Much emphasis has been placed on reducing the Postal Service’s costs in response to its financial crisis. Yet financial viability could come in the form of a balanced approach that both reduces costs and increases revenue. How would a smart business respond to declines in its major products? Would it raise prices where possible in stagnant areas and invest the proceeds into existing or new growth areas? Would it selectively discount products to grow volume in price sensitive segments? Disruptive innovation, such as that underway in the communications sphere, requires change to ensure the Postal Service has what it needs to move beyond the critical crossroad it faces today.Read More
Globalization is not a new phenomenon. Throughout history, people sought better ways to correspond and trade over great distances. In recent times, a number of key forces emerged to fuel globalization. Perhaps most important, technological advancement like the internet, personal computers, mobile devices, and global positioning systems (GPS) energized globalization at an unprecedented pace by facilitating instant information transmission, regardless of distance, at a decreasing cost. The result was a dramatically changed business environment.
Businesses and governments, capitalizing on new technologies to improve efficiency, trade, and financial performance, spurred international policy integration, operations standardization, and deregulation and privatization of many public monopolies like power companies. The postal services were no exception. The competitive pressures resulting from an increasingly interconnected marketplace such as the rise of integrators and electronic substitution created profound changes in the postal service ecosystem, which both threatened traditional mail segments and created new opportunities. As a result, the postal sector entered a new era that stimulated many foreign posts to adapt their business model to enter novel markets, diversify product offerings, and develop opportunities in non-traditional sectors to stem the posts’ declining mail businesses.
While many posts, including the U.S. Postal Service, are downsizing due to shrinking domestic markets, China Post is aggressively expanding. By the end of 2015, the China Post Group plans to extend universal service to all villages, increase urban residential letterboxes, and add 300,000 jobs. This development presents an opportunity for the Postal Service to partner with China Post to expand the reach of both posts, as the demand for end-to-end solutions between the Chinese and U.S. markets grows.
The major factors that fuel expansion and justify development are an increasing residential delivery network, major growth in small-to-medium enterprises (SME) and exports, and a developing direct marketing industry. The Chinese government also fosters China Post’s growth by permitting non-postal activities like banking and shielding some profitable segments of the express mail market from competition. Although industry players question the legality in an international context, China Posts’ Express Mail unit has the exclusive rights to a profitable product segment.
Together these factors guarantee steady mail volume increases and help China Post secure a position in the burgeoning direct mail industry, e-commerce market, and other non-postal sectors. By tapping into its far-flung network of post offices to provide customers a wide range of services in one convenient location, new opportunities will emerge for China Post as well as the Postal Service.
The Postal Service is taking action to capitalize on these opportunities. Last year, the Postal Service introduced a new, small-packet product targeting China’s small, lightweight exports, such as electronics and apparel. The Postal Service also signed a memorandum of understanding with China Post and eBay to provide an end-to-end, e-commerce solution. Earlier this year the Postal Service hosted a 20-member China Post delegation to discuss the direct mail industry. As the demand for postal products and services grows with China Post’s expansion, the Postal Service is uniquely positioned to establish a partnership that connects and fosters Chinese and U.S. markets.
What other opportunities do you think the Postal Service should pursue with China Post?
This blog is hosted by the OIG’s Risk Analysis Research Center (RARC).Read More