VIEWPOINT

2023

P O S TA L R E TA I L
NET WORKS
Turning a burden into
a competitive advantage
AUTHORSThe digitalization of the economy is profoundlychanging trade. Traditional retailers must transformto survive reduced foot traffic and sales. Postal

Edouard Moulle
Giancarlo Agresti

operators that have not yet outsourced their

Achraf Joumaa

branches face the same problems as retailers,Francois-Joseph
Van Audenhove

amplified by the progressive disappearance of mail,the growth of virtual banking, and the digitalizationof a substantial proportion of counter operations. Adeep transformation is necessary. In this Viewpoint,
we share how retail networks, once transformed,
could represent major assets for postal operators bydifferentiating their value proposition in e-commerce
and taking advantage of the increasing constraints ofurban logistics.

ARTHUR D. LITTLE

VIEWPOINT

RE TAIL’ S PROFOUND
TR ANSFORMATIONREINVENT OR DISAPPE AR

The weight of e-commerce is increasing rapidly

They have expanded their sales channels by

across the globe, covering all types of categories,

combining physical commerce and e-commerceand soon may reach remarkably high levels (seeinto a coherent whole. Now, physical stores

Figure 1). This is dramatically shifting the retailare evolving beyond these diversified sales

sector. Indeed, the penetration rate of e-commercechannels by offering several initiatives aimed at

could rapidly exceed 25%-30% in all regions.

incrementing their purposes or functions. These

Euromonitor cites South Korea as a prime example,

evolutions fall into three notable categories:

Traditional retailers do not have many options.

where the penetration rate in 2021 surpassed 40%.

1. Logistics. Traditional points of sale are no

Challenges to traditional retail come from twolonger solely distribution points for products;

different fronts:

they also function as logistics points for
e-commerce with multiple functions: click

1. Economic models based on high fixedand collect, pick up/drop off (PUDO) locations,distribution costs, including real estateshipping from store, and returns.

and sales staff, with fewer sales in stores.

2. Format. The shift of sales toward online

2. Little opportunity for price increases oftransactions has led to smaller store formats.

goods due to the price transparency that

However, the physical nature and formats

e-commerce has brought.

of stores are evolving into showrooms thatAs a consequence, the average level of retailer

integrate brand corners, offer ephemeral or

margins has fallen in recent years and remains

seasonal sales, etc.

low, leading to both a growing number of
failures/closures of physical stores and a steadily
increasing commercial vacancy rate, especiallyin low GDP growth countries (see Figure 2).

3. Customer experience. These evolutions aim
to take advantage of the physical world tosupport in-store traffic and develop customer

loyalty. The emphasis can be on productFigure 1. Global growth and weight of e-commerce
Figure 1. Global growth and weight of e-commerce

experience (e.g., testing at Boulanger), productcustomization (e.g., Nike), or trainings (e.g.,Western Europe

makeup courses at Sephora), for instance.

North America

Figure2.newEvolutionof commercialva
Thesefeatures are producing
positive results

Middle East & Africa
Latin America

on their own but using them in combination canEastern Europe

create even better results, as there is no singleAustralasia“magic recipe.”

Asia PacificWorld0%

10%
2017

20%

30%

2022

35%

Figure 2. Evolution of commercial vacancy rate
11.7%

12.3%

12.2%

25%

12.0%

10.4%

20%

7.4%

16%
8%
3%
Food

Beauty & personal

Apparelcare
2017

UK

France2015

2022

Source: Arthur D. Little, Euromonitor (top), Statista (bottom)

Source:ArthurNETWORKS
D. Little, Euromonitor (left), Statista (right)
POSTAL RETAIL

Germany 12020

Note: (1) Data for shopping centers in major cities
Source: Arthur D. Little, Institut pour la ville et le commerce2

ARTHUR D. LITTLEVIEWPOINT

E VEN TRUER FOR
P OS TAL NE T WORKS …

Notwithstanding the impact of parcels in theAs a specialized retail network, post offices are

crucial questions about the economic model andeven more exposed to the changing demand

usefulness of these networks.

branches, the overall traffic in post offices isdeclining quickly (see Figure 3). This change raises

for traditional services since (1) demand for

To cope with these trends, some postal operators

mail is rapidly declining and (2) remote banking

have outsourced their retail activities to thirdapplications are eliminating the need for someparties. This move allows them to suppress

branches to fulfill banking services. Also, parthigh fixed costs and make the cost of sales andof the non-postal diversification services that

consumer contact points more variable. Postal

some postal operators have developed, such asoperators mainly engaged in logistics activities,

over-the-counter bill payment and government

including mail, parcels, express, and warehousing,or administrative services, are being replaced byhave made the most use of this type of outsourcing.

digital services as well.

