Evolving Postal Services: Adapting to the Parcel Delivery Era

March 15, 2024

Postal service providers are dealing with a sharp reduction in letter mail due to digital transition. Letter-post revenue dropped from more than 50% in 2005 to 34% in 2021, while forecasts indicate a further fall, reaching approximately 29% by 2025.

This shift poses a dual challenge: sustaining service quality while facing shrinking revenues. 

This article explores how postal operators can find new life in the booming parcel delivery sector, offering a roadmap for adaptation and growth. We'll uncover practical solutions that empower posts to embrace the e-commerce wave and secure their place in the future of delivery.

The changing postal landscape and following challenges 

The digital revolution has drastically shifted communication from physical to digital, heavily impacting the postal industry. Since 2012, mail volumes have decreased by about a third in advanced economies, with more significant drops in some areas.

Although there was a slight recovery during 2021 and 2022, mail volumes remain below pre-pandemic levels, and early 2023 data shows the decline is accelerating.

This backdrop sets the stage for exploring the challenges and opportunities within the changing landscape of postal delivery.

The challenges posts face include:

  • Declining revenue: Fewer letters sent yearly mean decreasing revenue for posts. This trend has had a significant impact on major postal operators around the world, including Britain's Royal Mail, PostNord in the Nordic region, Poste Italiane, and Australia Post, all of which are dealing with the financial strain of declining letter volumes.
  • Maintaining service quality with stricter regulations: As governments impose tighter quality and service standards, postal services must adapt without compromising efficiency or financial stability.
  • High competition in the parcel delivery market: The rise of e-commerce has attracted numerous new players to the parcel delivery market, intensifying competition for traditional postal services.
  • Increasing costs and operational inefficiencies: Adapting to the new parcel-dominated market often means overhauling existing processes and infrastructure, as the parcel delivery process is more complex than letter delivery, involving an investment in larger sorting facilities, advanced sorting technologies, and parcel handling systems.

However, the following opportunities could help overcome these challenges:

  • Leveraging existing infrastructure for parcel delivery: Postal services can repurpose their extensive network of postal offices as crucial hubs in the parcel delivery chain, enhancing their competitive edge.
  • Partnering with other players to strengthen market position: Collaborations with e-commerce giants, logistics companies, or tech startups can open new revenue streams and improve service offerings.
  • Expanding out-of-home (OOH) delivery networks: By establishing more parcel lockers and pick-up and drop-off (PUDO) points, posts can offer more flexibility and convenience to customers, reducing last-mile delivery challenges.

Out-of-home delivery: a strategic solution

OOH delivery refers to a logistics model where parcels are delivered to a location outside of the recipient's home address. This approach diverges from traditional doorstep delivery, offering alternative, secure locations for recipients to pick up their parcels at their convenience. 

The primary forms of OOH delivery include parcel lockers and Pick-Up/Drop-Off (PUDO) points:

  • Parcel lockers are secure, automated lockers in accessible public places, such as shopping centers, transport hubs, and residential complexes. They allow recipients to collect their parcels using a unique code or electronic key, often at any time of the day or night, providing a flexible option for people with busy schedules.
  • PUDO points involve established retail or convenience stores that act as parcel collection and return points. These locations are part of a wider network, offering a human touch to the collection process and often additional services, such as late opening hours, parking, and assistance with heavy or bulky items.

Advantages of OOH delivery for posts 

1. Increased convenience for recipients

OOH delivery offers flexibility for recipients. They can collect their parcels at a time and place that suits them best, without waiting at home for deliveries. Convenience is especially beneficial for people with unpredictable schedules or those who cannot be at home during traditional delivery hours.

2. Reduced delivery costs

OOH delivery eliminates multiple delivery attempts when recipients are not home, saving on fuel and labor, addressing the last-mile delivery challenges at the same time. Parcel lockers and PUDO points consolidate deliveries to a single location, further optimizing route efficiency and reducing the carbon footprint.

