Interview with Deutsche Post CEO

Forbes has just published an interview with Frank Appel, the CEO of Deutsche Post. While the entire short interview is worth reading, his response to one question is in line with the research that I have conducted on the future of the mail business.

With the imminent end of the mail monopoly in the EU by 2011, what are the new revenue sources you're looking at?

"The monopoly has already gone thanks to the Internet. There's a movement from physical delivery of mail to electronic delivery. People are writing less letters. As you know, we're currently in tough talks with the unions in our mail business. I'm very conscious of the fact that the success of the past doesn't help in the future."

In this answer CEO Appel makes three key points that reflect my recent research on the postal market.

The monopoly has already gone thanks to the Internet.

In this statement, CEO Appel tries to calm the fears of shareholders regarding the impact of eliminating the monopoly. In doing so, he suggests that Deutsche Post has bigger problems in the mail business than removing the monopoly.

The Internet clearly is a problem for national postal operators. Nearly all documents that could be mailed have electronic alternatives that can deliver the same information. Four barriers are holding back senders from using electronic delivery: 1) recipient preference for mail; 2) not knowing or trusting the recipient's e-mail address; 3) difficulty of targeting display, search, and e-mail advertising without violating privacy concerns of Internet users; and 4) lack of a coherent, return-focused document management strategy which includes a coherent approach to transition to a recipient-friendly, electronic content delivery.

The impact of electronic alternatives is different for the United States Postal Service than it is for most foreign postal operators as the United States Postal Service still handles a significant share of all remittances that are easily diverted to the Internet. Foreign postal operators never had as large a share of payments and therefore new payment technologies have less effect on them.

Where the impact of the Internet is similar is in the delivery of information contained in a range of documents including bills, statements, shareholder communications, member communications, acquisitions advertisements, and retention advertisements. Figuring out how to keep mail relevant for transmitting information contained in these documents for as long as possible is critical for national postal operators to manage their transition to a world in which mail is not the primary means of document delivery.

Compared to the problem of dealing with the challenge of the Internet, the removal of the monopoly looks less problematic. Competition from physical delivery competitors is easier to understand and deal with. In fact, it may hasten the changes necessary to keep mail relevant in in an Internet-centered communications world.

We're currently in tough talks with the unions in our mail business.

Current contracts with postal unions worldwide reflect the results of negotiations completed within different market environments that now exist. Previous agreements had to deal with the challenge of introducing new information technology, mail sortation and material handling technology that reduced the need for postal labor. Those national posts that successfully handled the technological transition were able to sign agreement with flexible labor rules that allowed them to operate fewer, larger facilities which operated with short operating windows for sorting originating mail and mail delivered within a sortation facility's delivery area.

Today's negotiations have to deal with challenges from outside the corporation, including competition from electronic and physical delivery. As such, nearly all of the agreements will have to deal with the transition to a smaller, and even more-flexible workforce than current agreements now allow. The labor strife in Belgium, France, Great Britain, and the Netherlands all illustrate that negotiations will not be easy. Finding a way for the national operator's management and postal union leadership to prepare employs for change will be key to minimizing labor conflicts as the postal workplace changes.

Success of the past doesn't help in the future.

This is the clearest statement that nothing is sacrosanct for a postal operator. Every idea for streamlining processes to reduce costs and improve service or developing new products have to be considered. For example, as mail becomes increasingly tied to advertising, national postal operators have to find a way to provide day-certain, low-priced delivery as an advertising campaign is most effective if physical mail arrives on the same day as the e-mail. Without day-certain delivery, advertisers send multiple e-mails to match the actual physical delivery, increasing the cost and reducing the effectiveness of the advertising campaign.