Outsourcing is ongoing, recently (see Table 1).

The main exception to the substitution trend isre 3. Evolutionthe
ofincrease
postofficetraffic
in selectcountries
in parcels
stemmingfrom the growth
operators that have maintained their own retail

In parallel with the outsourcing movement, postalof e-commerce. Both purchases and returns

network have sought to diversify their activities.

create an additional workload for post offices,

There has been a great deal of trial and error.

which can generate revenue and provide lower

Three new services, unrelated to banking, havecosts than home delivery.

successfully emerged:
1. Telecommunications, mainly in the form ofFigure 3. Evolution of post office traffic in select countries

mobile virtual network operators (MVNOs).
Developments have shown that a “call for-33%

-8%
64%

59%

12-17%
3partners” approach has been particularly-46%

18-34%
62

effective in this kind of business.

14

2. Activities on behalf of governments or7

utilities to facilitate local services (e.g.,

4bill payment, identity or official document
delivery, document certification, medicalUSItaly
Percentage of people
18 years old and up
who visited postal
office at least once

Switzerland

FranceUK

file management).

Number of annual visits per inhabitant
2016

3. New services, notably for the public sector,

2021

such as organizing theoretical driving license
Figure 4. Outsourcing rate of postal retail networks,
2015 vs.
exams in France or providing Internet access
2021
in African or Middle Eastern countries.

Source: Arthur D. Little

Table 1. Outsourcing rate, 2015 vs. 2021
COUNTRIES

thur D. Little

OUTSOURCINGRATE
2015
2021

COUNTRIESOUTSOURCINGRATE
2015
2021

COUNTRIESOUTSOURCING
RATE
2015
2021

Italy

0%0%

Portugal

74%

76%

Norway

97%

99%

US**

13%

10%

Austria

72%

78%

Denmark

99%

100%

Japan**

18%

15%

Morocco*35%

78%

Germany

100%

100%

Saudi Arabia

10%

15%

Canada83%

83%

Netherlands

100%

100%

China (People's Rep.)

28%

21%

Australia

84%

84%

UK

100%

100%

Türkiye**

24%

22%

Sweden86%

91%

Belgium

51%

51%

Indonesia

89%

95%

Switzerland

33%

61%

Ireland

96%

96%

France54%

63%

Finland90%

99%

Decreased
OUTSOUCING RATE

Remained stable
Increased*Number of outlets increased by 265% during period**Number of outlets decreased during period while insourced outlets decreased less
Source: Arthur D. Little, Universal Postal Union (UPU)

POSTAL RETAIL NETWORKS

3

ARTHUR D. LITTLE

VIEWPOINT

P OS T OFFICES AT
THE CROS SROADS
Unfortunately, multiple developments have notmade a sufficient enough contribution to address
the decline in traffic and network revenues.
Postal operators therefore face a dilemma: makethe most of their consumer network or drasticallyP O S TA L O P E R AT O R SSHOULD CONSIDERLE VER AGING THEIRR E TA I L N E T W O R K S
TO IMPROVE THEIRVA L U E P R O P O S I T I O Nlower their costs by reducing their footprint and/or outsourcing their networks. But if they aim toenhance their networks, they must implement
new recipes.

