02 Apr Irish postal network strengthened by COVID-19 challenges
David McRedmond, CEO, An Post, details how overcoming challenges laid down by the COVID-19 pandemic has transformed the nation’s trade network and what the company has done to improve the lives of Irish citizens
What efforts did An Post do to keep its services going and help the community during the COVID-19 pandemic?
During the past year, the company has truly acted for the common good. 2020 has probably been the worst year in our lives with lockdowns, illness, death and all sorts of issues the pandemic brought forward. Ireland has had the longest lockdown of any country in Europe. However, An Post managed to keep both delivery and postal networks open throughout the pandemic thereby keeping Ireland connected and Irish companies trading. Like any country that underwent a lockdown, there was a sharp rise in e-commerce delivery. With all non-essential retail stores closed, anything people bought online needed to be delivered, and most of it was delivered by An Post. Parcel volumes increased more than 100 percent in 2020 over 2019. Before Christmas it was up to 300 percent. It was difficult, but we managed to install more infrastructure, capacity and automation throughout the year that enabled us to deal with the increase.
Despite challenges, we managed to grow our revenues by 2 percent in 2020 from 2019, which we did not expect. An Post had revenue of $1.1 billion in 2020, and our profits before depreciation were $40 million. We have $27.8 billion in Ireland’s State Savings products through the post office network, which represents an increase of 7 percent year-on-year. We handled almost $16 billion in transactions in 2020. This is substantial given Ireland’s relatively small economy.
Our purpose is to act for the common good and improve the quality of life for generations to come. This mantra informs everything we do. We ran a range of programs to help the community. We created a portal so one could register one’s elderly or vulnerable relatives if you wanted our postmen and postwomen to check on them. We collected their post and mail for free and delivered it for free. We provided free postage to nursing homes and care homes. At the beginning of the first lockdown, we gave free postage-paid postcards to every home. Everybody in Ireland sent postcards to each other. It turned around years of decline in personal letter volumes. In the second half of 2020, we saw our letter volumes increase, which is almost unheard of for a postal service. Inwardly we operated longer opening hours and ensured physical distancing, safety screening and hand sanitizing facilities at our post offices. We had dedicated hours for the elderly. We extended our range of financial services and provided almost $2.4 million to support small businesses through discounted parcel postage and direct mail support to grow their business online. Throughout the pandemic, An Post has been recognized as one of the best postal services in Europe. We have never had a stronger reputation than now thanks to our heroic frontline staff.
What has An Post done to incorporate digital technologies in its operations?
Most of our internal digital transformation has been in building the parcel e-commerce infrastructure so we can trade internationally. Although it sounds simple, Brexit made this extremely complex. 70 percent of our international parcels come from the U.K. We had to make sure we could process traffic through a new customs platform. Implementing end-to-end digital infrastructure to enable frictionless trade has been vital. We built our automation so that we could handle the 100-percent increase in parcel volumes.
Our external digital transformation has been in two areas. The first is our advanced track-and-trace system, which allows customers to follow their parcel, know when it will be delivered and make personal delivery choices. Having an advanced system is critical as people’s habits change through remote working. The second area is our financial services. We developed successful sub brands, such as An Post Money and An Post Commerce. An Post Money sits between big banks and the new Fintech companies to offer the best of both. An Post Commerce is our business-to-business brand, which will be recognized internationally. It is designed to help Irish companies trade more freely online around the world.
We are going to see a rapid acceleration of digital integration through 2021. Ireland is the fastest in Europe at accelerating digital technology into business processes. A key term is omni-channel, meaning both human and digital platforms. Although we provide services to customers over the phone and face to face, these human elements are seamless with digital interactions whereby you control your own commerce.
How is An Post engaging with the concept of sustainability in its operations?
Our first objective is tackling climate change. As in most countries, the postal network was built to deliver letters that are light and small. We must completely rebuild all our local delivery units throughout the country to accommodate parcels. We will be refurbishing our whole network for the next three years. This will all be completed to platinum standard, the top rating achievable for energy efficiency. An Post has the largest electric fleet of vehicles in Ireland. In early 2020, Dublin became the first city in the world to have zero carbon emissions from its postal deliveries. All our vehicles in Dublin are electric. By June 2021, all our deliveries in every city in Ireland will be electric. We aim to be carbon neutral by 2030. We are going to heavily invest in the circular economy around packaging. In Ireland, companies such as Smurfit Kappa–one of the world’s largest packaging companies–is a global expert in recyclable packaging. We want to do the same.
