Flexibility wanted for NZ's postal delivery

Negotiations between the Government and New Zealand Post on the future shape of postal deliveries are advancing, said NZ Post's chief executive Brian Roche.

The postal service provider is seeking changes to its deed of understanding with the Government which will allow it to reduce the frequency of mail deliveries and reconfigure other services.

Speaking to Sunday Star-Times following the release of NZ Post's 2012 annual report, Roche said NZ Post needs the flexibility to make it financially sustainable in the face of continued rapid falls in the volume of mail being sent.

The deed was put in place in 1998, before the mass-uptake of the internet and a decline in mail volumes. Roche said negotiations with the Government could be completed in the first quarter of next year, with officials sympathetic to the postal carrier's calls for "flexibility".

Roche won't reveal exactly what "flexibility" NZ Post is seeking, but he indicated it would see an end to rigid performance levels - such as the requirement for five or six-day mail deliveries in most of the country - that the 1998 deed mandates.

"There's been comment about three days a week. These are matters the Government is looking at, at the moment," Roche said, but even were it granted the flexibility to respond to the likely continued falls in mail volumes, many Kiwis in dense urban centres would see little change in delivery patterns.

It is people in more sparsely populated areas who will initially be likely to see reduced deliveries.

"We are seeking for flexibility around our delivery days and flexibility about how we deliver our services in our outlets," Roche said.

"The headline is the flexibility to move to below five days a week."

Such moves are happening all across the world, Roche said, although New Zealand is in a basket of countries with particularly small populations and large land masses.

Roche said in the last financial year to the end of June, the volume of mail dropped by nearly 7 per cent, the biggest drop recorded and a decline the rollout of ultra-fast broadband will only increase.

The decline, said Roche, was particularly marked considering it happened in a period in which there was a general election, which usually helps underpin mail volumes.

Over the past decade, NZ Post's total mail volumes have fallen from 1.1 billion items in 2002, to 834 million items in the 2012 financial year.

In the year ended June 30, 2012 the NZ Post Group reported it had returned to profit, recording a surplus of $169.7 million compared to a loss last year of $35.6m. The result was driven by strong profitability at subsidiary Kiwibank and cost savings in the core postal business.

Roche says he thinks of NZ Post as a portfolio of companies including the growth business of Kiwibank, the mature and sustainable courier business, and the declining postal business.

"I think this is a very sad situation, but we can't wish it away," Roche said.

In fact, if the numbers are not persuasive enough, NZ Post research has shown physical post is of declining importance to New Zealanders, particularly younger ones. The research shows that three out of four people say they post fewer letters, two out of three now pay all their bills electronically, and just 1 per cent of people under the age of 45 say physical mail is an important medium of communication.

"We think there is a future for letters, but it is substantially less than 10 years ago," Roche said. "We don't want to do anything to accelerate that decline."

Despite that statement, NZ Post is gearing up for the launch of an online bill interchange called YouPost, which would, if it takes off, result in fewer physical letters.

The idea is that big billers, such as utilities, will be able to send electronic bills to customers signed up as members of YouPost. The service will be a little like an internet banking portal bringing together all of a person's bills and will be free to the public and paid for by the billers.

A number of big NZ Post customers, attracted by potential cost savings for their businesses, have signed letters of intent to use the service, says Roche.

Other changes will help make the postal business sustainable. A pilot scheme in Tauranga showed that courier drivers could deliver some mail items, and posties some courier items, which offered efficiency gains likely to be rolled out around the country.

Another pilot in Marlborough is testing a 16 price-point, single bag/box parcel pricing system, which in six months is likely to be rolled out around the country replacing the current 120-price point system. It'll be an off-the-shelf system that will reduce staffing needs in Post Shops and reduce queuing.

Technology to deliver stamps and core services like bill-pay have also been trialled in a concept branch on Wellington's Kapiti Coast.

The reason is simple, said Roche: "The average transaction value is around the $2.50 mark. That's quite a challenge. It's probably half a hamburger."

Such moves will ultimately mean job losses, said Roche, but not mass redundancies.

Sunday Star Times