OP TIMIZING NE T WORKS
THROUGH OUT SOURCING
Continuing to execute and intensify postal

There are opportunities today to diversify theuse of these networks (or parts of the networks),
particularly in the core business of postal
services, by better using available resources andnetworks in a universal way and developing newvalue propositions that incorporate proximity as
an advantage.

outlet outsourcing is one option. This wasThree courses of action appear particularly

widely implemented by postal operators during

relevant:

the 2000s, notably by those whose business

1. Develop logistics operations in branches

portfolio was mainly logistics. Note, however,that managing an outsourced network is costly(especially due to instability of business and ahigh number of failures). It is also interesting
to observe the current trend of post offices
increasing their points of contact, even whenoutsourced, driven by the need to increase(like mail and parcel delivery in close vicinity
of offices), leveraging periods of low counter
activity.
2. Develop new service offerings in logistics
that leverage proximity and thus contributeto improved value propositions.

territorial-presence density (particularly for B2C,

3. Capture value from higher volumes ofout-of-home parcel delivery to PUDOs or lockers).

business — by selectively offering retail
network access to third-party logistics

DIFFERENTIATING AT
THE FIRS T & L AS T MILE
However, postal operators should also consider
leveraging their retail networks to improvetheir value proposition in e-commerce (e.g., forparcel delivery) and create a decisive advantage.
In fact, the role of post offices can evolve andenrich itself via new activities that leverage theirfootprint and proximity in logistics, especially inurban areas. In this context, proximity refers to
the density of these postal networks; generally,providers; this can happen without threatening
the competitiveness of internal solutions.
These developments and changes to the corebusiness do not exclude other relevant ways ofmaximizing commercial space. For example, postoffices have already identified opportunities
to share office space, host new activities (e.g.,brand corners, ephemeral stores), or develop newcommercial activities, mainly through calls forpartners (which several post offices have alreadydone in the MVNO field).

due to Universal Service Obligations, 90%-95% of
the total population have access to a post officewithin 10 minutes of their residence.

POSTAL RETAIL NETWORKS

4

ARTHUR D. LITTLE

VIEWPOINTE X TENDING THE
OPER ATIONAL PERIME TER
Integrating more postal operations within post
offices is both feasible and relevant:- The pace of the workload at the counter during
the day leads to underuse and allots moretime to staff for other activities during lulls(which may occur twice a day and range fromtwo to three hours).

- Preparing delivery tours is usually automatedand performed remotely, making it possible
to pre-organize mail bags or parcels byorder of delivery. It is therefore feasible todelegate mail and parcel-delivery operations
to counter staff for nearby areas. Delegating

Extending the operational perimeter of postoffices also makes it possible to improve service
through proximity. The post office can play therole of micro-hub by providing intermediate
product storage for deliveries, which can optimize
convenience for recipients and contribute tocustomer satisfaction. Services could include:- On-demand delivery of parcels or registeredletters (similar to the services French start- up
Tousfacteurs offers from Mondial Relay PUDOs).

- Home delivery or parcel collection during

specific time slots, with micro-tours operated

is opportune, as it uses spare time while

by post office staff during low-traffic periods

improving the economics of distribution;or subcontracted to local courier companies.

unproductive route time between thedistribution center and delivery locations isgreatly reduced due to better proximity.

-IMPROVING VALUE
PROP OSITION
THROUGH PROXIMIT Y- Implementation of a drive function (pedestrianor car) associated with PUDOs to improve

service and differentiate the out-of-home

Mail and parcel deliveries can be made on footdelivery offer from competitors thanks toor by cargo bike within a designated radius

reduced waiting times. Such service is alreadyaround the post office, which has favorable

provided by major US retailers as “curbsideeffects on pollution and congestion in cities.

pickup” for their online sales. The customers- Mobilizing more post office staff during

periods of high activity, particularly during
the end-of-year peak period, makes it also
possible to mitigate peak loads.

Multiple activities can be assigned to the retailuse a geolocation app when picking up theirpurchased goods, enabling the store to prepare
the product in advance and deliver it (to them inperson or to their car trunk) upon arrival.
The location of a post office relative to its delivery

network, including:areas also makes it possible for same-day delivery- Servicing as PUDOs (with or without lockers),

services when orders are shipped from stores orfrom regional warehouses.

- Using offices as departure points for postal

Services can also cover diversification into newprovided there are sufficient opening hours.

workers delivering presorted mail and parcels
and using counter staff to deliver these items
during periods of low traffic.

