Alibaba’s e-commerce head has a plan to save post offices around the world

Not very 2.0
Not very 2.0
Image: Reuters/Fabrizio Bensch
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They say that what doesn’t kill you makes you stronger. That certainly appears to be the case for government-run postal services around the world.

It’s no secret that the old-school providers of “snail mail” have been under siege in the internet era. The spread of e-mail, online advertising, online bill payment, and other digital communication tools have put a real dent in postal service revenues as people in many parts of the world have gradually stopped writing letters, stopped writing checks, stopped browsing through catalogs, and stopped heeding paper-based direct-mail marketing.

Instead of killing the post office, however, the internet is now offering opportunity. The rise of e-commerce and online shopping–especially cross-border online shopping–has the potential to generate huge new volumes of small parcels that postal services around the world are uniquely positioned to handle and deliver at low cost. Rather than falling into obsolescence, mail carriers stand to prosper if they can adapt quickly to meet the demands of this rapidly growing and evolving market.

The opportunity is clear. According to the World Trade Organization, cross-border online retail sales reached $100 billion in 2013 and will continue to accelerate, driven by the rising ranks of consumers in the developing world, where people are discovering they can buy all manner of merchandise that is unavailable locally from a growing list of web retailers and online marketplaces that ship across borders direct to their doorsteps.

For example, transactions on AliExpress, a multi-language retail marketplace owned by Alibaba Group, are growing rapidly on the strength of sales by Chinese vendors to customers in Russia and Brazil. We are about to see another surge in cross-border online trade as the Chinese government, keen to shift from an export-driven to a consumption-based economy, is championing policies that will increase availability of global products to Chinese consumers.

This trend isn’t confined just to the BRICs. In less-developed economies, e-commerce has the potential to leapfrog the build-out of physical retail infrastructure just as mobile phones superseded the need to string up landlines. Because of its utter lack of conventional shopping options, “Africa’s principal retail experience will be e-commerce,” says Sim Shagaya, CEO of a popular Nigerian online marketplace, at a recent forum on global e-commerce staged by the Universal Postal Union (UPU), the United Nations specialized agency for postal services, in Bern.

Post offices are already benefitting from this trend. Parcels and logistics contributed 17% of global postal service revenue in 2012, compared to just 9% in 2002, as e-commerce generates ever-higher volumes of small parcels flowing through the global system.

Indeed, with their armies of couriers and years of operational experience, postal services in many countries have a clear competitive advantage over private carriers when it comes to moving smaller parcels. For example, to ship a 1-kilo box of toys from China to Brazil costs about RMB 118 (US$19) via China Post, versus more than RMB 210 (US$33.80) via FedEx. In some emerging markets, the post office is the only viable way to send packages directly to consumers. Government carriers also are natural partners for the delivery of goods for micro, small and medium-sized enterprises, businesses that traditionally have relied on low-cost services from the post office.

But to capitalize on their advantages, post offices, hardly paragons of innovation, will need to adapt and cooperate as never before. The rapid growth of small parcel volume in cross-border trade already is testing the capacity of certain routes.

Breaking bottlenecks and knocking down other formidable logistical barriers to global e-commerce will require investment in IT and physical infrastructure; improved partnerships and coordination between post offices, shippers and other stakeholders worldwide; and standardized customs, payment and delivery processes.

Fortunately, a handful of organizations are responding to the challenges. In Europe, some government post offices have been partially privatized to encourage them to become more efficient and competitive. Several postal agencies have created products and services specifically tailored to the needs of e-commerce. For example, Bpost, Belgium’s postal service, is guaranteeing parcel deliveries within specified time frames and is providing consumers with the option of free shipping for returns.

More needs to be done. Customs agencies must retool so they can connect digitally with postal services to speed packages through their systems far more quickly than happens today. International registered-parcel shipping, which is the most popular service among buyers using Alibaba Group marketplaces, needs to be cheaper and upgraded through global IT integration allowing for complete online tracking information. The lack of a universal solution for international returns is hindering e-commerce growth.

Snail mail was never a match for the light speed immediacy of the Internet. Now mail carriers have a second chance to stay relevant by becoming an essential link in the global e-commerce supply chain. As Anne Miroux, director of the division on technology and logistics at the United Nations Conference on Trade and Development, said during the Bern forum: “E-commerce is the business of the future, and you’re either ‘in’ or ‘out. ’ ”

Time to go all-in.