Post

Harry Koorstra interview

Mail traffic continues to slow down as e-commerce thrives

Metamorphosis in progress

As a result of the new postal law coming into effect, TNT’s competitors are now free to deliver letters even as mail volumes continue to slide. At the same time some interesting e-commerce opportunities have presented themselves.

TNT Post may appear to be in heavy weather at the moment. The company has had to look on powerlessly as the Dutch government opened the domestic mail market to foreign competition, without being extended the same courtesy abroad itself. Meanwhile mail volumes have been steadily dropping for years as a result of digitised communication. Under the circumstances, getting everyone to agree on a new CLA to govern TNT Post’s production arm is not the work of a moment. That is why we met up with TNT’s Harry Koorstra, who is in charge of the company’s mail division and also a member of the Board of Management, to ask him about the situation.

As of April 1 the new Postal Law has come into effect, which prompted TNT Post to send a letter containing (among other things) rival companies’ phone numbers to every Dutch household. A remarkable move.

“Indeed, but not without logic. Let’s define what is at stake here. The postal market has been liberalised and that means certain rules need to be observed. The government is supposed to educate its citizens about such matters, but sadly this has not been the case. In this respect the government does quite a poor job. It routinely fails to inform citizens, even though the latter are expected to know the law. Instead, that task now falls to the media. The trouble with this is that they tend to operate very selectively and therefore a complete picture is not presented. Looking at the amount of complaints we receive through our call centres about the services of our competitors, we came to the conclusion that we might as well explain the situation ourselves. So all we did was point out how to recognise the operator responsible for the delivery of a particular piece of mail, and provide the relevant contact numbers.”

“The government routinely fails to inform citizens, even though the latter are expected to know the law.”

Earlier this year an agreement was reached with the unions concerning a new CLA governing TNT Post’s production arm, but in the end things did not work out. What happened?

“I should begin to answer by clarifying that there is a sector-wide CLA in place, in which the three mail network operators in the Netherlands have laid down a regulatory framework for the future. Our competitors have been afforded a few years’ respite to make sure they comply with these rules – even though the next few years will prove decisive in determining the outcome of the competitive battle. This puts us at a significant disadvantage compared to our rivals. That does not change the fact that we are happy to see these rules laid down in writing. Coming back to our own CLA, there was a deal on the table, complete with signatures, which was subsequently rejected by the union members. Again, I should clarify by adding that the CLA applies to 23,000 employees, 11,000 of whom are member of a union. Among this group 5,000 actually voted, 3,500 of whom voted against. That equates to fifteen percent of the total workforce. CLA negotiations dictate that one deals with the unions, so basically we have to respect the outcome. Nevertheless, together with the Works Council we as management decided to conduct an employee survey, to gauge the general opinion among our workforce. The results of this survey may prove useful when determining any future steps. Our survey showed that 74 percent out of a total of 7,683 respondents would opt for wage concessions in combination with employment guarantees and / or transitional measures. Some 25% of the total workforce send out a very different message, in other words.”

What was the question that was posed in this survey?

“Basically it was about the choice between wage concessions and forced lay-offs. It really is a wicked dilemma for all concerned, be it management, the unions or those who are affected. You have to understand that if we are to safeguard maximum employment – and we are willing to do our utmost to make sure this is the case – then something has to be done about employment terms. If you refuse to even consider this, then you are inevitably risking mass lay-offs. It is not really a fair choice. Equally however there is no getting away from the fact that our labour costs have exceeded the market average by 25 percent in recent years, and right now they are a whopping 65 percent higher than those of the competition.”

“Our labour costs have exceeded the market average by 25 percent in recent years, and right now they are 65 percent higher than those of the competition.”

Concerns regarding the possible loss of jobs are closely related to two other worrying developments, that is increasing competition and decreasing mail volumes.

