How are leading global postal operators responding to challenges of disappearing mail volumes?

Postal operators revenue share by activity

Mail volumes are falling worldwide, mainly due to e-substitution: the trend for things that were formerly done on paper to shift online. This is a major issue for postal operators around the world, and they are adopting a range of strategies, diversifying into different lines of business, in order to grow in the face of this adverse trend.

Although local regulatory and market conditions and the ownership structures of the individual operators have an important bearing, there are some common themes. The most obvious of these is parcel delivery, which is both closely related to mail and, thanks to online retail, a growing business.

The UK postal operator, Royal Mail, is now primarily an international parcel delivery company being the only postal operator in the top 10 global economies which derives the majority of its revenue (59%) from parcels, as well as being the only one not to own a network of post offices. In addition to being the market leader in UK parcel delivery it also has the General Logistics Services (GLS), parcels network which operates in Europe and, following recent acquisitions, North America. GLS represented 28% of the group’s overall revenue in 2018, likely to increase following its recent acquisition of Dicom in Canada.

The only postal operator to have more extensive parcels operations than Royal Mail is Deutsche Post, which owns the global DHL parcels network. However, parcels represents a smaller proportion of its group revenues (39%) because DHL, following its historical acquisitions of Exel, Danzas and AEI is the leading global logistics group.

Both Royal Mail and DHL have withdrawn from financial services. This is in contrast to other postal operators such as Japan Post, Poste Italiane, China Post and India Post for whom financial services represents the majority of their activity.

The publicly owned United States Postal Service (USPS) has changed the least of all among the postal operators in the leading global economies with 72% of its revenues being derived from letter mail. USPS has made heavy losses in recent years and its regulatory environment means it has far less freedom to operate commercially than its European and Asian rivals. Unable to make acquisitions or offer financial services, USPS has focused on increasing prices in its mail operations and delivering large volumes of parcels at low costs for retailers such as Amazon.

Our new report, Leading Global Postal Operators – Benchmarking of performance, strategy and diversification: 2018