 There's a scene in the 1980s sitcom Cheers when Cliff, the philosophical postman, arrives at the Boston bar looking more dishevelled and exhausted than usual. 'What's up Cliff?' asks his friend Norm. 'It's the mail,' wails a haunted-looking Cliff. 'You pick it up, deliver it, but it just keeps on coming and coming; there's no end.'
If Cliff had been delivering mail today, he'd have had even more reason to moan. Despite predictions that so-called 'snail mail' would be killed off, first by the fax, then by email, courtesy of the home computer, the laptop and, more recently, devices such as BlackBerries, this age-old industry is very much alive and kicking. Although person-to-person letters are now reckoned to be less than 3% of total mail, in the US alone some 500 billion pieces of mail a year are sent, generating big profits for companies involved with adding value and ensuring it reaches its destination. In Europe it's a similar story with the industry valued at around €90bn and growing. Those in the business say the surprising growth reflects the fact that the internet, far from killing postal delivery, has actually encouraged it, through the growth of online shopping, online DVD rental and such sites as eBay: all require increased use of postal services, with private companies working alongside and sometimes competing with national postal companies to provide the most technologically advanced and cost-effective means of doing this.
With consumers increasingly turned off by cold-calling and pop-up online advertising, properly targeted mail is often seen as the best and least intrusive way of attracting a potential customer's attention, not least because it is something they can deal with as and when they choose. 'There are huge opportunities in this industry, which thanks to new technologies is today more efficient and versatile than it has ever been,' says Murray Martin, COO of US company Pitney Bowes Incorporated.
Until recently, PBI was most closely associated with the franking machine its founders created in 1920 and which over the following 86 years became a familiar sight in offices around the world, enabling companies to send mail and control mail expenses without having to deal directly with the post office. In PBI's HQ in Stamford, Connecticut, original models can still be seen, relics of a bygone, pre-digital age.  Thanks to postal deregulation and advances in technology, PBI today is completely remodelled and recovered from the unsuccessful diversification it undertook in the 1970s and 1980s. Under chief executive Michael Critelli it has moved back into its core business: successfully managing the mailstream at both upstream and downstream levels – from providing help with direct marketing to adding value with direct mail handling.
'The mailstream is one of the largest engines of commerce in the world today yet also one of the most misunderstood. Companies wanting to grow their business should recognise the importance of targeting customers properly, getting them to open their mail and then encouraging them to respond to what is being offered,' says Martin. The company's bottom line has certainly benefited from this philosophy. Investment in new digital technology, which helped PBI fine-tune its services and increase its share of online-generated business – including eBay, where PBI helped devise a new postal payment scheme with PayPal, helping turnover to grow some 11% last year to $5.3bn (€4.1bn), with profits rising by 12.6% to more than $1bn.
Yet the non-US side of PBI's business is now equivalent to around 26% of turnover and growing fast, partially on the back of acquisitions made in Europe over the past few years, most notably of France's SECAP. With EU opportunities set to increase – assuming the European Commission's liberalisation proposals take effect in 2009 – PBI plainly hopes to emulate its success in the US and take its growth to the next stage. Critelli admits it will hardly be plain sailing with cultural, legal and other factors making the business environment distinctly different, and strong competition – notably from Germany's Bowe and Switzerland's Kern. 'The biggest question mark is the pace and direction of liberalisation,' he says.  Indeed. Although countries such as the UK, Netherlands, Germany and Estonia have already partially deregulated their industries – particularly for parcels and letters weighing more than 50 grams – with some moving to full deregulation next year, others, notably France's La Poste, which handles four times the amount of franked mail of Bundes-post, remain opposed. Ostensibly this reflects fears that increased competition and cherrypicking could make it harder for national operators to meet their Universal Service Obligation (USO, whereby non-profitable rural routes are maintained, often through cross-subsidy from more profitable services). However as in many other sectors, old-style, state-owned companies – many of which are over-staffed and over-unionised, with working practices often unchanged for years – also fear what will happen to them when they have to face the full force of the market.
Another concern for PBI and companies like it that want to grab a slice of Europe's deregulated postal business – is that, despite some consolidation, the market is much more fragmented. In the US parcel delivery business for example, PBI has to work with just four main companies (which control 80% of the market); by contrast, the UK alone has at least 25 delivery companies. Patrick Keddy, who heads PBI's European operations, says the company has no intention of competing directly with national postal operators, adding that package delivery services are likely to form only a small proportion of new business. In the short run he anticipates that offering on-site management support and off-site software and other services to large companies – such as banks, insurance companies and utilities – will be the main part of its business, although SMEs will also be targeted, as ever. 'For high-volume mailers in a deregulated mailing environment with more choice, our solutions – enabling, for example, bills to be fast-tracked and advertising mail sent in a slower but more targeted way – have proven extremely useful. Experience shows that commercial mail gets very different results depending on the day the mail arrives with the potential customer,' he says.
PBI will also try other innovations in Europe, notably personalised stamps and kiosks. The former – whereby companies can have their own logo on stamps, or even Mickey Mouse if they so chose – should be a nice little earner once legal and other details are worked through. However, kiosks – which could prove an ideal solution for communities that have suffered the loss of their post office, obliging a long trek into town – could prove a major money-winner, and PBI is currently in discussion with a number of organisations over their introduction. These high-tech kiosks will allow consumers to complete shipping and mailing activities without the need for staff or a building. With such innovations, Keddy believes the company should be able to double its European turnover within the 'foreseeable future'. Yet the big question is whether postal deregulation actually happens on schedule. Given Europe's past record in such matters, PBI (and other companies hoping to see profits flow on the back of deregulation) probably shouldn't hold its breath, particularly if France maintains its traditional opposition to change. |