| Postal De-regulation Series | |
| Over the course of three issues, Ian Phillips will be looking at different aspects of postal de-regulation and the resulting opportunities for publishers: | |
| May / June 2007 | Direct Mail |
| July / August 2007 | Magazine Mailing |
| September / October 2007 | Value Added Services |
In the last issue, I started to discuss the opportunities postal deregulation has created for publishers and paid particular attention to how the cost of posting recruitment, renewal and customer letters can be significantly reduced. In this issue, I’ll be taking a look at the delivery of subscription copies and other bulk magazine mailings.
Publishers’ Needs
I’m sure some publishers have at least made enquiries with Royal Mail’s competitors as to what they have to offer with regards to magazine distribution. I’m also sure they have been disappointed by what they were told and found. I know I have been. However, on the evidence I’ve seen recently, the cracks are now starting to appear in Royal Mail’s Presstream armoury and there’s an opportunity for publishers waiting to be realised. A number of Royal Mail’s competitors have either launched or are planning to launch a service which can compete with Presstream on both price and service. It’s early doors yet and publishers are still limited as to what they can and can’t do, but the potential is most certainly there if, and it’s a big if, publishers are willing to give in order to take. More on that later.
Royal Mail are most certainly not out of the picture yet either. Far from it. Presstream is still and is likely to remain the dominant delivery service for subscription magazines while ever Royal Mail keeps it running. The fact is it works. Quality of service is good, it fits well with our supply chain (admittedly only because we’ve had to build our supply chain around Royal Mail’s requirements), but overall, its key selling point has been that it’s very competitively priced. This last fact is the major reason why Royal Mail’s competitors haven’t gone for publishing like they have other industries.
I wonder how many of you noticed or paid heed to my word of warning in the previous paragraph? The words in question are ‘while ever they keep it running’. I said this because there has been talk for a long time now, that Royal Mail might combine Presstream with Mailsort to create one bulk mail product to serve all industries and bulk mailers. I used to listen to this talk with total scepticism but when a lot of the people doing the talking are senior Royal Mail execs, you have to listen and be brave enough to admit that from Royal Mail’s point of view, such a strategy might seem attractive.
The fact of the matter is you have to be realistic. This scenario may actually become a reality much sooner than we might think. If you also consider that Mailsort accounts for a much higher percentage of mail volumes than magazines and is considerably more expensive than Presstream, it’s obvious to one and all that the bulk letter mailings are worth considerably more to Royal Mail than magazines and newspapers. It doesn’t take a genius to work out in whose favour a combined bulk mail service would be priced.
And what about Zonal Pricing? What’s that going to do for our industry? For what it’s worth, it would create a whole load more complexity, uncertainty and cost is my summary take on it. The threats from digital dictate that we need to keep our costs down to remain attractive to consumers, yet postage just keeps going up and up. Finally, as I write this, the CWU have successfully balloted their members. The point I’m trying to make is this - when you combine these facts and risks to our industry, a realistic alternative route to market for subscription copies becomes all the more attractive and urgent.
The Alternatives
If you’ve read this far, I guess you’re interested enough to find out what’s available and what benefits you might expect. In the next few paragraphs, I’ll give you an overview of what’s available but I’m afraid it’s a little harder to say what the benefits might be. To put it simply, in order to get the largest saving possible, publishers have to consider giving in order to take. You may remember I mentioned this would come into play earlier. Ultimately, the benefits will depend on what your business and third party suppliers decide they can and can’t do, move or change in order to maximise and / or realise the savings.
With regard to what’s available, there are a number of suppliers offering three types of services which can compete with Presstream on cost and service. The largest and most common service is unquestionably Down Stream Access (DSA) which we covered in the previous issue. I wouldn’t say fast on the DSA heels exactly, but certainly gaining publicity, volume and coverage is Hand Delivery (HD). Finally there are a few companies who have negotiated rates with a number of licensed operators and developed software which will sort and route mailings through the cheapest operator for the items being mailed. I’ll call these Multi Operator Solutions (MOS).
With the exception of UK Mail who only offer DSA services, all the usual suspects such as DHL, TNT and Citipost etc are offering or are soon to offer DSA and HD services. Publishers should also consider approaching two smaller suppliers such as DX, who provide HD services, and OnePost who have developed a multi operator software solution. There are other companies publishers could approach but I think those that do will probably find they’re wasting their time. I could be wrong of course so if you do find somebody other than those mentioned here, please email or write a letter to the editor so he can tell us all about it.
Hand Delivery
As we covered how DSA works in the last issue, I thought it only fair that I go into a bit of detail about hand delivery and alternative delivery networks to Royal Mail. Many might be surprised to learn that they’re not exactly a new thing. Over the years a number of companies and suppliers have come and gone. Express Dairies are the latest example to spring to mind.
At one time, HD operators didn’t have a very good reputation for reliability amongst those publishers in the know. An unacceptably high percentage of customers would complain that copies were left on the doorstep or not delivered at all. Over recent years though, things have changed for the better. Most of the suppliers offering HD services today, have been doing so for a number of years and are very experienced at what they do. Citipost (formerly and more commonly known as Datarun) and DX are currently the established market leaders in alternative delivery networks suitable for the delivery of magazines. But TNT and DHL are fast on their heels as both have ambitious plans to build HD networks in the UK and, more importantly, they have the financial backing required to build such a network.
