UK Post Office Ltd plans to transform 6,000 branches

On March 9 Royal Mail Group issued an update on the implementation of the 2010 Government’s Post Office framework to transform the loss-making network of 11,500 post offices. According to the plan, 6,000 post offices are going to be converted, between mid-2012 and 2015, to 2,000 “Main” and 4,000 “Local” branches. 200 pilots have been carried out in the past year to fine tune the new models.

– “Local” branches will provide a limited range of basic postal services through stores or gas stations counters. They will be operated as a secondary retail service (no dedicated postal counter or staff.)

-“Main” branches, typically in downtown areas, will operate from larger retail premises and will carry a fuller range of products and services through dedicated post office counters.

The new model entails not only modernization but also in many cases relocation. Expected customers benefit is a “more modern and convenient retail experience for customers”, for instance longer opening hours. Transformation will be funded from the $ 2.1 b government aid announced in 2010;  franchisees converting to the “Main” model will receive between $ 22,000 and  $ 70,000 depending on the branch size.

The business model is also changing, as “subpostmasters” (= franchisees) will switch from a partly fixed/partly variable remuneration from the Post Office to an all-variable model – a move criticized by postal union CWU. The 5,500 post offices, which will not become local or main branches, will be supported “by subsidy payments reflecting their key role in UK life”.

Post Office Ltd turnaround plans also include strategies to become a front office for local and central government (through new services such as Identity Assurance Services – see our posting of Mar. 1). Other directions include “expanding accessible and affordable personal financial services available through the PO”, and “supporting greater involvement of local authorities in planning and delivering local post office provision”.

Note on Post Office Ltd activities

Post Office Limited (a separate company within and part of the Royal Mail Group) runs  close to 12,000 offices throughout the country. Only 373 (“Crown offices”) are owned and operated by the Post. 97% are independent businesses operated under franchise/agency arrangements – this has always been a specificity of the British model. 2,500 offices were closed between 2007 and 2010 – the Conservative government has since confirmed there would not be  further closures. In 900 villages new forms of “outreach services” have been put in place, e.g.,  in the shape of mobile postal vans or community-owned multi-service retail shop + post office.

Post offices (this is another specificity of the UK model) have always relied on three sources of revenue – 1/3 mail, 1/3 financial services, 1/3 (or more) government services . Revenue declined sharply in the past 10-15 years as online banking and e-gov services developed, and government pensions got increasingly paid into bank accounts rather than at PO counters. On average 20 million people (vs 28 million in 2000) and half of Britain’s SMEs still visit a post office each week.

 Key links

-Royal Mail March 9 press release : http://www.royalmailgroup.com/news/2012/post-office-launches-%C2%A3134-billion-branch-network-investment-and-support-programme

-BIS 2010 report (Government Policy Framework):  http://www.bis.gov.uk/assets/biscore/business-sectors/docs/s/10-1260-securing-the-post-office-network

-NERA’s 2009 report for then-regulator PostComm on the Social Value of the Post Office Network http://www.nera.com/extImage/PUB_Postcomm_Aug2009.pdf

-More on Post Office offerings at: http://www.postoffice.co.uk/find-out-more/about-us/governmentservices/what-we-offer

Consumer Focus’ December 2011 report on the lessons of the closure program, highlighting the importance of partnerships with local stakeholders http://www.consumerfocus.org.uk/publications/devon-knows-long-term-impacts-and-lessons-from-the-post-office-closure-programme