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“What do you see as the main
opportunities for the Post
Office in the future?”
Presentation by Nick Read
June 11, 2019
Six key trends are creating significant disruption and intense pressure
within the Post Office operating environment
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Aging.customer
demographic
Growth'in ecommerce
shopping habits and move'to online
Intense Pressure drives a need to focus on:
>
Innovative and differentiated customer
propositions
Efficient operating models (omni-channel)
Lean operating costs
Fit for purpose organisational structures
Decline in core Low cost Gig economy
Post Office activities operating models
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Clear progress to date ...but headwinds....and more to do
1. Post Office has successfully transitioned to a profit making business, based on its Franchise model
2. Network Transformation (including Grown Office) has both improved the customer experience
and stabilised the estate
3. Innovation, NPD and acquisition has driven new revenue streams which will secure the three year
horizon eg banking framework
BUT...
Core revenue and footfall generators are in decline eg POCA and letter mail
Relationship with Franchisees is strained
Cost to serve is uncompetitive and not digitised
Relevance to a younger demographic remains unclear
VVvVVv Vv
Dependency on Royal Mail and bank of Ireland
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So what? Where do the opportunities lie?
Strengths
> Trusted and well recognised brand
Weaknesses
>
Declining footfall, transactions within the Network
> Broad geographical reach/unique network > Lack of consumer brand awareness — products and services
> Not for mail and parcels > No clear customer segmentation and targeting — SME, youth,
> Growing F5 business home, aged
> Market leader in foreign exchange > Limited transformation skills and capabilities — particularly
digital and analytics
> Network stabilisation and dedicated workforce, c \ b d head high. IT 5 lui
entrepreneurial Franchisees > entral cost ase and overheads too high. IT estate (including
Horizon) not fit for purpose
Opportunities Threats
> Accelerate Network Transformation > Royal Mail (MDA) relationship
> Exploit Digital Identity Verification and growth in brand > Securing the next stage of the everyday banking framework
> Extend FS business — framework and open banking > On-going decline in fast services - Government front office?
> Introduce ‘challenger’ brands alongside Telecoms, such as > Litigation and Franchisee relationship
energy. > The leading position in mails
> Push harder on Insurance > Viability of the rural network
> Leverage the growth in convenience retail and ecommerce
@
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Addressing the threats to ensure they are nullified will be critical
1. Royal Mail contact agreement ends in 2022. Securing a favourable renewal to this £300m/year
contract is essential. Growth in parcels presents a huge opportunity to lock in value and address
the threat of disintermediation
2. Securing the Everyday banking framework for deposits/withdrawals and potentially
extending/enhancing services to include DD/Standing Orders/Printing statements ..and other
products
3. Government services have been in terminal decline since 2004/5. The opportunity remains to
drive national and local Government services — BEIS, DWP, DfT, Defra, Home Office — back into the
Post Office
4. Litigation and the Franchise remuneration model has the potential to embarrass the Post Office.
Delivering a fair, equitable (and affordable) solution is critical. Central to this is reducing the
operating costs for franchisees through digitising and automating processes
5. Defending and maintain the Post Office leading position in mails through innovation — products
such as ‘drop and go’ and ‘drop off’ and with greater convenience and efficiency
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A range of opportunities exist...
matching capability to execute, with a clear strategy, will determine success
1. Accelerate Network Transformation. Digitise and automate to reduce the cost structure, improve
customer service and cover the cost to serve for franchisees
> Focus on core processes — onboarding, agent servicing, cash management, call centre service,
as well as HR, training and finance
> Radically automate and digitise customer journeys, improve ecommerce convenience and POS
system (Horizon)
> Introduce Al to drive cash predictive modelling, vehicle routing, labour scheduling
> Step up strategies to drive efficiency for Franchisees and profitability for local model (eg lover
cost self service kiosks)
2. Further develop the current position of most popular provider of Identity verification. Internet
security issues and brand will only increase
> large addressable market — KYC, benefits claims, bank account opening, banking fraud, website
verification
> Potential to develop a digital identity platform and produce a digital certificate for universal
use
> Look to potential partners — Government departments, banks... gov.uk.verify
Ce)
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A range of opportunities exist...
matching capability to execute, with a clear strategy, will determine success
3. Drive and build out further the Financial services business
> Extend the everyday banking — provide more services too
> Exploit Open Banking by building partnerships with Fintech operators — Revolent, Monzo,
Starling
> Explore customer segmentation strategy through FS — eg youth, children’s accounts, Go Henry
4. Leverage the success of the Telecom business by harnessing the strong challenger brand potential
of customer champion, trusted brand, simple propositions but disruptive
> move into adjacencies — Utilities, Energy
> develop white label partnerships with low cost structures and cash generative potential
> extend from purely residential into SME
5. Drive the Insurance business larger and use it to test market new propositions
> Aging customer demographic needing heath insurance
> Product bundling — Passport ‘check and send’, Travel Insurance and Foreign exchange
> Extend into the home market — Hire, Alexa, Security, home moving
Ce)
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Mobilise the team around a simple version, with a clear purpose
and timeframe
Particular activities which should be prioritised ahead of others:
1. Addressing and resolving the Franchisee disputes
2. Accelerating the simplification and digitisation of the cost structure
3. Securing the Royal Mail contract and driving the parcel opportunity
4. Focusing on certain growth opportunities
> Growing FS through digitally enabled customer propositions
> Become the leader in Identity services
> Insurance
> Telecoms and adjacent Challenger brand opportunities
This will ensure the strong financial improvements, currently even, are maintained
Declining revenue streams are replaced with new growth opportunities
The future proofing of the Network is sustained