The key factor with HD networks and building them is volume. Volume = sustainability. The main reason so many companies have tried to build a HD network and failed is service quality. This resulted in a reduction in the volume being mailed through the network which meant it became unsustainable from a financial perspective. Despite this, the few companies with an alternative delivery network running in competition to Royal Mail today are growing in size and coverage. DX has built their network over many years serving the legal and financial industries. They now have a network capable of delivering to a surprisingly large percentage of UK postcodes, to both business and consumer addresses. They also have a desire to expand the network as saturation increases in the areas in which they operate. Fast on their heels is Citipost. Only this year, they have expanded their network outside of central London to include a number of major UK cities. However, if they don’t get the volume or maintain the service quality, we may well see that network start to reduce its coverage. I wish them every luck because, for the reasons I stated earlier, it’s my belief that this country and more specifically our industry, needs alternative delivery options to Royal Mail.
TNT and DHL meanwhile are still basically in the planning stage. TNT are trialling a network in one region of the UK. I’m told they even have delivery agents dressed in very fetching orange tunics. Regardless, it’s my view that they’re a long way from being able to expand the network into other regions and years away from being able to provide a network capable of delivering to much more than 50% of UK postcodes. But at least TNT are doing something and telling people about it because DHL seem to have gone very quiet over the last six months or so. So much so that I really couldn’t tell you what, if anything they’re planning now. If you were to ask me who I thought would be the company most likely to become a major supplier of UK postal services to the publishing industry, nine or even six months ago, I would have said DHL. As it is today, I now think that if they don’t get their act together soon, they may well find they’re too far behind the pack to catch up without buying an existing operator or network like Citipost or DX.
Unfortunately, only those companies offering HD services are able to compete with Presstream 1 for a next day delivery service. Ultimately, this means many weeklies can’t consider anything other than hand delivery, because the best DSA suppliers have to offer is currently a two day service. Worse still, HD coverage of UK addresses is still very poor and limited to mainly business addresses in major city centres. Consumer publishers are probably sitting there thinking, "There’s no point looking at either option for my weeklies then", and they’d probably be right, but even some consumer titles could route a significant percentage of their subs circulation through a HD operator and save a tidy sum as a result. On the other hand, purely because many B2B customers have their magazines delivered to the office, B2B publishers will most likely find that HD operators are able to deliver a much larger percentage of their overall subscription circulation profile than their consumer counterparts. Add to the fact that most consumer publisher can’t contemplate delivering a weekly a day later than they are at present, and both DSA and HD are no-go areas. My advice is to save yourself the bother and stick with Royal Mail and Presstream 1 unless you know you have a reasonably high city centre penetration.
DSA
So what about DSA service providers? Can they do a job for our industry too? You bet your sweet fanny adams they can. Sadly, it’s only to a point. I’m not going to dwell too long on DSA, but I can tell you from experience that there are some DSA operators who can compete with Presstream 1 and 2 on price and Presstream 2 on service. As the market is in such a flux, it would be wrong of me to say which companies are competitive, so you’ll just have to take my word for it that they are out there. It’s just a case of looking and getting quotes. Regardless, the important thing to remember is that there are DSA suppliers able to compete against Presstream on price and service.
Multi Operator Solutions
MSO’s have been created as a direct result of deregulation. The suppliers offering these services are not licensed operators. In fact they don’t really have a postal service as such. What they have done is negotiate rates with each licensed operator and developed software into which the address data for individual mailings is loaded. The software then routes the mailing through the cheapest service provider and sorts the data to each operator’s sortation requirements. Using these services, it is entirely feasible that a single mailing could be routed through three or more suppliers. It just depends on the profile of each mailing and the routes available to the MSO supplier. These companies make their money by charging the customer slightly more than the operators charge them. The publisher sees a saving, the MSO make a profit and everyone’s happy. At least that’s the theory. I’d like to be able to have written this article from the perspective of someone who has used an MSO supplier, but I haven’t so I can’t. Whilst the prices I’ve been offered by an MSO have been competitive against Presstream and would most definitely have saved me money, I’m in the lucky position of having the time and resources available to assess all the options and so far, I’ve always been able to find a cheaper alternative.
The most common and successful MSO supplier to date is OnePost, who I mentioned earlier. However, if you take some time to do some digging and if you talk to one or two of the bigger, more established mailing houses and printers, then I think you’ll find a number of them have or are in the process of developing their own MSO solution. No matter who you talk to, MSO’s could well provide smaller publishers who have few resources or little experience to devote to such a project, with their best chance of realising a sizeable saving, quickly and with little input from themselves. They’re extremely willing to work with our industry, they know they have a benefit to offer and from what I’ve seen and heard, they know the publishing industry is big and innovative enough for them to make an impact with publishers.
Impact on third party suppliers
Apart from the money on offer, what I like most about the services available from Royal Mail’s competitors, is that they are pretty much based around the Royal Mail model of Directs and Residues etc. Consequently, our mailing house suppliers are able to adapt quite easily. Of the mailings I’ve routed outside Royal Mail, the first reaction I get from some mailing houses who have not used anything but Royal Mail is one of total fear and scepticism. Others are more realistic and open to the idea. A few have tried it on and claimed they must increase their rates due to an assumed increase in workload, though I’ve yet to come across one who has been successful with me. Once they’ve run a few jobs, they soon pipe down. In short, our mailing house suppliers are more than capable of accommodating our needs. If you find one that isn’t or wants to charge you extra for the privilege, my advice is to name and shame them on the InCirculation forum and find a new supplier.