- Subcontracting parcel distribution to thepost offices during peak periods.

logistics market segments, such as reverse
logistics for products to recycle, reuse, or repair, bymaking this activity convenient for individuals andaffordable for recycling companies. This type ofservice also can be applied to any type of activity
that requires precise delivery and working withintight time slots (e.g., meal delivery or food producte-commerce). Offering refrigerated pickup points
for orders or home deliveries from these proximity
points replicates what Italian postal operator Poste
Italiane and its subsidiary MLK Deliveries havedeveloped with their partner Mazzocco.

POSTAL RETAIL NETWORKS

5

ARTHUR D. LITTLE

VIEWPOINT

MAKE SELECTIVE OFFERINGSTO COMPETITORS

Operations carried out on behalf of competitors

The activities performed by postal retail networks

occur in the post office, but the postal operator

traditionally are reserved for their own postal

can also offer the service to concentrating andoperations — to function as a point of contact formaking available flows in regional logistics

their customers and their various postal businessplatforms or injecting them into the competitors’unit needs, including mail, banking, and insurance

agencies, which brings additional economies ofservices. However, these services could be offeredscale.

to competitors, provided the competitors do
not gain a decisive advantage or that services
are limited to operators positioned on flows of
a different nature (e.g., courier companies).
This kind of approach is already implemented
by Post Office in the UK (note that Post Office isindependent of Royal Mail). Post Office has been
acting as PUDO for DPD out-of-home delivery
parcels since 2021, which enables DPD parcel
recipients to pick up their packages from Post
Office branches (and the service is expected toexpand in late 2023 to include drop-off options).
Parcel-delivery service Evri also partnered withPost Office at the end of 2022 to do a trial ofin-branch sales and parcel PUDOs as it looks toprovide a safe, stable and convenient location
for customers to send, collect, and return parcels.

need not be limited to operations done in the post
offices. For example, e-commerce returns canTo sum up, the following operations/services tocompetitors may be considered partially or in
totality:- Collection points for failed shipments (thosethat were not delivered to the appropriatehome), including the possibility of redelivery
at the recipient’s request- Standard PUDOs for out-of-home delivery- Collection and concentration of return flows- Micro-hubs with delivery organized on demandor during a time slot chosen by the recipient- B2B relay points for mobile professionals(e.g., for maintenance activities, point-of-saleadvertising, home services)

These logistic diversifications do not apply

Postal retail networks are interested in leveraging

identically to all post offices and can betheir proximity, better amortizing their fixedcomplemented by additional country-specificcosts, and capturing a share of the value onservices. They are highly dependent on existing

parcels that are not currently handled by theinfrastructures and may lead postal operators topostal operator. For consumers, this means moreconsider different network formats for different

convenience in receiving their parcels. For local

zones or within zones. In all cases, logistic

authorities, this could result in a significant

diversification and careful change management

reduction in pollution from emissions and urban

must be part of all transformation projects. Whilecongestion. For competitors, this could lead tothe actions are of a high-stakes nature, they are

significant savings for the collection of theirvital for those who have maintained large retailparcels, or the redistribution of failed deliveries.

networks and plan to use them as key assets forThus, there are multiple benefits to considering

future development.

collaborations between competitors.

POSTAL RETAIL NETWORKS

6

ARTHUR D. LITTLE

VIEWPOINT

CONCLUSIONFROM COST HANDICAPSTO COMPETITIVEA D VA N TA G E SI M P R O V I N G P R O F I TA B I L I T YM AY R E Q U I R E M O R E E M P H A S I SON OUTSOURCINGIn a previous Viewpoint (see “Postal Operators: The Need forTransformation and Corresponding Strategic Moves”), we discussed
challenges faced by postal operators from the decline in their
historical activities (particularly mail) and shared three strategic
priorities:1	Evolve the business model to defend and maintain profitability.
2Capture growth from e-commerce and increase profits bybuilding upon mail and retail assets.

3

Diversify the portfolio by leveraging mail and retail assets
and entering attractive markets, especially in logistics.

These priorities naturally apply to the postal operators’ retailstrategy. Improving profitability may require more emphasis
on outsourcing. But postal branches also can be leveraged todifferentiate their value proposition in both the last mile ofe-commerce and in logistics. There’s an inherent need for a goodbalance between outsourcing and insourcing new business; what
was once considered a burden is now likely to create a decisivecompetitive advantage for postal operators, especially in a context
where urban logistics constraints are rising.

POSTAL RETAIL NETWORKS

7

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