistics; in other words, to a large extent it is beyond Royal Mail’s control. Alibaba has taken a different approach by investing in Singapore Post’s Quantium Solutions business, as it sees Asia-Pacific as a growth market, and Singapore Post understands the complexity of delivering to many different countries in the region.
The second challenge relates to “last-mile delivery.” For consumers to embrace e-commerce, they must be confident their parcels will be delivered. For people who are not at home for a large part of the day, this is a concern that can potentially limit the value of their orders and even result in customers discontinuing ordering. This challenge inspired no shortage of innovative solutions – stirring up the industry and creating opportunity where options were becoming limited.
What started as basic tracking, alerts, and post office collection has evolved into a wide variety of services – the development of which shows no signs of slowing. Take, for example, the UPS Access Point service that allows customers to have packages delivered to predetermined locations in the neighborhood. Small businesses, such as shops, coffee shops, and pharmacies, with available, secure space can become partners of UPS to offer this service.
There are also startups that have brought their own flavor of innovative ideas to fill the delivery gap, including postal lockers, intercept services, and collection points. A good example of a startup providing postal lockers is InPost, founded in Poland and already operating in more that 20 countries. Some of the more forward-thinking postal companies haven’t wasted any time bringing such service offerings to market themselves – either independently or in partnership with a startup. UPS introduced the Access Point service following its acquisition of Belgian startup Kiala, which was already providing collection-point services. In Singapore and Australia, local postal operators have already started offering postal locker services.
Time to innovate
So, what does this all mean for postal operators? In short it will require transformation of the business to create a new set of capabilities that will support business model innovation. Some of these capabilities include:
- Innovative business models involving revenue sharing and settlement with the partners involved in last-mile delivery
- Omnichannel customer engagement to allow a consumer to choose last-mile delivery options, track deliveries, etc.
- Agile pricing strategies that charge based on various parameters, such as weight, volume, temperature control, delivery time, etc.
- Recurring billing for subscription-based services, e.g., UPS Access Point is available to consumers on a subscription basis
- The ability to offer tiered pricing and volume discounts to e-commerce providers and sellers
- Event-based charging so that each letter or packet can be priced accurately to avoid revenue leakage and enable better revenue management
- Scalability to support millions of consumers and massive volumes of transactions that consumers will generate
Postal operators wishing to stay relevant, be competitive, and successfully navigate – or even lead – the digital disruption journey will need to pay particular attention to selecting the right billing solution to offer these diverse services and options for more convenience and better outcomes.
Paramount to a successful outcome is being prepared to navigate often unexpected requirements for renovating the digital landscape. As postal operators look for ways to monetize new opportunities, taking an honest look at legacy systems and asking whether they will both scale and protect the business as they evolve is an important first step. Adopting new technologies that enable operators to establish new business models driven by agility, creativity, and innovation are at the foundation of not only surviving disruption, but thriving in it.
Learn how to manage the threats of disruption in 4 Ways to Digitally Disrupt Your Business Without Destroying It.