International Mail – As it was, as it is, as it could be!

It’s not just the domestic postal market that has seen upheaval of late. The international market is changing rapidly too. Old certainties are disappearing, but are being replaced by new opportunities. Ian Phillips analyses the fast evolving international mail market, and what it all means for publishers.

By Ian Phillips

I think most publishing companies realise that, unlike domestic mail services, outbound international mail has been a competitive environment for many, many years now. However, following a long period of relative calm, the last three or four years have seen some really dramatic changes in this market which have changed the face of a once familiar and stable side of the mail industry. In fact, I would go as far to say that recent developments have changed this side of the industry beyond the recognition of most customers. I should also add that stability has still not materialised, and because of the changes taking place in this market, we can be sure there is a fair amount of change to come and that is something all international mail customers can benefit from.

Mercury International

Not so long ago, as far as publishers were concerned, there were a number of international mail suppliers targeting our industry. However, I think it’s safe to say that, on the whole, one supplier in particular managed to win and secure the business from most of the UK’s major publishing companies and they did a damn good job at keeping them for many years. This company’s major competitors managed to secure some good, medium sized accounts but, along with their smaller competitors, they failed to break the ‘virtual’ monopoly held by their bigger competitor until relatively recently.

I’m sure many will have realised that the ‘virtual’ monopoly supplier I’m referring to was formerly known as Mercury. I’m also sure that many will have realised that Mercury was bought towards the back end of 2006 by DHL as part of their acquisition of Mercury’s former owners, Excel Logistics. I wouldn’t go as far to say that this was the catalyst that threw the doors of the international mail industry wide open again, but it has certainly been a contributing factor that has opened a crack that their competitors may be able to squeeze wider. Having said that, the period of change actually started some years before DHL had even considered purchasing Excel and their subsidiaries. In fact, I’d say that the process started back in the late 90s when Royal Mail International short-sightedly levelled the bulk mail discounts they offered to their largest customers (who, let’s face it, were mainly the consolidators) and, as a consequence, the market has been evolving ever since.

Royal Mail own goal?

Royal Mail’s strategy was simple and may well have worked had it not been for a small number of overseas postal authorities who happened to be looking for a foothold in the UK mail industry at exactly the same time that Royal Mail International levelled the discount structure. Subsequently, though inadvertently, they had the opportunity they were looking for handed to them on a plate by the very company they were trying to compete against. Of course, the reaction and ingenuity of the consolidators and RMI’s major customers played a large part in this as well. Rather than just sit back and accept what RMI was doing to their business and pass the increases on to their customers, they fought back. They picked up the phone and negotiated favourable rates and routes with the overseas companies and PTT’s looking to break into the UK.

In my opinion, the only loser throughout this whole process was the very company that instigated the whole thing – Royal Mail International. Not only did they see the foreign postal authorities successfully move into the UK, they also saw the consolidators moving large amounts of volume to them and secure the ability to lower their retail prices to customers in the process. From the customer’s perspective, the option of where to place their business was a bit of a no brainer. Yes RMI had (and still have) a quality service that could be relied upon to deliver the mail, but the price they were charging was somewhat higher than their competitors. Given that publishing is such a price sensitive industry and we are comfortable with opting for a slightly lower level of service in return for a lower price, it was no surprise to those close to the mail industry that, instead of attracting customers to open a direct relationship with Royal Mail International, I think it had totally the opposite affect and actively encouraged customers to place their business elsewhere.

Boom time for consolidators

Since then, publishers, suppliers and international mail have moved a long way. Yes Mercury set about and successfully dominated overseas mail generated by the publishing industry but that didn’t stop their competitors trying to do exactly the same thing. In truth, it actually encouraged them to try the same strategy and that’s exactly what they have been doing for some time now. By negotiating good, affordable rates and using reliable routes with the foreign PTTs and private delivery agents throughout the world, I think it’s safe to say that 1990 to 2005 was a bit of a boom time for international mail consolidators and publishers alike. Printed media was still growing and we all benefited from an increase in volumes and lower prices for a number of years.

Current trends

In the here and now, having seen what I’ve seen these past 12 months, I’m now convinced that the DHL takeover of Excel Logistics and consequently Mercury, has opened the doors once again. Whereas prior to the DHL take over, I found few suppliers able to really compete with Mercury on price (service yes, but not price), I have now seen just how DHL’s competitors have filled Mercury’s boots with the foreign PTTs and just how competitive this has made them. Companies like Air Business and BTB Mailflight are now a significant force to be reckoned with and are regularly winning contracts from their bigger competitors. Whereas DHL has been forced to close their links with some of their traditional suppliers operating in the UK, companies like the two I mentioned earlier have been quick to replace them by negotiating favourable rates with companies DHL were forced to leave behind. Off the back of this, they have then been able to lower their retail prices to customers and compete with DHL on price and service and if the amount of business they’re winning is anything to go by, they seem to be doing quite a good job of it too. If you don’t believe me, just give the MD of any consolidator a call and I’m sure they will be more than happy to give you an idea as to how their prices and service compare and how their business has grown over the last two years. Having said all that, you ignore DHL at your peril. They are, and, if the strength and experience of their management team is anything to go by, will continue to be a major supplier to our industry and they are still regularly winning new contracts and retaining existing business.