“Our main worry is not increased competition. This is something that everyone is going to have to deal with, not just ourselves. Our chief concern is that the mail business is a declining one. Back in the spring I discussed things with 1,200 employees, in small groups to allow a proper dialogue to take place. I wanted to impress upon people the reality of the situation, so that they are aware of the facts. So I asked the following questions. Who among you does not have access to the internet? Everyone did. Do your children use a computer? What a question! Of course they do! Next question: do you use online banking to take care of your financial affairs? Two-thirds of the Dutch population does. Finally, who among you still uses coal to heat their homes? This question was greeted with much laughter; obviously nobody does these days, even though there is plenty of the stuff around. It is just that there are better alternatives out there. The same thing applies to the mail market. Ten years from now, mail in its current form – necessitating delivery six days a week, as per government decree and in line with the traditional breadwinner model – will be a distant memory. And even today a six-day delivery week is no longer commercially viable. It makes sense to the politicians only; it doesn’t make economic sense. The whole thing is little more than political window-dressing. For some reason people seem to think that delivering letters and postcards is a goldmine, although they account for a mere 8 percent of the total mail volume.”

What kind of business model would you like to see?

“We don’t mind delivering mail six days a week. We could be out there seven days a week and twice each day, for all we care. The problem is one of demand. We are often asked: “How come you don’t deliver on Mondays anymore?” We do deliver on Monday – it is just that there is hardly any mail! Banks, insurance companies, telecom providers, energy companies – to a large extent they account for the mail that is sent. The reality is that they produce the bulk of their mail on Thursday and Friday, which is subsequently delivered by us on Friday and Saturday. It means that by Monday there is nothing left to deliver. That’s why we think Monday delivery should be axed. “What about holiday greetings?” comes the politicians’ response. Believe me, the aforementioned major senders of mail think that three delivery days is plenty. Not only that, they are doing everything they can to cut down on their own outgoing mail, because for them it is just an expense, with no added value. Therefore they pressure their clients to accept digital alternatives. Those who refuse are charged the extra cost. In ten years’ time mail of this variety will have ceased to exist. Any mail requiring delivery could be picked up by the consumer, or you could arrange to have it delivered to your home, possibly through some sort of subscription.”

You paint a rather bleak picture…

“Well it would be if we had only just found out about it. Thankfully that is not the case. The reality of mail disappearing is something that we first identified in the previous century already. Any company that is highly dependent on a particular product and is being confronted with a situation whereby that product nears the end of its life cycle needs to react and come up with suitable alternatives to offset the situation. In our case we started the process back in the early nineties with the acquisition of TNT. Back then it was clear to PTT that while the Dutch postal service was a fine one, its market was about the size of a stamp. The company therefore opted to diversify according to the ‘stick to what you know’ maxim, by developing activities that were close to its own competencies, which for us turned out to be express. But it was not a simple case of one revenue stream cancelling out another. We still instructed TNT Post to pursue growth opportunities elsewhere. And boy, did it ever: TNT Post’s European Mail Networks have grown into a € 1.2 billion business. Another strong growth platform is our Parcel Service business, which is our foray into e-commerce.”

How is TNT going to benefit from e-commerce?

“E-commerce has really come into its own and the resulting stream of goods is sure to grow explosively. We benefit from this in two main ways – front-end and back-end. The front-end portion consists of making an online purchase. Purchases subsequently have to be delivered to the consumer, the back-end; where are the items located now, where do they need to go, and how do we get them there – these are some of the questions retail businesses are faced with. And we at TNT happen to be very strong in that particular area. We are experts at managing complex processes combining human and machine components. Through our parcel service we pick up and deliver to consumers parcels that have been ordered online. Simultaneously we have been looking at the front-end by developing our own online retail activities. We currently rank 20th in the Netherlands, and as high as 10th if only physical transactions are considered – when making travel arrangements for instance there is no physical delivery involved. Ironically webstores need to advertise to generate traffic. Even a major player like bol.com invests in TV commercials. It turns out that old media such as these serve to guide consumers to new ones. We have sought to use this knowledge by introducing sjopze.nl, a flier that collects top webstore deals. It is delivered by TNT Post, which means that apart from paper and printing costs it does not cost us one penny. Online merchants are eager to have their ad published there, since it draws customers to their store. In turn we deliver the items purchased online. Incidentally we also launched our very own webstore called hebbedeal.nl recently.”