The village Post Office is coming under increasing threat in the UK. Post Offices have been closing at an alarming rate for some time - around 250 small, rural Post Offices shut their doors each year, a figure that rose to a record 547 in 2000.
Consignia, the new name for the organisation that runs the Post Office, Royal Mail and Parcelforce Worldwide, is finding it hard to recruit new postmasters. The reason is clear. Not only are people completing fewer transactions in Post Offices, but benefits payments, which are currently paid to millions of claimants each year through local Post Offices, will be paid directly into bank accounts from 2003.
They will lose a huge source of revenue from the government, and a huge number of regular customers will, in effect, have fewer reasons to visit their local Post Office. But Consignia has come up with a strategy for saving its troubled rural Post Office network, a large part of which involves Internet home shopping.
It is planning to build up a package of home shopping fulfilment services that it hopes will either entice new customers or encourage existing ones to continue using its 1,500 Royal Mail and Parcelforce Worldwide delivery centres, as well as its network of 18,000 Post Office branches.
The first of its home shopping services was time-slot deliveries to 9pm, on offer throughout most of the UK via Parcelforce Worldwide, which has been adopted by more than 100 catalogue and Internet retailers.
Last month, it launched its Local Collect service, which offers its network of Post Office branches as alternative delivery addresses. The scheme allows consumers to choose delivery direct to a Post Office branch of their choice when they order from a retailer signed up to the service.
Alternatively, they can opt to deliver to their home but have the package directed to their nearest Post Office if they are not at home when delivery is attempted. Currently, undelivered packages are returned to one of the 1,500 Parcelforce Worldwide or Royal Mail depots, which are often quite a distance away from the consumer and have inconvenient opening hours.
Online retailers pay nothing for Local Collect except a £300 joining fee, which covers the cost of linking their fulfilment systems to the Post Offices' new Horizon IT system.
Consumers can still use the system if the retailer they are purchasing from has not joined the scheme. All they do is tick a box on the advice of delivery card that comes through the letter box when a package cannot be delivered. This will cost 50p, however.
"We are not charging retailers, so there is absolutely no reason for them to charge for this service either. It would be a straight profit take," says David Taylor, director of Consignia's home shopping division.
So far, the service is available to the 100 companies selling goods via Consignia's worldofshopping.com website and a couple of other retailers including Redcats, which runs the Empire and La Redoute mail-order catalogues.
Retailers linking to the Horizon system can take orders and then print off a label from a database of local Post Offices. Thus, they can despatch parcels and packages with the address of the customer and a back-up address of the nearest Post Office if it needs to be re-directed in their absence.
"We can offer the service for free to retailers because every failed delivery costs us. We are also doing it to generate more business for home shopping and Consignia. We want this market to take off," adds Taylor.
A trial of the Local Collect service in the 1,000 Post Offices and 160 delivery centres in the South West was hugely successful, with a greater than 90% user satisfaction rate. Seventy-five percent of those using the service said they ended up making an additional visit to the Post Office just to pick up their delivery.
As well as getting the added 'pass-through' custom for their other products, Post Offices are also paid 30p for each Local Collect parcel they handle. The next couple of months will see the company trialling the use of drop boxes, secure devices that can be used to store home shopping deliveries until the customer can pick them up.
"We haven't finalised the arrangements for trialling these yet," says Taylor. "We need to sort out the standards for accessing them and understand how planning regulations will effect where they are placed."
Consignia will deliver to the drop boxes but consumers will have to rent or buy the drop-boxes from third-party organisations. The final and most ambitious part of Consignia's strategy is the creation of a huge customer preference database. Taylor hopes a database can be built containing the delivery preference of millions of home shopping consumers; for example, whether a consumer wants all deliveries made to a neighbour during working hours, and to their own house on weekends.
Currently on the drawing board, the database will enable retailers to know in advance what delivery instructions to offer, thus speeding up the fulfilment process.
Once the data protection criteria have been met, the customer preference database will be linked up with retailers in spring 2002. Taylor believes these new initiatives will go a long way to cracking some of the traditional problems associated with home delivery.
The same problems that caused the collapse of giant US home shopping start-ups such as Urbanfetch and Webvan have apparently been overcome by UK grocery retailer Tesco. "Tesco's success is very important. The trick is to create new business models that crack the problems of home delivery," says Taylor.
"The Tesco model is driven by store picking and the willingness of people to pay premiums on their goods. Tesco says it charges £5 for deliveries that cost it £8, but they claim they can cover the costs by adding additional margins on their goods," says Taylor.
"[Tesco] stuck at it long enough to make it work, but we only deliver, so we cannot depend on product margins. The idea is to find other models."
Whether or not breakthroughs in home delivery models are made, online shopping will continue to boom. A recent report from Merrill Lynch shows that the value of online shopping in the UK has doubled from just over £3bn in 2000 to more than £6bn in 2001, with the UK accounting for 36% of the European market.
Part of this success, according to the report's authors, can be attributed to Post Office efficiency. "A typical delivery in Italy or the US might take up to two weeks. In the UK, a typical delivery takes two days," says Merrill Lynch's head of European Internet research, Peter Bradshaw. "On a relative basis, the UK's Post Office clocks the opposition."
The Horizon Project
Completed in June 2001, the £1bn Horizon automation project was one of the largest IT projects ever undertaken in Europe. Nearly 18,000 Post Offices have been installed with a touch-screen terminal, barcode reader, keyboard and printer. They are all linked to the main Post Office datacentre via the largest secure non-military ISDN network in Europe or by satellite connection. The system handles up to 3,500 sales, automated payments
or benefits payments transactions per second. ICL, the Post Office's technology supplier for the project, trained more than 63,000 employees at over 12,000 training venues throughout the country.
1. Evening deliveries: Time-slot deliveries up to 9pm
2. Local collect: Pick up your home shopping at the local Post Office
3. Drop-boxes: Home shopping purchases dropped in a secure box outside your home
4. Customer preference database: Automatically tells retailers your delivery instructions