The UK’s Post Office (PO) faces “exciting times and opportunities”, as its sister company RoyalMail heads towards privatisation and the UK government tries to cut the costs of public services,
according to its new MD.Paula Vennells told last week’s ‘The Future of UK Postal Services’ conference that thestate-owned company would “aim to become the front office of national and local governmentservices”, while retaining a close relationship with Royal Mail and building its financial andretail services.
Post Office Ltd is a wholly owned subsidiary of Royal Mail Group, and has around 12,000 outletsin the UK, including owned ‘Crown Office’ branches in city centres, and outlets run bysub-postmasters that combine a shop with the Post Office branch. More than 90% of these areprivately owned and run. Vennells said that although the Post Office was about postal services,that business only accounted for just over a third of the company’s income. The company hadrevenues of £398 million in April-September 2010, the first half of its 2010-11 fiscal year.
“Royal Mail is our biggest supplier currently, and accounts for 37% of revenue and 50% ofcustomer visits, and both [Royal Mail CEO] Moya Greene and I are committed to making sure thisrelationship lasts for as long a time as it can do. We will enter into a commercial distributionagreement with Royal Mail once that [sale] transaction has happened, and until that time, and afterthat time, the relationship remains very strong.
“These are exciting times for the Post Office,” Vennells stressed. “We have got some significantchallenges, primarily relating to the customer experience – for example queues at some of ourbranches. We are also affected by the structural decline of the mail market. And, at the moment,the Post Office network is not sustainable in its current form. So, these are three big challenges.However, as a result of the Postal Services Bill and the funding recently announced by government,and its recent policy statements, we now have some really fantastic opportunities to address all ofthose.”
Although the Post Office was a physical distribution network, it was also one of the biggestcash distribution networks in the UK. “We are also a linked IT network and have just completed,incredibly successfully, one of the biggest IT migrations in Europe,” Vennells added.
Vennells described the new government’s promise of no more Post Office closures as “one of mygreatest reassurances”. She added: “The UK government has committed £1.34 billion to the PO for thefive years from next March. That is a tremendous commitment at a time when many other services ofthe public sector has had to be cut.
“We will use it to do three things: secure the network, so there will be 12,000 PO outlets atthe end of this period. And we will improve access, both locally, and in towns and city centres,and online. We will modernise the network, primarily around improving the hours that people areable to access its services. And also develop new products and services, and make thoseavailable.”
She said the Post Office had been asked by government to support Francis Maude and the CabinetOffice’s report on Online Government Services and the Digitisation of Government Services,published last week. “One of the biggest growth areas for us is in growth in government servicesthat can be put through us, and I am grateful to the government’s commitment for this. This is avery good opportunity for the PO. It is critical to government and the PO. It will save thegovernment money, and what it does for the PO is maintain our relevance in the community, becausenot everyone will be able to go online, even when government improves broadband access. What thepost office can do is offer that face-to-face services, and we have been working closely withgovernment, particularly on three areas.”
These are identity verification; processing of identity, and the PO Pay-out product, which canmake payments of local and national government money to individuals that can identify that theyqualify for it. Vennells said the Post Office had installed 750 application and enrolment identity‘kits’, which can take biometric photo capture, fingerprints and electronic signatures.
“We have just processed tens of thousands of identity applications for the UK Border Authorityin the last six months, and we have just signed an agreement with the DVLA for a 10-year drivinglicence, requiring exactly the same identity application. The kinds of encashment facilities andthe technology that we have mean we can do all kinds of services for national and government. Andso this is a very big area for us, and is important for our five-year plan, in terms of the revenuestreams attached to that, and we are working with a number of government departments now onpilots.”
Vennells said the Post Office’s network was its biggest challenge. “What we have done iswhat any good retailer does, and segmented it. So if you think of Tesco, you have Tesco Metro, andyou have superstores. We have developed different sizes of post offices, according to the needs ofthe communities they are based in. They fall primarily into two main areas, but within those thereare different sizes of post offices: main post offices will offer the full range of products andservices, from mail to personal financial services, and will become the front office forgovernment, and they will be the focal point in major towns and cities. But they will be a range ofsizes according to the catchment area.”
She said local post offices were where some of the most innovative developments had been takingplace. “We have, under Post Office Essentials, trialled a low-cost, variable pay model of postoffice.” The company had more than 50 of these in the pilot, which, when eventually rolled out,will be known as Post Office Local. “This has been hugely successful and seven out of 10 operatorsare now actively recommending this to other small convenience store retailers as the solution torunning small, viable, long-term post offices. It accounts for 95% of customer visits to postoffices. We will continue to run outreach post offices in the most remote rural locations. We have500 mobile post offices, and these will continue.”
Moving certain services from behind dedicated post office counters in partner stores such asBudgens to the main customer till service areas has extended the hours where services are availableby 40-60%, as well as improving the efficiency of space and staff use in the shops. “This isanother area we intend to invest in,” she added.
Financial services was also an important area for development, and the Post Office was one ofthe fastest providers of financial services in the UK. It intended ‘grow’ a number of its products,increase the number of partner banks to offer cash withdrawals to, and look to create strongerlinks with building societies and credit unions.
Fresh funding would also help it to combine access to services, both through its physical andonline networks. “Our travel money sales online are now three times those through our post officenetwork, so this is a huge opportunity for PO,” said Vennells . “The combination of physical storesand online access is a story of ‘both-and’ for us, not ‘either-or’.”