Our second objective has to do with social sustainability and is centered around the United Nations Sustainable Development Goals. We are developing the An Post Green Institute. This program will ensure less gender gap and promote diversity in the workplace. We intend to train all management on sustainable practices. The Green Institute will launch in 2021.
Our third objective revolves around sustainable communities. For example, we gave every homeless person a secure and personal address with our facility, Address Point. Those without can choose a proxy address and collect mail from a local post office. The address looks like a regular personal address. It enables people who are homeless or living in temporary accommodation to get on with their lives, seek employment, stay in touch with loved ones and deal with their children’s schools or medical appointments without fear of stigma or discrimination. It is an innovative, humane means of supporting the community and making a real difference to the lives of individuals and families. Additionally, An Post launched its Green Hub platform in 2020 to push for energy efficiency in the home. It simplifies the process of accessing great value loans to refurbish your house for higher energy ratings. It connects the customer with all experts that provide building and planning works and accesses state grants for retrofitting.
How deeply has Brexit affected trade between Ireland and the U.K.?
It is hard to assess the impact of Brexit because the ongoing COVID-19 pandemic has led to massive increases in trade, which masks any direct effects. Companies such as ASOS and Amazon do not have warehouses in Ireland and their parcels come from the U.K. We spent two years developing systems that allow big e-commerce companies to work in Ireland, and most of those companies are based in the U.K. We developed systems so that consumers can pay whatever customs charges are due on their U.K. online shopping at the checkout stage of their purchase. These charges did not exist before because there was free trade across the EU. Our systems enable easy and advance payment of charges so that goods can go straight through customs. Building this system has been onerous, but it is working extremely well. As a result, 95 percent of U.K. parcels are prepaid and go straight through customs to consumers. Although there are still challenges ahead, by and large we can manage. There have been some delays at the ports because of paperwork and bureaucracy, but all parties are working together to overcome any problems.
How is An Post leveraging partnerships to increase trade with global markets?
In terms of international collaboration, we opened our first offices in China. We expect to extend our services there as new supply chains with China are important. We want to develop international supply chains with various partners, whether that be DHL International or some of our Chinese partners. Postal services were set up and established to facilitate trade, and that essential purpose needs to be remembered. As the world becomes more complex, there are various trade wars and arguments. However, consumers should be able to trade in a frictionless way. We can provide that through collaboration and investment in our network.
What is An Post’s strategy as we move towards the end of the COVID-19 pandemic and economic recovery?
An Post will play a vital part in the recovery and opening up of Ireland. We will see a rise in profits because we will be able to trade more freely. We will be able to adjust pricing and do things that were delayed due to COVID-19 and Brexit. One major change is the improved e-commerce network that allows customers to manage deliveries out of home as much as at home. We will also be continuing discounts for small to medium-sized enterprises for the next 12 to 18 months.
The level of consumer financial savings rose significantly over the past year. We expect there will be a high level of consumer expenditure post-COVID. Our focus is on building efficient capacity. Our previous strategy was to build our system capacity to handle extreme parcel volumes by the end of 2024, but this was accelerated due to the rise in e-commerce last year. We have now reached that capacity. Continuing to grow that capacity into the future will be our key focus.
We are aiming to build up our financial service ecosystem through open banking. We have a banking arrangement with Bank of Ireland for An Post to provide banking services in every community for all banks. Many banks have closed branches or withdrawn from rural areas. In many communities, An Post is now the only network that provides banking services for all major banks through what is called agency banking. We do not compete with banks; we provide an additional service. We are seeing rapid growth in terms of the services that we provide.
The Irish economy has been on an extraordinary journey. Although we have had our ups and downs, the economy has proven to be quite robust. We have built a world-class postal service in Ireland that supported the country throughout the pandemic. For postal services, the years ahead look brighter and stronger.