Slow beginning for new Mail Services

In two previous articles published in February and October 2002 in PFM magazine, The Strategy Works interviewed the original and second stage entrants to the UK Mails market, granted a licence by Postcomm.

Six months on it is timely to look at the impact made by these licensees in the marketplace by talking to end-users in leading plc’s who routinely dispatch large volumes of mail. In addition MailSource – recently acquired by Swiss Post – have also been interviewed as the leading independent player in mailroom management.

In just 10 years MailSource UK has become a £23m business from a standing start in 1993. Chairman, James Greenbury, reports their philosophy is based on “cost reduction and service enhancement”. To enable clients to buy more efficiently MailSource have developed ‘smart’ bespoke software (‘uBook’) which determines the best cost options. “It makes the user more intelligent as to what they are ordering”. However, Greenbury concedes it is the courier part of the equation where the main savings are to be made - “Postage is not a huge part of the cost structure in an office type mailroom”, he said

Not ready
MailSource’s key clients include Goldman Sachs, BBC, KPMG, Shell, with each customer’s purchasing options reviewed on their merits. Being independent from the main carriers gives them the freedom to choose. Greenbury questions the credibility of some of the new licensees and feels that not all of them are ready – “To the best of my knowledge I think we have only been approached proactively by Hays”.

Juerg Wunderli is CEO of MailSource Group, a subsidiary of Swiss Post. Wunderli reports that Swiss Post with an annual turnover of SFR 6.5bn, pursued an outsourced mailroom strategy three years ago, due to the decline in traditional domestic mail of 2% per year. Their new ‘outbound solutions’ strategy comprises not only mailroom management, but also printing of documents that eventually pass-through the mailroom, such as mass mailings and invoices. Wunderli confirms the policy of working independently with third parties and that MailSource has no intention of applying for a UK mail licence. Similar operations to the UK have been set up in Switzerland, Lichtenstein and Italy. “Our vision”, confirms Wunderli, “is to become the recognised European leader of specialised mailroom solutions”.

End Users
In a recently completed survey amongst corporate end-users The Strategy Works has discovered that the majority of decisions on which mail handler is used are taken by a team – sometimes up to six members – 86% of respondents confirm this to be internal policy – sole decision makers are the exception. The most popular service used, after first class post, is ‘next day timed delivery’ - by 82% of respondents.

Of the new entrants, the most impact has been made by Hays, who are used by 50% of respondents, followed by Special Mail Services - both these are strongest in the financial services sector.

However, not all companies are being actively courted by the new suppliers. Neil Clark, Business Manager at Norwich Union is surprised how few suppliers have made approaches and has not seen any service providers who can offer the wide range of services provided by Royal Mail, whilst admitting that some are offering competitive rates for certain parts of the range.

Direct mail
Others use different suppliers for different segments of their mail, for example, Keith Willis of Lensmail (Specsavers) use new entrant, Express Dairies for 3 day delivery and pick up and Royal Mail for all direct mail.

Interestingly, a major user like Readers Digest reports no proactive approaches at all. Stephen Ross-Bryant believes suppliers are still finding their feet and thinking about how to tackle the market. ADM’s John Todd states no-one can yet offer a nationwide service for the full range of services. ADM are trialling Express on items between 200g and 1.5kg, but admit they are using RM for all direct mail, and so far “no-one can compete with them.” Todd adds “should a true competitor come onto the market we would naturally look at their services and rates”

Initiatives
Some fresh initiatives are being led by trade associations such as the Professional Publishers Association. The PPA’s Nicola Rowe reports a new initiative between Express Dairies and DataRun is on test, whilst negotiations continue with Royal Mail on access pricing. The PPA is a facilitator with the final decision being a personal one for each member. However, Rowe remains sympathetic to the plight of Royal Mail - “no one wants to see Royal Mail financially crippled”.

The conclusion is the rapid charge predicted at the outset of postal deregulation has not yet materialised, but with 46% of the sample indicating they were ‘likely’ or ‘very likely’ to review their purchasing practices over the next two years, the medium term could see changes in market behaviour.

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