Postcomm's announcement last month that bulk business mail will be deregulated sooner than previously expected, heralds a new era of private investment and long term licences. As Michael Herson found, outsourcing of mail is now a realistic option for FM's and one which will develop rapidly.

The Regulatory Authority Postcomm, set up in November 2000 to oversee the deregulation process, awarded their first licenses during 2001 to the 'young pretenders' seeking a slice of the £6bn UK mails markets. Last month it announced that, following lengthy consultation, the mail market will be opened to full competition. Postcomm chairman Graham Corbett said, "The current postal monopoly is clearly not providing its customers with the service they want and it is failing to contain its costs"

Facilities Managers will be familiar with the market entrants - TNT, Hays and Business Post (UK Mail). It is difficult to get into the mails sector without previous experience of parcels and express. Most industry analysts expect a cautious approach, as initial licenses are only for twelve months duration. In reality, these competitors have started 'nibbling at the edges' rather than taking the Royal Mail head on by attempting to deliver 'the last mile'. In effect, this produces 'partner competitors. According to Don Brooks, managing director of Deutsche Post Global Mail, "Any type of competition to Consignia would also require usage of Consignia for delivery, applying work sharing".

Royal Mail is not likely to take these developments lying down. Managing director of Royal Mail's Mail Markets, Gillian Wilmot, is well prepared for the new environment "Many will be surprised at the boldness and imagination of our commercial strategy, as they see it being deployed. She admits that there are some service and quality issues to be addressed. "We have been listening to our business customers and are re-vamping our existing product range to meet their value and quality expectations".

The two main areas for competition are Mail Management and Consolidated Mail - in effect, 'wholesaling' mail at some point in the distribution chain, but not making the final delivery. The growth of outsourcing has increased the demand for mail room solutions. Hays have the benefit of an existing customer base from their Document Exchange (DX) and Specialist Courier networks, with particular sector strengths in legal, financial, insurance, travel and optical sectors. Hays is very much focusing on mail solutions - "Our uniqueness is about managing mail", said Phil Simmons, Managing Director of Hays DX Management Services - a division of Hays PLC. Simmons is careful to make the distinction between managing mail, as opposed to managing mail rooms, as Hays is offering a consultative approach that offers FM's more than just cost savings

Bob Black, the managing director of TNT Express Specialist Services, has been focusing on mail solutions since 1994, and TNT have three distinct products within their offering - mail room management, inter-site mail management, and document management. It is perhaps no coincidence that both TNT and Hays have their respective 'Sameday' products housed within the same division as mail services. Indeed, it is this faster guaranteed delivery that is the cornerstone of the new mails service. "Exact guaranteed delivery" is central to the TNT offering, according to Black.

Black feels TNT's internal mail service falls outside Consignia's monopoly, but nevertheless, in order to effectively 'legalise' what they have been doing for a number of years prior to the setting up of Postcomm, it has applied for the appropriate licenses - or at least where it feels they may face a challenge. TPG (Dutch Post Office), the owners of TNT, has shown its commitment to the UK mails market by purchasing both Circular Distributors and Lason - a reprographics imaging/archiving company, allowing them to take a stronger presence in B2C mail.

Of immediate interest to the three players who have already entered the market is downstream access. This allows competitors to collect and sort mail from customers, and then re-inject it back into the Royal Mail stream for the 'final mile' delivery. All three players are negotiating currently with Consignia, but only Paul Carvell, managing director of Business Post's new division, UK Mail, feels he is close to an agreement. The dilemma for Consignia is that it needs to charge a realistic price that the regulator deems fair, but at the same time not erode its profit margin by so much, that it threatens the provision of the universal service.

Clearly the cost of providing the 'universal service' at a uniform price is expensive to maintain. Which may be why, in other liberalised markets such as Sweden and Finland, no competitor to the incumbent postal administration have shown any interest in taking it on as a business model. Wilmot confirms "We're happy to talk to any licence holder about direct access to our network, but it must be at a price that allows us to maintain the universal service". Hays has launched a new service, branded DX Metro. It is restricted to
member of the Hays DX service wanting to send mail to non DX members within
the postcodes where Hays have a licence to operate the service - in Central
London, Manchester and Edinburgh.

UK Mail is the latest to be awarded its license, and the last to launch - scheduled for April this year, a new service called 'Business Class', positioned between first class (cheaper) and second class (quicker). Business Post, the largest remaining independently owned parcels operator in the UK, with a turnover of £135m, have benefited from its newly signed five year GSP (Global Service Participant) partnership with FedEx, for whom it undertakes the collections and deliveries in the UK. This in turn has led to dual branding and joint marketing which, (in theory), could give FedEx a toehold in the UK mail market at some point in the future.

UK Mail have selected 12 out of their 63 depots for the initial test, located near major conurbations, and is targeting a quarter of their 20,000 customer base. If awarded a 10-15 year license, Business Post would install state of the art automated letter sorting machines. Carvell shares the majority view that it is difficult for new players to enter the market without previous experience and an established infrastructure - "It's not an easy thing to get into" he said.

However, a new small company is Berkshire based Collectpoint, with a turnover of £1.5m, who tap into the UK's network of convenience stores and petrol forecourts through chains such as Spar, Londis and Co-op. These outlets act as drop-off points for parcels when consumers are out, allowing out of hours collections in return for a small fee. Jim Doyle, Director of Collectpoint, confirm it has signed up 3,000 of their target of 8,000 convenience stores in the UK, and has extended this service to field service engineers and the growing insurance replacement (insurance companies are increasingly despatching replacement goods, instead of cheques, in order to improve customer service and discourage fraud). Collectpoint typifies the new entrepreneurial spirit within the mails market. They are not a traditional player with a physical network or logistics infrastructure. This type of alternative "call and collect" delivery service is also being successfully trailed by Royal Mail.

Arguably, the most interesting 'sleeper' in the market is Deutsche Post. Don Brooks, has admitted they will be next into the UK market. To build its UK base, Deutsche Post acquired Mitcham based Herald (a large international mail consolidator) two years ago, re-branded it as Deutsche Post Global, and increased turnover from £15m to £45m focusing on international direct mail. Of all the new players, it seems the most likely to focus on direct marketing as its core offering.

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