How a liberalised mail market works
What does a liberalised mail marketlook like? What might an Asian countryexpect if it allowed competitors to itsnational post office? For an answer, one might look at theUK, which is one of the most liberalisedmarkets in the European Unionat present. True, its national postaloperator, Royal Mail, is still government-owned, when other Europeancountries – most notably […]
February 1, 2007
By PLA Editor
Air & Cargo Services air cargo Air Cargo Asia air cargo freight Air Forwarding air freight Air Freight Asia Air Freight Logistics air freighter air freighting Air Logistics Asia Air Shipping Asia airlines cargo airways cargo asia cargo news cargo aviation
What does a liberalised mail marketlook like? What might an Asian countryexpect if it allowed competitors to itsnational post office?
For an answer, one might look at theUK, which is one of the most liberalisedmarkets in the European Unionat present. True, its national postaloperator, Royal Mail, is still government-owned, when other Europeancountries – most notably Germanyand the Netherlands – have privatisedtheirs, but Royal Mail is under pressureon its home patch as never before.
Witness the announcement in earlyJanuary that the biggest UK governmentministry – the Department ofWork and Pensions – was to switchsome of its mail from Royal Mail toUK Mail, a private operator, in a dealworth $23m. The department cited apotential $9.5m in savings in its annual$136m bill for postal services as thereason for the switch.
With other government departmentsunder similar pressures to cutcosts, analysts expect Royal Mail tosuffer further such losses in businessin future. The government’s own NationalAudit Office estimated recentlythat the government could realisesome $60m of savings by more efficientuse of postal services, for example by pushing operators to give them volumediscounts. Currently less than 20 percentof mail sent by UK governmentdepartments and agencies attracts avolume discount.
Meanwhile January saw TNT Postwin several large commercial contractsin the UK. On 15 January, for example,it announced that telecoms operatorBT had chosen to use its Premierservice, which provides a two day timedefinite service for 170 million itemsof pre-sorted mail each year – mainlybills and statements or what is knownas transactional mail – in a deal worthsome $175m over three years.
A day later, Centrica, a domestic gassupplier, gave TNT Post a $68m dealover two years, involving 120 millionitems of transactional mail and 50 milliondirect marketing items. It joinedother leading UK utilities in switchingto TNT, including npower, a majorelectricity provider, and Thames Water,London’s water company.
Royal Mail need not panic yet. It isestimated that private operators haveso far only captured somewhere between10 and 12 percent of the UK’smail market, but it is a percentagethat will probably grow. The nationalpostal operator also still performs thevast bulk of the last mile transactions.Even under the above contracts, TNTPost will be feeding mail into RoyalMail for the final delivery to domesticaddresses.
In other parts of Europe, however,TNT already does some last mile deliveriesitself, despite the 50 gramlimit below which letters theoreticallyremain a national postal monopoly inEurope. And Harry Koorstra, its boardmember responsible for mail, admitsthat it does have plans to roll out itsown delivery system in the UK.
‘We will start somewhere in the secondhalf of the year with deliveries tokey business centres,’ he says. ‘It costs a lot to build up the infrastructure, so our approach is to organise the customer base in the first place, using sub-contractors to ensure we have a variable cost stream. But once we have a stable customer base, we will roll out our own delivery system.’
– Peter Conway