| The European Postal Market |
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The demise of postal monopolies across the European Union became a reality this week with the approval of a directive enforcing liberalisation. In effect all key European economies have 3 years to open up their postal market to meet the Jan 1st 2011 deadline. Countries new to the EU or those with wide topography have been granted a 2 year extension until 2013.
The European postal market is big business, posting 135 billion items per year and with an estimated value of £65bn. The industry employs over 5 million people and accounts for just over 1% of Europe’s GDP, so inevitably there has been much government resistance wishing to protect their national interests. Many countries have been slow to open their postal market to competition. Only Sweden, Britain and Finland have scrapped all legal monopolies. Germany has also liberalized its postal deliveries, but the government has introduced fairly high minimum wages - between 8 and 9.80 Euros - for letter carriers, which critics say could deter potential competition to former monopoly Deutsche Post. The directive ensures that a universal public service is provided by the incumbent in every European country. This guarantees each country gets at least one delivery and collection a day, five days a week and can be subsidized by governments if it loses money. The consequences are far reaching, since it marks the starting pistol for foreign operators to seriously consider implementing an end-to-end service to rival the national network. For instance, the UK has been a forerunner of de-regulation with 12% of mail collected by rival operators, yet over 99% is still delivered by Royal Mail. The EU directive makes it financially feasible for the big 3 operators – DHL, TNT & UPS to consider an alternative delivery network and provide true competition. This is clearly the strategic aim behind the legislation, which is bidding to reform the postal market through competition. The issue of outside competition for domestic mail-carriers is a heated one in many EU countries. Ninety per cent of European mail is sent by businesses, and this is where most new entrants are likely to target new, lower-priced services - ignoring unprofitable consumer services in remote or rural areas. Such a move will mean the national operator will have to react in order to remain competitive against European rivals.Closer to home, the ramifications for Royal Mail are double-edged. The UK has one of the biggest postal markets in Europe which makes it an attractive target to predatory operators looking to build a delivery network. This week, TNT announced plans to pilot a hand delivery service in Liverpool. The pilot scheme represents a serious attempt to launch an independent delivery network. The service will initially concentrate on commercial addresses but will grow to encompass general coverage. The service will initially only be offered to TNT’s existing blue-chip clients who’s mailing are so large they offer the perfect test bed. After successful implementation, TNT intend to roll out the service into other cities including Bristol, Manchester, Birmingham and then London. The aim being that by this time next year TNT will be in a position to roll this service out to new customers and steal a lead on the competition to gain serious market share. The news for Royal Mail is not all bad. They are one of the first and by far the biggest operator to go through the de-regulation process. Although this has been a difficult transition, it has forced them to cut back in an efficiency drive and funds are beginning to be used to finance modern kit. Importantly, Royal Mail are well placed to pounce into Europe and establish themselves as a force to be reckoned with as a European postal operator. They can count on their existing traffic to spearhead initiatives into European territories and if they can manage to be the first to market. Despite Royal Mail being button lipped, speculation has been rife about their strategy for Europe. But until they lay claim to their European intentions, we must assume they are satisfied to confine themselves to the UK. |
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