Digital age, economic woes: can the post office survive? (Feature)

By Shabtai Gold Apr 4, 2009, 3:08 GMT

Bern, Switzerland - E-mail, internet bill paying and other electric substitutes had already been hitting the world's postal services hard when the global economic crisis struck, leading individuals and companies to cut back anywhere they could including in the mail.

'Some of our largest mailers are in financial services, catalogue sales, manufacturers,' said Lea Emerson, the head of the international division at the United States Postal Service (USPS). 'Those are some of the ones hardest hit by crisis, and they are mailing much less.'

Data from the US showed that starting in 2002 the classic letter began its decline, as people began to really migrate to the web, even for holiday cards and messages to family. In 2007, the volume of commercial mail also started to drop.

Since the global economic downturn went into full affect last year, airlines have been reporting drops in cargo demand, as fewer goods were being shipped around the world. Parcels, a central part of the postal services' core business, are seeing similar hits.

One solution to stay relevant, said chief executive officer of Poste Italiane, Massimo Sarmi, was for postal services to build on the trust people have in them and embrace the digital age.

'My vision for the future is to be the third party to trust on the internet,' Sarmi told the Germany Press Agency dpa on the sidelines of the Universal Postal Union's annual meeting in Bern.

The post office could guarantee delivery of e-mails, protect and secure communication and verify that the sender and receiver are indeed who they claim to be. All this would allow business to take full advantage of the internet and give the post office a place in the new world.

The USPS has also gone online, allowing customers to 'click and ship,' meaning they could print their own barcode label, order a package pickup from home and never have to set foot inside the post office.

But the Italians, like the French, the Swiss and others, have a major advantage over the Americans. Their postal services have large financial wings - banks - that are doing well in the crisis.

Many of these banks have government backing, making people feel more secure placing their money at the post office rather than in a commercial bank, much like the mentality that prevailed during the Great Depression.

Switzerland's Post Finance has been raking in billions from customers who fled the troubled giant UBS.

'Before the crisis some experts said to specialize, but I think a diversified portfolio is excellent in times of crisis,' Jean Paul Bailly of La Poste in France. 'If mail is facing difficulties in terms of volume, we have other areas holding up well.'

His financial wing, while conservative, can boast that it was not exposed to a single toxic asset and did not have make any writedowns as the economy fell off a cliff, to quote Warren Buffett.

The added advantage of the financial services meant the post office could be the fully integrated service people might look for, one that can handle their payments, security and delivery.

However, in spite of the slowdown and the precipitous decline in global trade, postal operators still see the package as a source of revenue, particularly thanks to e-commerce, which in some parts of the world is pulling through even with the crisis biting at its heels.

As people get used to buying and selling on the Web, they are discovering deals abroad and taking advantage of exchange rates. Until the transporter from Star Trek becomes and reality, and Scotty can beam books from the shop to the customer, there will be a need for a delivery person to bring the package to the front door.

'Commerce will continue to exist,' Nicholas Staheyeff, the chief financial officer of eBay said. Postal services, or their private sector competitors, were 'naturally placed' to benefit from this, he added, refusing to eulogize the post office.

Another source of hope was the developing world, parts of which are seeing the volume of mail continue to increase and have yet to fully get on board with e-commerce. One they do, the industry might see another boom.

The crisis and the digital age, postal operators from around the world said at the annual conference, would require them to reinvent themselves. Most believed that if they did it right, their industry would thrive for decades to come. How many jobs in the postal sector might be lost and what services will get cut, is another question.