Postal Organizations: Lens on the Long Term

Despite measures to increase cost control and growth, the pressure is on for the postal industry to remain relevant and sustainable. At the launch of our 2012 study Achieving High Performance in the Postal Industry at the European Postal Services conference in Rome, Accenture revealed how high performers that are taking a clear, strategic view of cost containment, with a focus on creating sustainable customer value, are seeing that there is light at the end of the tunnel.

In our fifth in-depth study of the postal market, Accenture finds high-performing postal players not only understand their long-term strategies, but also continue to refresh and update them to secure profitability. Indeed, three core propositions highlight a compelling case for change.

• First, that technology substitution is a reality—and here to stay.


• Second, that although it is accepted that diversification drives new revenue, generating profitable revenue is a significant challenge.


• And finally, a fundamental restructuring of every aspect of the postal operation is essential if costs are to be brought under control.

As physical mail volumes continue to plummet and tough economic conditions prevail, the warning signs to “diversify or die” can no longer be ignored by postal players across the world. Failure to restructure their businesses or seek out new services and markets is seriously hampering some postal organizations’ chances of survival.

Technological substitution is a reality—and here to stay: Many geographies are now seeing the early signs of economic growth. Historically, we would have expected this growth to translate into volume growth; however, today’s reality is that our world has changed and volumes and gross domestic product (GDP) are no longer aligned. As we look forward, it is clear that technological substitution is a fixture for the future.

To survive, postal operators need to consider how to manage this issue, decide what role they will play in a new multichannel world and look for the innovative, technology-driven opportunities that might emerge to modernize their business.

Diversification will drive new revenue, but generating profitable revenue is a significant challenge: Since the publication of our first report in 2006, Accenture has seen how postal operators are seeking to identify and develop new services across the international marketplace. However, many opportunities, although realizing returns, have a fundamental flaw—they are unable to generate sustainable, profitable revenue.

Investment decisions around diversification must consider the extent to which each opportunity, as part of an overall portfolio, can deliver sustained profitable revenues. Otherwise revenues will grow, but commercial viability will not be secured.

Fundamental restructuring of every aspect of the operation is essential if costs are to be brought under control: Around 50 percent of postal operators saw their costs increase at a rate that was greater than their revenue growth in our latest study. This trend cannot continue and needs to be addressed quickly.

Postal organizations must conduct a “root and branch” review of every aspect of their business. The review should extend far deeper in their restructuring than has previously been considered. Selling surplus assets and outsourcing non-core functions are likely to be the core elements of strategies in this area.

In Accenture’s view, a burning platform for change has been created and the time is ripe for transformation. Postal operators must now face the challenge of modernizing their businesses—developing new services and changing their service models. For high performers, the customer will be at the core of every aspect of this change.

High performers will embrace opportunities with senders and receivers to enable them to make the right strategic choices—choices that will secure their commercial future for the long term.