Mailing and payments revenues of Liechtensteinische Post AG are declining rapidly. A boom in parcel services only partly offsets that. Postal services need to engage in digital transformation.

Digitalization disrupts a vast amount of industries, some more than others. One that undoubtedly can’t escape digital transformation is the postal service. Emails have largely replaced the physical mail; digital payment apps and videoident make postal offices obsolete. The pandemic has greatly accelerated a trend that has already been ongoing.

Revenues decline

Liechtenstein’s postal service Liechtensteinische Post AG suffered a 9 percent decline in mailing service revenues in 2020. Payment services have deteriorated even more. Liechtenstein has completed 13 percent fewer payment transactions in postal branches compared with 2019.

“Unfortunately, that is not a temporary effect but results in permanently lower revenues with a long-lasting effect for our annual earnings, for the current fiscal year, but also the near-term future,” says Roland Seger, CEO at Liechtensteinische Post AG. He doesn’t believe digitalization, which weighs on the firm’s postal and payments services, will revert after the COVID-19-era. It’s a permanent structural change that will heavily affect postal services everywhere.

Parcel services

Despite the substantial revenue losses, there is one cause for optimism: Since the onset of the pandemic, an e-commerce boom has resulted in more demand for parcel services. Volumes have increased by 25 percent as lockdowns have forced people to order more online. The revenues from this business have partly offset the declines in other areas, but only partly. Leichtensteinische Post AG has posted annual earnings of CHF 2,4 million.

“The positive development [regarding parcel service revenues] has to be seen critically. We can’t expect the same growth rates in the future, and it is also not enough to compensate for the losses in the mailing services,” explains Seger. Parcel services margins are lower, as costs of delivery and transport are higher.

The way forward

The Liechtensteinische Post is a good example of digital disruption. It’s grow or go; the “old” world has to adjust. But it’s not like postal services can’t digitally transform. The Polish Post has an app that allows youngsters to send a digital photo to their grandmothers who have no mobile phone or internet. The app converts a digital photo into a printed photo and delivers it to Granny the way she is used to.

The Swiss Post has its own innovation arm that tests new technologies with customers. One example is a delivery robot designed for short distances within local neighborhoods. It somewhat looks like a small dog, and it’s very useful for things that need to be delivered quickly, such as pizza or flowers. The Swiss Post is also working on autonomous shuttles, drone delivery, e-voting, and e-health and smart letterboxes.

So there is a way forward, also for postal services. The question every company has to ask themselves is what is at the core of their business model? In the case of postal services, it’s getting things from A to B. There are many ways to do that, even more so in a digital world.

Image: ©Shutterstock