It’s a New Time and a New Game for Mailing

It’s a New Time and a New Game

AIMED

The Association of Independent Mailing Equipment Dealers (AIMED) met at their annual convention to discuss the prospects for their industry. This important group, like many other segments of the mailing and shipping industry ecosystem, has been feeling the pressure of last several years. They are looking for a vision and recommendations for action that will lead to profitable growth.

The Present Tense

AIMED serves as the only association of independent dealers in the mailing, logistics and electronic document management/business communications industry. This industry segment is closely associated with the major mailing equipment manufacturers such as Pitney Bowes and Neopost.

C1The association describes the current state of the industry as “at a crossroads.” The traditional focus of relatively simple mailroom automation process improvements, postage and shipping payment systems, addressing and labeling, and other services may not continue to deliver profitable growth in the face of declining mail volume. Competition from new sources, such as Endicia, a rapidly growing PC-based postage payment solution that can replace traditional postage meters, may disrupt traditional relationships.

These dealerships, like many printers and other segments of the mailing and shipping industry, have been a tightly knit group, often family owned and operated, with membership often revolving between the equipment manufacturers. Most are traditionalists, but many have added additional mail-related products to their sales portfolio and are focusing more on service. They have broadened their scope of business to provide a greater range of products and services to their customers, but are bumping against traditional industry boundaries and competition from other segments of the mailing industry.

Changing Rules

The industry is getting more complex, and it is harder to keep up with changes. Customers are more demanding and have more options. It is no longer sufficient simply to provide and service equipment.

Mailroom managers are looking for help to preserve and extend their role their companies, and are looking to their vendors to provide advice and solutions. This is taking many in the industry out of their comfort zones, especially in the areas of information technology, data analysis, and software management.

The Greatest Asset

Three industry leaders provided insight on what it will take to succeed in the future in a panel discussion moderated by Bob Goldberg, AIMED Legal Counsel. The discussion was upbeat and focused on opportunities for the industry.

C2Bill Shannon, Vice President of Multi-Channel Post and Carrier Solutions at Pitney Bowes, noted that customers are the lifeblood of any business organization. He recommended that dealers invest in technology that enables them to better engage with their customers. Optimizing the customer experience and providing relevant, orchestrated multichannel messages are essential for instilling trust and brand loyalty. There needs to be a well thought-out strategy behind them that makes communications purposeful, authentic, and engaging. Such a strategy involves many stakeholders, processes and systems.

Christopher O’Brien, Executive Vice-President, Communications and Shipping Solutions at Neopost talked about transforming from hardware companies to providers of software solutions. He noted that companies need to focus more on leadership development and on mobilizing teams around building stronger relationships with customers. It is essential, he said, for dealers to be able to provide enterprise-wide perspective, rather than remaining satisfied with traditional sales approaches based on selling or leasing equipment and providing basic equipment repair or updating services.

Harry Whitehouse, Founder and Chief Technology Officer for Endicia, added to the perspective by describing opportunities in E-Commerce package growth, the emerging value of USPS initiatives and international markets. He also suggested that dealers could not and should not try to do everything themselves, but should seek out strategic partners to help them in new markets.

Investing in the Future

C3Robert Cintron, Vice President, Enterprise Analytics, USPS, described how the organization is tripling its capital investments (from about $700 million last year to about $2 billion this year). Much of it is devoted to continued development of information technology and analytics, the implementation of new handheld devices for letter carriers, and the replacement of the vehicle fleet. The USPS will have significantly enhanced data that will enable postal managers, customers and mailing service firms to track items in the mailstream from acceptance to delivery, and to use sophisticated analytics to resolve problems and create predictive models to improve service and reduce costs. Mr. Cintron noted the opportunities for the industry to apply new analytical tools to increase the effectiveness of their offerings to mailers.

Leveraging New Capabilities

Kent Smith, an independent industry consultant, reminded the conference participants that the USPS is a very strong organization, despite popular perception to the contrary. It is the most efficient postal system in the world, with the world’s lowest postage rates. It has been delivering strong service and customer satisfaction, and has become more flexible, particularly in developing and testing new products and services. He noted that the USPS is positioning itself as a platform for growth for the entire mailing industry ecosystem, and challenged listeners to think of the Postal Service as the first Google and to consider themselves as the developers of new applications.

Mr. Smith noted that the core industries served by AIMED members are growing and that the evidence continues to mount that mail can still be a relevant and profitable business tool, connecting businesses with their customers to do things important to them. He outlined a variety of opportunities for the future in the next generation of mail preparation, production, and processing and in the application of new technology to the mail to make it more interactive and to link it with other channels. He also remarked that total visibility (the analytics described by Bob Cintron) will help connect customers and help re-invent the whole local delivery market.

E-Commerce and the Shipping Market

Opportunities in the package shipping was the topic of a special session by Art Wurfel, President AME Systems. He provided a background of the package shipping market is evolving. C4The “duopoly” of UPS and FedEx is beginning to break down. This is significant because they provided proprietary systems to their customers and created barriers to entry for independent dealers and equipment providers. They also created, through extensive advertising and other means, a powerful “mind share” positioning with potential customers.  Breaking through to these customers will require significant investments in long sales cycles, customer service and support, and information technology.

Tim Geiken, former UPS executive and Principal, Platinum Circle Partners, provided an extensive review of how UPS and FedEx structure their contracts, and described the differences with the USPS system. USPS has regulated rates, open to public review while all UPS and FedEx shipping contracts are essentially negotiated and unique to the customer, developed using activity-based costs designed to protect the per-piece yield (profit) of the delivery firm. He discussed the use of peak pricing, redesign of fuel surcharges, the implementation of dimensional charges, and other fees which may significantly increase prices. UPS and FedEx may impose penalties on firms for missing estimated volumes in a contract, and have the option of changing the contracts almost at will.

Harry Whitehouse and Clark Casell talked about the potential for the USPS to become a powerhouse in the package market – Priority Mail repricing (while FedEx and UPS were developing additional surcharges) is a game-changer. Mr. Whitehouse also noted the disruptive influence of Amazon’s drive to provide prompt local delivery services, which may hurt the hub and spoke system used by the major carriers but can help the USPS’s “last mile” delivery network. Dealers trying to help their customers succeed in this market must know how the delivery firms behave and what motivates them. They must use the information available, since many of their customers have not generally focused much attention on shipping – literally, it is often the last thing a company thinks about.

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By Kent Smith

Kent Smith is Research Director, Ursa Major Associates / Postal Vision 2020. His 38 year career in the Postal Service included Rate Classification Research, Market Research, and Strategic Planning. Ursa Major Associates / Postal Vision 2020 is dedicated to taking a broader, longer-term perspective on the future of the mailing industry ecosystem. The thoughts expressed in this “Point of View” are his own.

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