22 July 2009 - Steve Lawson - Editors Comment - © Hellmail Postal News

The growth in internet access, wider use of email and the mobile phone, as well as an economic slump is forcing the United States Postal Service to look at closing post offices and small, under-utilised ones are likely to be high on the list - much as they have been in the UK.

The onslaught of faster and more immediate forms of communication has been gradually eroding business for postal operators and with the next generation already familiar with computers and email long before they reach the end of junior school, decline in mail volume is likely to continue for some time.

The Finnish postal service today announced a 9% fall in first-class mail volume. a whopping 16% drop in direct mail and a worrying 10% fall in parcels. Part of the fall will be due to consumers cutting back on all but the most basic consumer goods during the economic crisis, and the collapse of numerous retailers but advertising budgets are also being slashed as business looks at ways to reduce overheads in difficult economic circumstances.

For the U.S. this will be a real awakening with its postal service enshrined in the constitution, but communications have also left the telephone behind, with satellites able to provide internet connections virtually anywhere in the world. The letter is already beginning to face the same problems that beset the Telegram, and with no one completely certain if and when the trend will level out. The USPS is already considering dropping one day in its six-day delivery service to reflect the decline in demand and is carrying out an internal study into how it could make the transition, ahead of a formal presentation to congress.

The Royal Mail which dropped second deliveries a few years ago and effectively shifted early deliveries into the spot reserved for second deliveries, with post sometimes not being delivered until late in the day, is still fighting for its survival as European competitors continue to move in on its more lucrative contracts. Many believe that Royal Mail is likely to face increasing pressure to reduce delivery days to five or less, at least for domestic post which contributes little if anything to its revenue streams.

State-owned Postal operators which have an obligation to provide the Universal Service Obligation, and the one link that connects all global operators, are having to look seriously at how the USO can be funded in the longer term. The EU, in implementing the liberalisation of European postal services, to a large extent ducked the issue and left the responsibility of providing the USO to individual countries. Consumer groups are concerned that consumers themselves could be left to pay for the core service, delivered at a much lower standard, whilst the most profitable parts of postal services are shared amongst the commercial sector.

Even Deutsche Post DHL, often considered to be the most successful postal operator in Europe, has already withdrawn from the U.S. in the face of mounting losses, and is concentrating on 'consolidation'. Eastern European countries, many of which were already seriously behind some Western European operators, are having to find money to pay for massive upgrades at a time when they can least afford it or are already being supported by massive borrowing. The whole liberalisation agenda was based on the perception that the mail industry would grow but increasingly, the relentless growth in other forms of communication is impacting heavily on traditional post. Whilst there has been a rise in small parcels through the growth of Ebay, spending this year has been markedly reduced. Some analysts expect eBay's marketplace revenue to be down 21.7 percent on previous years but even the rise in small packets has still not been enough to offset the losses in mail volume. A reduction in direct marketing is also expected to compound problems for postal operators.

In the UK, the Royal Mail, which is again facing a serious revolt by the postal Union (the CWU) over its efficiency strategy and allegedly ignoring of agreements made in 2007, is likely to see further business lost as companies look seriously at how they can cut costs and avoid being caught up in an industrial dispute.

In 2007, independent postal operator The DX, saw a 30% rise in sales enquiries during national strike action at Royal Mail. It also operates a collection service at Post Offices after recently striking a deal with Post Office Ltd. The DX was formed in response to strike action by Royal Mail workers back in 1975.

In a statement earlier this month, a spokesperson for The DX said:

"This type of disruption only serves to reduce customer confidence in the mail industry as a whole and as such we at DX are disappointed that the two parties have been unable to reach a compromise." - a valid point since as well as damaging Royal Mail's business arm, the gap between traditional postal services and the new breed of faster digital communications becomes wider still.

However, John Coghlan, Chief Executive Officer at DX sees the present industrial dispute as an opportunity for businesses to look closer at what it has to offer:

“Postal strikes cause huge disruption to businesses and their customers. As the only alternative provider of nationwide next day mail services, we are ready to help both existing and new customers minimise the impact of the Royal Mail strike. We would expect enquiries about our services to increase if the row between the unions and Royal Mail continues”. he said.

Three days of industrial action begin on Friday. As a further 400 mail centres consider whether to back centres already committed to industrial action, more companies are already looking at switching to online billing, using other forms of communication, or simply posting around periods of strike action, all of which presents a huge problem to Royal Mail which is already seeing an acceleration in volume decline. Royal Mail is insistent that strike action on top of existing financial and technological pressures will simply make it harder for the company to survive and let down customers. There is though, some doubt amongst union members in some areas that a prolonged period of industrial action could actually achieve sufficient gains to warrant extending the dispute and it is unclear whether this could become a national dispute or not.

Either way, the next few weeks will reveal the extent of union members' opposition to Royal Mail's strategic plans and the groups ability to stand on its own two feet in a recession. The CWU is fiercely against any moves to privatise Royal Mail in part or in whole but with most having voted in favour of the 2007 agreement, even if there is disagreement on the way in which the agreement was taken forward, it could also potentially split opinion amongst members themselves as to what will or won't secure jobs.

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