Thursday 2 April 2009

No postal service in less than 10 years?

Another year, another price rise for the cost of postage. This one seems to have gone by almost unnoticed as I think the G20 and the associated news of President Obama visiting and rioting anarchists has kind of filled the airwaves.

For those that missed it, the price of posting a letter has gone up by 3p to 39p for First Class and 30p for Second Class - this is an increase of over 8% so not exactly linked to inflation. In fact, the Royal Mail indicates that they made a loss of over £100m last year on the Universal Service and would need a price rise of more like 6p per stamped letter to close this gap.

Back in 2000, the Post Office warned that European proposals to cut their monopoly could ultimately see the price of a stamp rising to over £1 - citing the issue that posting a letter from London to Scotland actually cost £2.50 but within London just 15p and breaking up their monopoly would see profitable business cherry picked, leaving just unprofitable and expensive to service rural business.

Mail volumes are also falling with increasing rapidity. They fell 2.3% in 2007 and 3.2% in 2008 - that’s a rate of decline of 139% year on year which if continued (and Chief Exec Adam Crozier seems to think it will – predicting an 8% decline next year) would see the average daily mail bag go from 83m in 2006 to almost nothing by 2018.

So here is my prediction - in less than a decade the daily postal service will be dead.

There will obviously still be some form of hand delivered mail, but it will be less frequent (weekly?) and more expensive.
Possible Scenario?

Ok, so thats a pretty apocalyptic prediction, but even if the rate of decline stayed at 3.2%, the mail bag will have halved in just 20 years time - meaning we would have a very different service than today.

You could argue that the Post Office could turn this situation around by creating innovative products and services, however when national institutions like TV Licensing are increasingly offering their services by email - removing potentially millions of posted letters - and banks and utility companies are pushing towards paperless statementing it doesn’t bode well.

This does bring some interesting thoughts and opportunities however.

A recent Business Insider article worked out that it would be cheaper for the New York Times to give every reader a free an e-book device (like the Amazon Kindle) and shut down the print presses - delivering the news paper electronically and by subscription.

This got me thinking about the postal service - what if we just stopped hand-delivering letters and simply sent them electronically to a device which was provided for this purpose by the Post Office. Giving a £200 e-reader to 28m homes in the UK would cost about £5.6bn – not a small number but at present postage levels of around 20.8bn letters per year, that’s less than 27p per letter - just 70% of the current cost to post it.

Not as far fetched as it might sound and there is definitely precedent. Mobile phone companies have been subsidising their handsets for years in order to drive up usage and it has worked, with over 100% penetration. The mobile network Blyk has gone one better and removed ongoing usage costs as well by allowing brands to target messages to its subscribers - a typically hard to reach teen market.

I suspect it won’t be the Post Office that ultimately offers this service however and instead someone will develop the business model that provides free devices and ongoing usage in return for allowing brands, service providers and content creators to push information to it.

This is going to change the way brands communicate.

Hand delivered items will go up in price, meaning this channel will be used sparingly and where it shows real results. People will receive so little physical mail that there will be a buzz and excitement about anything delivered - almost going back to the days of the hand delivered telegram – so expect higher response rates for well targeted and less frequent communications.

Image from LiquaVista

Electronically delivered letters via an e-reader will be different to emails in the same way that email is different to SMS. More creative, more tactile and higher dwell time - they will be consumed in a different setting and at a different time and so content will need to be specific.

As for the devices - yes they are a little crude today with almost all commercially available models having a black and white screen and a large surround. However Fujitsu have just launched their FLEPia colour e-book in Japan and flexible, rollable, colour displays will be with us in the next couple of years. Checkout Shane Richmond’s blog at the Telegraph for a run down of some of the devices around.

The paperless home is fast approaching providing secure (no more shredding),
instant (no more delay) and portable (no waiting at home) communications.

I’m afraid the Postman is going the same way as the milkman, the pop man (remember home delivered Corona!) and the rag and bone man - it’s a bygone age waiting to happen.


Jam said...

A provocative idea! One that the Royal Mail almost seems to want to counteract - consider the 'heat pack' DM our Planning team received last month from their Media Centre.

The central difficulty about making all mail electronic is that that's exactly what you'll be left with. Electronic mail.

Let's call it "e-mail".

Tactility and physicality are what the RM have to tout, because it's the one distinguishing feature of mail. And, it really does work, leaving you with things you might want to keep or hold - look at an initiative like

Perhaps, then, the postal service will not die but will become an extremely niche product dedicated to high-value, rarefied communications. Which, actually, would be pretty awesome.

Anonymous said...

Hi Jam - sorry, been on holiday.

I don't disagree that Royal Mail are fighting back - as you point out, the Matterbox is one such idea. There is also the increase in postal services such as DVD rental or new services like However I don't think these will outweigh the bulk of mail lost from utility and bank mailings as they increasingly move online.

As for electronic post being like email, I think this is possible, however the media I feel will be different.

At present, if an automotive dealer wanted to send a brochure they would have to create a single page HTML email and/or a seperate PDF attachment. With an e-reader they can simply send the brouchure, as they would today in the post and I can read as a brochure, as I do today.

I think the medium will demand that content is presented in a paper-like fashion, making for a more natural reading experience.

However I could be wrong and we may simply by-pass e-readers as netbooks gain in usage.

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