Postal operators adapt strategies to rapidly changing conditions

The worsening economic situation, weaker demand, rising costs and operational challenges are forcing postal operators to respond quickly with strategic, commercial and operational changes, according to senior executives at Parcel + Post Expo this week.

Postal companies across Europe and around the world currently have to plan ahead for 2023 and beyond amid wide-ranging economic uncertainties, difficulties in predicting whether this year’s parcel volume slowdown is only a short-term effect or not, and without being able to judge whether this year’s operational disruptions and surging costs will continue next year.

A wide range of executives and managers addressed these issues and other topics during three days of conference sessions at Parcel + Post Expo in Frankfurt this week.

“Fertiliser for the future”

Mart Mägi, CEO of Omniva, explained how the Estonian postal group is trying to adapt its strategy to these changing conditions and, to maintain its international business, “go around the rim of Russia” by developing partnerships and new activities in the Middle East and Central Asia. He had already outlined this strategy in a CEP-Research interview earlier this month.

As an example of new activities, Mägi told conference delegates that Omniva is now testing urgent same-day deliveries of food.

Remaining optimistic despite challenging market conditions, the plain-speaking Omniva CEO said in a memorable – and very frank – comment: “The situation is shit but shit is fertiliser for the future.”

Complete transformation

One CEO facing dramatic challenges is Valentin Stefan at Romanian Post, which has a legacy of an ageing workforce, a lack of technology and falling revenues due to the structural decline of letters and other activities.

Stefan, who has been CEO for two years, said he wants to modernise the entire company and invest in the network, for example by replacing little-used street mailboxes with parcel lockers. The company is spending more this year on parcel lockers and sorting systems than it had invested in total over the last decade.

“We want to create a brand-new company,” he declared. “And we have to take risks. We should not be afraid of failure.”

New operations

A different kind of strategic change is taking place at Spanish postal operator Correos, which is investing in its own cargo airline to gain vitally needed air capacity.

Correos Cargo, which was launched at the start of this year, currently flies three times per week between Hong Kong and Madrid with high load factors. Flights are mostly carrying B2C e-commerce parcels from China for delivery by Correos in Spain.

Eduardo Herrera Garcia, chief operating officer of Correos, explained that the new airline is providing operational benefits such as directly controlled capacity along with competitive advantages such as the opportunity to establish Madrid as an e-commerce hub for Europe and Latin America.

Responding to a question about the general business outlook, he admitted: “We do not know how volumes will develop. Let's hope business turns up again in 2023.”

Price-sensitive shoppers

These changes in demand were confirmed by Carmen Cureu, DPDgroup’s market research director, in a separate conference session. She said ecommerce growth had “flattened out” as shoppers purchased less online than before during these “difficult economic times”.

“People are more price sensitive at the moment. There is more C2C and more second-hand shopping,” she commented.

More positively, though, new e-retail segments such as food and medicines are also developing fast, making the e-commerce basket “more diversified” than in the past, she pointed out.

• CEP-Research will report on other conference sessions next week.