The work of the PPA

Moving on, I said earlier that publishers were usually willing to trade quality of service in return for a cheaper price. This is fine but only to an extent. Given that most of our customers pay for the magazines, journals and newspapers we publish, reliability is still and must always be a consideration when choosing an international mail supplier. Unfortunately there were, and possibly still are, a few dodgy cowboys out there that must be weeded out. Publishers must choose a reliable and honest supplier capable of delivering the service they’re offering. To demonstrate the importance of reliability, I’d like you to consider what would happen if your supplier dumped your magazines in a landfill site instead of mailing them. Can you imagine the adverse reaction from customers and how much it would cost, firstly to replace the undelivered magazines and secondly to win back the confidence of the affected customers? I’m mentioning this because it wasn’t so long ago that this actually happened and a consolidator was actually caught dumping tonnes of mail in a landfill site near Slough. I know for a fact that some publishers where caught up in this scandal and it cost them dear in terms of lost business and lost customer confidence. Ok, the directors of this company went to jail but that was of little consolation to their customers who paid for a service in good faith and had it thrown back at them in the worst possible way.

As a direct consequence of the mail dumping affair, the PPA International Postal Committee set about looking for ways we, as an industry, could secure some confidence in the services offered by the mail suppliers. It has taken a considerable amount of work and effort from the PPA and those who sit on the committee, but it looks like we are now close to securing the level of confidence we need. The PPA, in conjunction with the Mail Consolidators Association, has just launched an accreditation scheme for international mail consolidators. Suppliers signing up to the scheme will be audited by an independent body to ensure they have robust systems and practices in place to actually deliver the service they are offering. Having been involved in this process for some years now, I am more than confident that this scheme will supply the publishing industry with a transparent measure which, if supported, will help weed out the cowboys from a vital part of our international supply chain. The scheme has so far been well received by publishers and consolidators alike and all the indications are that it will be a resounding success. In short, the next time you’re looking for an international mail provider, please be sure to ask if they are PPA accredited and ask why not if the reply is in the negative. I for one will be extremely suspicious of suppliers who have not signed up to the scheme and successfully been awarded accreditation. I really do hope that you can see the value in this scheme and give it the support it deserves.

Hand delivery operators

It is also worth mentioning that UK based mail consolidators are not the only options open to publishers. There are a number of hand delivery agents running their own delivery networks in various parts of the world. For instance, AMP has a fantastic hand delivery operation in New York which will save you money against Airmail and / or Direct Entry services. They may also provide you with a better level of service to boot. Peer Frederiksen is another such hand delivery company. They have a large delivery network in many European countries and rates which are considerably cheaper than we can secure from a UK based consolidator. In fact, so good is Mr Frederiksen’s service that I am willing to bet a sizeable sum that if you asked your current supplier if they were routing your mail via his service, a good proportion will confirm that they are. And why shouldn’t they? What I and they like about Mr Frederiksen is that he doesn’t discriminate. His price is his price regardless of how much volume you’re giving him and the prices he charges are extremely competitive. What is also impressive is that he is able to collect locally, provide improved delivery times and more security than traditional routes have offered to date. In some cases, it is even possible to trace a single copy from one side of Europe to the other, and if you can find a PTT that can do that, then you have one up on me and you MUST let me know about them.

I’m almost certain that what I’m about to say next is not going to go down too well with some consolidators, but I can assure you that I am not breaking any confidences or trade secrets. In fact, everything that follows is already in the public domain but, it seems, only to those who want to know and most of them would rather it was kept as quiet as possible. I’m sure you appreciate that mail consolidators using Mr Frederiksen are putting a mark up on what he charges them. And why shouldn’t they? They’re only trying to make money. What they’d rather you didn’t know is that, volumes permitting, there is nothing stopping you opening a direct relationship with this and other similar companies and posting direct with them to cut out the consolidators and their mark ups. Having said all that, please don’t expect Mr Frederiksen to come knocking on your door any time soon because it’s unlikely to happen. He knows full well that consolidators are the lifeblood of his company and therefore service offering. Put yourself in the shoes of his biggest customers and imagine how you might feel if you learned one of your key suppliers was approaching your customers and actively selling a direct relationship to cut them out of the picture. I wouldn’t do it and I don’t think he will either. Conversely, there is nothing to stop you contacting him and if you make the first move, there’s every chance he will be willing to work with you without risking core business.

So, you see, what was once a fairly stable and familiar arena to publishers is once again in a state of flux and, as it has before, it will take some time to settle down. No doubt DHL will, as German companies often do, fight tooth and nail to retain existing and grow new business but I believe their competitors are in a better position to do the same, than they have been for many a year. As traditional mail monopolies start to disintegrate, particularly in EEC countries, new routes, suppliers and services are starting to emerge and there is no reason why we shouldn’t lever all of this activity to our advantage.