Posta’s last push to win in the age of e-commerce

By Steve UMIDHA

With the rise of new competitors, new technologies, and the inexorable trend toward e-commerce, postal networks across the globe continue to face a turning point.

It’s now useful to look at the state of play, for the broader postal and parcel market and for incumbent companies.

Parcel logistics—from pickup to delivery—are steadily becoming the most crucial enabler of e-commerce growth, according to global figures, given that an estimated 70 to 80 percent of all e-commerce purchases are delivered via networks rather than picked up in-store.

Mail revenue share for instance still stands at around 40 percent globally today but is swiftly declining, as indicated by a shift in volumes. 

The global volume ratio of letters to parcels has declined from 13:1 in 2005 to 4:1 in 2015 and is expected to reach 1:1 parity by 2025 – this is according to statistics by McKinsey & Company – a global management consulting firm.

Global trends also suggest that successful postal incumbents have raised productivity by about 1 to 2 percent annually over the last decade since the emergence of the e-commerce wave.

This level of continuous improvement, however, is becoming ever harder to maintain, but at the same time, ever more mission-critical in view of current market dynamics.

It is against this backdrop that the Postal Corporation of Kenya (PCK) continues to bet big on innovation to re-engineer its operations through the rapid adoption of technology by creating semi-autonomous units in a bid to remain competitive and shore up the corporation’s fortunes.

It’s kind of a modern-day cautionary tale, judging by the global trends.

As companies become more established, they naturally start allocating their resources based on the needs of their most profitable customers, and on building reliable features that can quickly return their investments and increase profits.

Not only do smaller customers get overlooked in the process, but when new technologies or opportunities emerge, those customers tend to avoid engaging with them until there’s a carefully studied market fit or tangible return on investments (ROI).

Ideally, that opens the space for newer, faster, agile startups to serve those neglected customers, gain traction, and challenge the bigger businesses.

And it’s a sound strategy, according to the outgoing Postmaster General Dan Kagwe whose term comes to a close in March 2023.

“Posta Kenya is making efforts to respond to the fast-changing consumer needs in the adaptation of new technologies. 

The era of disbursing money physically is over; with this partnership, you will be assured seamless connectivity across different platforms including financial institutions and retail outlets among others,” noted Mr. Kagwe during his last World Post Day celebrations held in Nairobi.

Partnerships

The partnership with Viewtech Ltd –signed during the celebrations, offers mobile money transfer services to Kenyans at convenient and affordable rates.

Further, the agreement will now see Posta play its role as a non-exclusive representative of Viewtech Ltd, offering deposit, withdrawal, registration, and verification services on PostaPay at a commission.

“Through this partnership, PostaPay App will now be available on Google Play. The application will offer peer-to-peer transactions; these are electronic money transfers made from one person to another through intermediaries such as the telcos. There will also be business-to-customer disbursements and customer-to-business disbursements as well,” assured Kagwe.

It is a deal that promises seamless connectivity across different platforms including financial institutions and retail outlets among others. The application also allows for the payment of goods and services and the transfer of money conveniently.

PostaPay will offer competitive transactional costs and real-time visibility of revenue collection.

“It is our strategic intent to position Posta Kenya as the preferred payments partner for Government People payments (G2P) and People to Government payments at affordable rates,” said Kagwe.

That aptitude is backed by previous milestones and successful undertakings by Posta-Kenya which efficaciously and impeccably delivered all Electoral and non-Electoral materials to all 47 counties and 290 constituencies across the country in the last two General Elections.

That was possible due to the firm’s long-established national network of over 600 branches countrywide and experience in last-mile delivery that has made the house name brand an ideal partner for couriers and logistics.

Milestones

Indeed, Posta Kenya has identified the importance of technology by developing new ground-breaking products that complement its core mandate of delivering financial payment, communication, and distribution solutions to its customers.

The Corporation is fast transforming into a paperless and cashless modern Agency capable of handling any Logistical and Payment solutions considering its vast network countrywide.

Owing to its last-mile delivery partnership agreement with the National Transport & Safety Authority and the Directorate of Immigration Services, Posta is now the preferred Government logistics and payment services provider of choice.

“Posta Kenya has the potential and capacity to deliver logistical solutions to all corners of the country and beyond,” promised Kagwe in his last speech at the helm of Posta Kenya.

Posta in a bird’s eye view

-Mr. Dan Kagwe was first appointed the Postmaster General in March 2017 and later re-appointed for a final three-year stint in March 2020.

-In his last few years in office Kagwe oversaw innovation strategies at the corporation which has recently included e-commerce and payment services with the view of improving Posta’s financial fortunes.

-ICT Cabinet Secretary Eliud Owalo has indicated that the government will prioritize revitalizing the Postal Corporation of Kenya with the view of making Posta more competitive.

-Presently, Posta’s liabilities which include staff arrears including statutory deductions are estimated at over Ksh.3 billion.

-Despite current headwinds, the Post Office in Kenya has remained among the most accessible and affordable communication platforms with a total of 623 outlets across the country.

 

Take away QUOTE:

“The long-term plan needs to answer three key questions: How much capacity is needed (and where) in line with evolving e-tailer fulfillment strategies and service expectations? What’s the right kind of automation technology in line with product mix and local factor costs? How can additional capacity be integrated in the best way to protect joint network economics? – McKinsey & Company.