3. Improved efficiency and scalability

OOH delivery streamlines the distribution process, making it more efficient. Parcel lockers, for example, can be accessed by delivery personnel 24/7, allowing for off-peak drop-offs and better management of delivery windows. Efficiency improves the experience for the recipient and enhances the capacity of postal services to handle higher volumes of parcels, especially during peak periods like the holiday season.

4. Use of existing infrastructure

Posts already have an extensive network of postal offices and facilities, which can serve as ideal locations for deploying OOH delivery networks. Leveraging this existing infrastructure allows postal services to minimize additional investment costs while expanding their service offerings and start implementing new solutions right away.

5. Competitive advantage for service revival

Offering OOH delivery options can differentiate postal services from competitors in the parcel delivery market. By providing innovative delivery solutions that prioritize customer convenience, postal service providers can enhance their competitive position and attract new business.

Bonus advantage:

The OOH delivery potentially opens up possibilities for postal service providers from different countries to collaborate across borders and become competitive in the e-commerce landscape. For example, if postal operators from two neighbouring countries opened parcel locker networks to each other,
e-commerce businesses could use postal services to ship orders, which would increase the volume of packages and make postal service providers more competitive.

Overcoming challenges in OOH Delivery

The common pain points OOH network managers face require innovative strategies and effective tools. Let's explore these challenges and consider how they can be addressed:

High investment in infrastructure and software

One of the primary challenges is the high cost associated with the infrastructure and software necessary for managing OOH delivery networks. It includes the cost of acquiring, installing, and maintaining physical assets like kiosks, lockers, and digital signage and the software needed for operation, management, and security.

Solution: To mitigate these costs, as mentioned above, network managers can explore partnerships with existing infrastructure owners or invest in modular and scalable solutions that allow for gradual expansion.

Open (carrier-agnostic) networks are a good potential solution. Unlike traditional models, where delivery networks are tied to specific carriers or retailers, an open network allows any carrier to deliver parcels to any locker or delivery point. This flexibility enhances efficiency, reduces delivery times, and minimizes failed attempts.

Difficulty in finding suitable locations

The right location is crucial for the success of an OOH delivery network. Ideal locations are accessible, secure, and situated where they can best serve the target audience. However, identifying these locations can be challenging due to competition, regulatory hurdles, and varying consumer preferences.

Solution: Using data analytics and market research to understand consumer behavior and preferences can help identify strategic locations. Engaging with community planners and real estate experts can also provide insights into emerging areas and potential partnership opportunities.

Inefficient and time-consuming location-scouting processes

Traditional methods of scouting locations can be slow and inefficient, often relying on manual research and negotiations. This can delay network expansion and increase costs.

Solution: Leveraging technology, such as geographic information system (GIS) tools and artificial intelligence (AI), can streamline scouting. These technologies can analyze large datasets to identify potential locations based on predefined criteria, such as foot traffic, demographic profiles, and proximity to additional services, like public transportation hubs, parking facilities, ATMs, restaurants, retail, or any other place that makes locations more accessible, convenient, and attractive to users.

Limited data to optimize network performance

Without adequate data, optimizing the performance of an OOH delivery network can be challenging. Necessary insights include understanding user behaviors, network usage patterns, and operational inefficiencies.

Solution: Implementing comprehensive data collection and analysis tools, like Mily Tech, is key. These tools can track various metrics, including usage rates and operational costs, providing actionable insights for improvement.

Take the next step towards optimizing your delivery operations

Out-of-home delivery is convenient for customers and more affordable for delivery companies. Customers can pick up packages at a time and place that works for them, and companies can make more deliveries with fewer stops.

However, implementing OOH delivery also requires investments in new technologies: for tracking, customer service, and logistics management to handle the increased complexity and volume of parcel deliveries.

For postal operators looking to harness the power of data-driven decision-making and optimize their delivery networks, Mily Tech's platform offers an unparalleled solution.

The tool combines location intelligence with business analytics, specifically tailored to address the unique challenges of the last mile. The platform's OOH delivery analytics solution empowers teams to develop their PUDO and parcel locker networks by enabling rapid location scouting, comprehensive network performance understanding, and strategies to boost parcel volume.

Discover how Mily Tech's platform can transform your network planning and decision-making process

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