The Future Viability of Posts and a Most Critical Postal Conference (Part 2)

It took me much deliberation and more research… But I was finally able to focus my thinking around what I wanted to do with this year’s paper for the Postal and Delivery Economics conference in Barcelona. As I mentioned in an earlier post, this was not easy. My research topic was broad, which caused significant issue deciding on common themes. But thanks to much discussion with colleagues, things became more cohesive as I began writing.

We all know mail volumes have fallen…some would say even crashed. Yet I would say volumes are not the most critical element that will define the future financial viability for posts in the future. Demographics, re-urbanization, and new entry in the last mile will trump volume fluctuation in the years ahead. The most critical element will be brand.

Posts have enjoyed a monopoly on brand and trust in parcel delivery over the last 30 years and have earned that trust over time. This is equally true for other established delivery providers such as UPS and FedEx. What I find most interesting is how new entrants to parcel delivery, like Uber and Lyft, can build trust in such a short time frame. This allows them to compete in these market spaces. This trust, which used to take decades to obtain, can almost be earned with a single few deliveries of outstanding quality and price, just like an everyday Uber ride.

This creates the biggest single threat for posts. If trust can be earned this quickly, and the price and quality of delivery is commensurate for entrants, parcel volumes, especially products such as Parcel Select in the U.S., are at risk of diversion away from posts. One can quickly imagine a reverse auction paradigm, a la the eLance / Upwork model. Fueled by online platforms that allow any agent to bid on a given delivery, the highest quality delivery service could well be the cheapest.

I’m struck by the resulting implications from this effect. There’s much last mile business at risk in the years ahead. Posts must decide whether to offer new value added services to customers or engage in a race to the bottom. The latter will mean driving price to marginal cost, commoditizing delivery and compete solely on price. With the paper due May 7 and the conference beginning May 24, time is drawing closer.

Stay tuned to see how the paper is received at the conference and how the presentation / defense goes on 5/27! #IBMAoT