Fewer letters yield new ventures

Sorting the mail swissinfo.ch/Thomas Kern

Branching out is the name of the game for post offices wanting to stay afloat in a competitive global market amid dwindling mail volumes at home, as a recent merger between parts of the Swiss Post and France’s La Poste demonstrates.

Although the July 2012 merger of Swiss Post International (SPI) and the global division of France’s La Poste has been finalised on paper, there is a lot to be hashed out, says Ulrich Hurni, the director of PostMail (the Post unit responsible for letter and newspaper processing) and the president of the board of the newly founded company, Asendia.

Overseas offices must still be merged and employees at Bern and Paris head offices must get used to working with their foreign counterparts, all so that Asendia can start chipping away at its goal of becoming a major player in the global business mail marketplace. The aim is to overtake the global market leader, Deutsche Post-owned DHL, in cross-border business-to-customer shipping.

Hurni acknowledges DHL’s current hold on the market but adds, “we have the vision to become the market leader and to overtake them” someday.

That goal may be a bit lofty considering DHL’s current international shipping market share of more than 30 per cent in Europe. Still, Matthias Finger, who holds the Swiss Post-funded Chair of Management of Network Industries at Lausanne’s Federal Institute of Technology (EPFL), says the idea behind the SPI and La Poste Global Mail merger is the right one.

“Like most of these Swiss companies, Swiss Post is too big for the country and too small to be a global player,” he says. “By going together with the French Post they can overcome some of that.”

And, both Finger and Hurni say that the Swiss have a distinct advantage when taking their postal services abroad – a lot of Swiss-based companies have already opened branches overseas, creating demand for Swiss Post’s services outside of Switzerland.

“The original [international expansion] strategy was always to go after the Swiss multinationals abroad and expand from that,” says Finger. “That gives [Swiss Post] an advantage over other countries of a similar size like Finland or Denmark which don’t have as many multinational companies to follow.”

What’s next for Swiss Post?

The Swiss Post is increasingly branching out into new territory through electronic and “hybrid” mail and e-voting platforms, says Ulrich Hurni, director of PostMail and the president of Asendia.

He says Swiss Post Solutions already offers electronic and hybrid mail (the ability to choose whether to receive mail in physical or electronic format) options overseas, which it is expanding into Switzerland.

In the future, customers could decide to have an “electronic post box” to receive letters over the Internet.

A recent Swiss Post project to offer a personalised newspaper, called “MyNewspaper”, was recently called off after a disappointing response from customers.

It would have allowed subscribers to select sections from various national and international newspapers that were then assembled, printed and delivered as a single newspaper.

Two posts are better than one

Despite that advantageous business climate, Swiss Post hasn’t historically pursued a particularly aggressive overseas agenda, says Finger. Instead, they’ve concentrated on a few specific markets, such as back-office solutions through the division Swiss Post Solutions.

“I think they are doing the right thing, it’s just that they are small and it’s a small country,” he says. “The government lets them do all these things, but after all, it’s a government owned company that cannot take too many risks.”

Postal policy consultant James Campbell says that France’s La Poste has also been quite conservative in the past, a realisation that likely led it to pursue its global mail division’s merger with Swiss Post International in a bit of a last-ditch move to become competitive internationally.

“The view on the French for the last ten or 15 years is that they have been slow in adapting to the market,” Campbell tells swissinfo.ch. “There are a lot of smart people there, but overall they have failed to understand that the market is changing and they have fallen behind, so much so that they may not be able to catch up.”

And for Swiss Post International, says Finger, partnering with La Poste was the best available merger scenario.

“They’re very similar as a type of postal service,” he says. “The French are also publicly owned, they also have a financial services sector. Looking around, I don’t know what else would have been better.”

The modern postal service

Mergers like the one between SPI and La Poste have become a way to maximise the infrastructure that many postal services needed when mail services were at their height, says Kenneth McKeown, director of markets development at the Universal Postal Union.

“The decline in mail volumes and revenues in most places means that facilities created for larger volumes have become a cost burden. Staff who were engaged traditionally on certain tasks have to be redeployed, package facilities have to be modernised to take in new business,” he says. 

McKeown points to Sweden and Denmark as an extreme example, since the countries fully merged their individual national postal services into one about three years ago. However, he also points out that there are parts of the world where mail in the traditional sense – sending letters and small packages – is still a booming business.

“The emerging countries are a bit of an exception to the rule,” he points out. “Brazil, India, China and Russia are actually doing quite well in terms of mail at the moment, so none of us are advocating the death of mail. It’s just changing, and … the developing countries still have a lot of mail left in them.”

Walking the line

While diversification and mergers have become a way for postal services to stay profitable in an era of changing demand, many must navigate government mandates and old concepts of what their business is supposed to entail.

Campbell says some analysts believe Germany’s postal service, Deutsche Post, took things a step beyond its mandate when it expanded overseas through the shipper DHL.

Hurni says Asendia’s new role is very clear and basic: to provide “business to customer solutions, for international mail”. Any more than that, he says, would overstep the federal government’s mandate for the postal service.  

“What we will not do and I think also what we would not be allowed to do is invest in other countries in infrastructure,” he says.

“We will never have big sorting centers abroad. That’s why I’m saying Asendia is a sales company without a big infrastructure. What we need are good products, quality, IT systems, and of course sales people. That’s it.”