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There's More Than One Way to Deliver the Mail

Robert Burgess
·7-min read

(Bloomberg Opinion) -- U.S. Postmaster General Louis DeJoy is testifying before Congress to defend his management of the Postal Service amid concern over voting by mail and the integrity of the November election. Democrats have questioned whether recent slowdowns and cutbacks at the post office under DeJoy may be part of an effort to suppress voting orchestrated by President Donald Trump, according to Bloomberg News. DeJoy told a Senate committee that allegations that cutbacks at the post office are aimed at having an impact on the November election are an “outrageous claim.” DeJoy said he’s simply trying run the Postal Service, which loses money, more efficiently and like a business.

Bloomberg Opinion figured it would be a good time to see how mail delivery works in other parts of the world, and whether the types of issues that are in focus in the U.S. exist elsewhere. Here are the results:

Germany's Publicly-Traded Post Office

Germany will mark the 20-year anniversary of its postal service becoming a publicly traded company in November. Today, Deutsche Post AG boasts a 47 billion euro ($56 billion) market capitalization, is nicely profitable, employs more than half a million people and is held in generally high esteem by the public. The shrinking German letters business accounts for just 15% of its 63 billion euros total revenues; services such as express delivery, freight forwarding and e-commerce make up the rest.

Yet for all its profits and solid management, Deutsche Post is hardly the corporate embodiment of Ayn Rand. It’s still obliged to deliver domestic mail six days a week, the unionized German workforce sometimes goes on strike and the state still owns one-fifth of the shares via the KFW development bank. Retaining the state as an anchor shareholder has boosted Deutsche Post’s credit standing, allowing it to borrow cheaply. Before becoming a public company, it also transferred a big chunk of civil servant pension liabilities to the government, lightening a burden that weighs heavy on the U.S. Postal Service.

While there are occasional gripes about service quality and rising postage costs, Deutsche Post is a regulated entity and no longer much of a political football. Public aversion to post office closures was overcome by allowing independent retail stores to operate small postal franchises, which are open longer. Customers can also collect internet shopping from unstaffed parcel machines and buy stamps online. And voting by mail has steadily risen to almost 30% of votes cast in the German federal election, and is uncontroversial. — Chris Bryant

The U.K.’s Royal Mail: Essential Yet Struggling

At the peak of the pandemic in April, a British postman managed to deliver a parcel labelled “vital survival stuff” whose address was simply “somewhere in Sheffield.” The postman located the addressee through Facebook and delivered the package of chocolate bars from a sender in Sweden.

Apart from that, things have been pretty grim at Royal Mail, Britain’s privatized mail service, which is struggling to modernize in the face of labor opposition. It has recently faced job cuts and restructurings, threats of strike action, walkouts over poor safety measures (four postal workers have died from Covid-19) and a 1.5 million pound ($1.96 million) fine for tardy delivery of first-class mail and overcharging customers for stamps.

Royal Mail has a universal service obligation, and is required to make deliveries six times a week around the country, so it is limited on the cost-cutting side. Somewhat confusingly, it was separated in 2012 from the state-controlled Post Office, which runs the network of over 11,600 branches that provide handles postal as well as government and financial services. Post Office branches are largely run by franchise partners and independent retailers, often known as subpostmasters, who are paid a fixed fee or commission. The number of branches has halved over the years, but 99% of the U.K. population must still be within three miles, and 90% within one mile, of an outlet. And yet it too has had to grapple with changing demand in the the digital age, a shrinking revenue base and court battles with stakeholders.

Whatever their respective struggles, Brits seem attached to both services, for different reasons. The decline of old-fashioned mail and the rise of Amazon.com have not shaken belief that a universal service obligation for mailed communications, symbolized by those iconic red pillar boxes that have been around since 1852, is part of the social contract. More than 18% of ballots cast in the 2019 general election were postal ballots.

As for the Post Office, for all the concerns about branch closures and declining profits, it made an operating profit of 40 million pounds in 2019. A 2016 study put the social value of the Post Office — what people were willing to pay for its services — at between 4.3 billion pounds and 9.7 billion pounds. — Therese Raphael

Japan’s Post Office Is Bigger Than Citigroup

What’s Japan’s largest financial company after Mitsubishi UFJ Financial Group Inc.? By some measures, it’s the country’s postal service, Japan Post Holdings Co., with an asset base larger than those of Citigroup Inc. and Wells Fargo & Co.

Postal savings banks have been around almost as long as state postal services, and Japan’s has long been a behemoth. Since the late 19th century, much of its wealth was built upon deposits taken in the country’s post offices and reinvested in nation-building infrastructure. Thanks to income from Japan Post’s separately-listed banking and insurance arms, the parent company is forecast to make 280 billion yen ($2.65 billion) of net income this year despite its core postal business not earning a cent.

To be sure, life as a Japanese bank in the 21st century isn’t all that more lucrative than existence as a postal service — especially when, as has historically been the case, you’re obliged to invest in negative-yielding Japanese government debt. The parent company and Japan Post Bank Ltd. have each lost almost half their equity value since a 2015 initial public share offering. Still, analysts expect the group as a whole to make stable profits well into the current decade, and retail investors continue to sock their money away. The 4.48 trillion yen increase in deposits in the June quarter was the biggest in records dating back to 2014. There are worse ways of keeping a public service in operation without draining the public purse. — David Fickling

Australia Post Is Looking to Pivot

The coronavirus pandemic has underscored the ways that Australia Post has been torn in two directions in recent years. For years, the balancing act pursued by its managers has been around minimizing costs from its loss-making letter delivery arm while maximizing its profits from parcels, where its dominant position has helped it prosper from growing volumes of online shopping.

Letter volumes have fallen by more than half since 2008, and one of the first moves AusPost made was to switch to deliveries only every second day, rather than daily — a temporary measure that few would be surprised to see become permanent. At the same time, parcel volumes were up around 50% or more on usual levels at the peak of the lockdown, and the company is looking to increase the frequency of deliveries to handle the flood.

Growing numbers of parcels will lift revenues, but they may cause margins to narrow, too. AusPost has had to pay third parties to make deliveries because it doesn’t have enough staff to handle the surge. Its fleet of delivery motor scooters looks increasingly obsolete, too, in an era when vans are needed to cope with growing volumes of bulky packages.

After a flurry of interest in privatization earlier this decade, that talk has long since died down. The more likely outcome would be less frequent, costlier letter deliveries so that core business is finally able to stand on its own feet. — David Fickling

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Robert Burgess is the Executive Editor for Bloomberg Opinion. He is the former global Executive Editor in charge of financial markets for Bloomberg News. As managing editor, he led the company’s news coverage of credit markets during the global financial crisis.

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