McKinsey report reveals postal companies must adapt to parcel boom

McKinsey & Company recently released a report titled, ‘Preparing post for further parcel opportunities.' According to the report, the postal industry is undergoing a transformation, driven by declining mail volumes and surging parcel demand. To remain competitive, postal companies must adapt and innovate, diversifying services to focus on e-commerce logistics, fulfilment, and last-mile delivery. Investing in digitalisation, automating processes, and enhancing customer experience are crucial.

Optimising networks through consolidation and partnerships, developing value-added services like same-day delivery and warehousing, and improving efficiency through data analytics, AI (Artificial Intelligence), and IoT (Internet of Things) are also essential. Innovative strategies, such as parcel lockers, electric vehicles, dynamic pricing, and collaborations with e-commerce platforms, will help postal companies enhance customer satisfaction, drive revenue growth, improve profitability, and secure their role in the evolving logistics landscape. By embracing change and innovation, postal companies can thrive in the parcel-dominated market.

Source: McKinsey & Company

Here are some key takeaways from the report:

• Embracing parcel-first operations: Embracing parcel-first operations requires postal companies to pivot from mail-led to parcel-led thinking. This involves optimising networks for faster delivery, streamlining processes for efficiency, and investing in automation technologies such as sorting, tracking, and delivery systems. Enhancing last-mile delivery capabilities and upgrading IT infrastructure for real-time tracking and visibility are also crucial. By adapting their operating models, postal companies can effectively manage rising parcel volumes and thrive in the parcel-dominated market.
• Digital transformation: Digital transformation is vital for postal companies to stay competitive. Leveraging advanced analytics, artificial intelligence, and cloud infrastructure enhances operational efficiency, customer experience, and informed decision-making. Modernising IT architecture enables real-time tracking, automated sorting, and seamless communication. Reinforcing cybersecurity protects sensitive data and prevents disruptions. By embracing digital innovation, postal companies can streamline processes, reduce costs, and deliver personalised services, ultimately driving growth and customer satisfaction in the parcel-dominated market.
• Cross-border e-commerce opportunities: Cross-border e-commerce sales through platforms like AliExpress, Amazon, Shein, and Temu are surging, growing 1.5 times faster than domestic orders. China dominates, accounting for 40% of cross-border volumes. However, supply chain modes are shifting away from the Universal Postal Union (UPU), with commercial parcel and forward-located inventory gaining traction. By 2028, these modes are expected to comprise 45% and 40% of cross-border volume, respectively. Platforms' preference for non-UPU products presents opportunities for postal companies to develop competitive solutions and capture a share of this growing market.
• Customer-centricity: Customer-centricity is paramount for postal companies to thrive. Meeting evolving demands requires providing reliability, convenience, and transparency. Key strategies include offering real-time tracking, flexible delivery options (in-store pickup, locker delivery, scheduled delivery), and seamless communication (SMS, email, mobile app updates). Additionally, postal companies should prioritise personalised services, easy returns, and responsive customer support. By putting customers first, postal companies can build trust, drive loyalty, and differentiate themselves in a competitive market.
• Sustainable Universal Service Obligations (USO): To ensure Sustainable Universal Service Obligations (USO), postal companies must collaborate with stakeholders to redefine requirements, pricing, and funding models. With declining mail volumes, adaptive strategies are crucial. This includes reassessing delivery frequencies, service standards, and territorial coverage. Innovative funding solutions, such as public-private partnerships or targeted subsidies, can maintain affordability and accessibility. By rebalancing USO, postal companies can preserve essential public services while securing profitability and long-term viability.

To succeed in the evolving logistics landscape, postal companies should focus on several strategic initiatives. These include reducing costs through efficiency measures and automation, building flexible workforces to adapt to parcel volume fluctuations, and expanding out-of-home delivery networks for increased convenience.

Additionally, developing capabilities for high-growth segments such as consumer-to-business-to-consumer (C2B2C) e-commerce will enable postal companies to tap into emerging opportunities. Forming strategic partnerships with e-commerce players and logistics providers will also be crucial, allowing for collaborative growth, enhanced services, and mutual benefits. By implementing these measures, postal companies can position themselves for long-term success and profitability in the parcel-dominated market.