Hong Kong postal reform is urgent – Hong Kong Economic Daily – Newspapers – Comments

Recently, Hongkong Post has been criticized by the Audit Commission for its failure to take responsibility for its own profits and losses, poor efficiency, and declining profits from its non-local e-commerce business. For example, the total comprehensive loss in the past five years has ranged from NT$77 million to NT$244 million. In fact, Hongkong Post has been operating under the Post Office Trading Fund (Post Office Fund) since August 1995. It has been unable to achieve the target rate of return for many years, thus requiring government assistance. The author attempts to explore the problems faced by Hong Kong Post and its response options from three aspects: changes in market demand, operational efficiency, and changes in non-local e-commerce business.

Email volume plummeted, unable to respond to evening demand

The change in market demand refers to the sharp decrease in the number of local mail items. For example, in 2014/15, Hong Kong Post processed 1.212 billion pieces of mail, and local mail items accounted for 1.038 billion pieces; however, in 2022/23, the number of mail items processed by Hong Kong Post dropped to 7.73 billion pieces, while there were only 649 million pieces of local letters. The total volume of letters processed and the number of local letters have dropped for five consecutive years. In the final analysis, the main reason for the decline in parcel volume is the decline in delivery demand for advertisements, business letters, and printed matter. Banks and other institutions have also reduced overall mailing due to paperless and cost considerations. In recent years, the increase in demand from e-commerce has not been enough to make up for the decline. In addition, local delivery has also been impacted by companies such as SF Express. These impacts are the fundamental reasons for the decrease in local mail.

In terms of operational efficiency, according to Hongkong Post’s latest annual report, employee salary expenses account for nearly 50% of total operating expenses. Despite the decline in the number of mails processed, staff expenses have increased instead of falling compared to five years ago. This means that the output invested by new employees has not brought positive returns to Hongkong Post. In addition, during the epidemic, the cost of air and sea transportation increased sharply, but Hong Kong Mail failed to pass on the additional costs in a timely manner, such as levying “epidemic surcharge” on the sender. As a result, you can only bear the loss alone, or simply suspend the service. At the same time, the current post office opening hours and postman delivery hours are limited to daytime hours, but do not meet the demand for night services, which is significantly different from the practices of other delivery companies. Finally, there are several questions for management to consider: Are the number of postmen and other employees adjusted according to the volume of mail processing? Are current delivery methods such as postman delivery and new forms such as self-service mail stations effective in reducing delivery costs? How to strike a balance between service commitment (such as delivery time) and affordable postage? Will you consider making the organization flatter and more goal-oriented?

Poor customer experience, “Smooth Shipping Service” is out of service

In recent years, the development of overseas e-commerce has undergone rapid changes. For example, some mainland e-commerce platforms have chosen to directly connect with destination postal agencies in recent years, instead of using Hong Kong Mail as an intermediary to provide international postal or dedicated line services. Specifically, the customer arranges for the e-commerce parcel to be shipped directly to the destination, and the postal agency at the destination is responsible for customs clearance and delivery. For customers, the cost can be reduced by 10% to 20%, and the time limit can be shortened by 1 to 3 days. In addition, the “Vantage” service promoted by Hong Kong Post a few years ago has also been discontinued. The reason for its failure was not only poor customer experience, but also insufficient supervision of cargo declaration, which resulted in many goods being shipped. It was detained by the customs at the destination and the delivery time limit was extended indefinitely during the epidemic. As a substitute for international postal services, the “Smooth Shipping Service” product has inherent shortcomings and is also affected by the epidemic. It can be said that it was born at the wrong time.

The key to Hong Kong postal reform lies in whether policy directions and services keep pace with the times. From the analysis of operating data, more than 90% of Hong Kong Post’s revenue comes from traditional postal services, which are indispensable public services (Public Utility Service) provided by countries or regions to citizens. The author believes that the government can consider returning traditional local postal services to government departments, and operate other non-main and peripheral businesses as government-owned private enterprises, or cooperate with other logistics companies in air transportation resources, warehouse management, etc. This will not only maintain the unique status of the postal business, but also provide greater flexibility for postal-related businesses, develop more innovative businesses, and thereby improve operational efficiency. At the same time, the government can also consider allowing Hong Kong Post to actively invest in local or international logistics companies to focus on e-commerce logistics, warehousing, cold chain and other services, and focus on emerging countries such as Southeast Asia and countries along the Belt and Road, thereby increasing non-traditional postal delivery proportion.

Learn from foreign postal services to explore business opportunities in various fields

Finally, the government can also learn from the reform experience of foreign postal agencies and learn from their strengths to offset their weaknesses. Take Singapore, Japan, and the British Post as examples. They combine their own advantages with innovative thinking to explore business opportunities in logistics, e-commerce, finance, insurance and other fields, and remove policy obstacles for postal reform. For example, Singapore Post has many subsidiaries engaged in different businesses, providing services including warehousing logistics, shipping and dedicated lines for companies in the Asia-Pacific region. In recent years, there has been greater investment in logistics companies in Australia, increasing the proportion of non-postal services to 70%. France Post is even more aggressive. It not only actively acquires upstream customers such as eShopWorld, but also invests in logistics companies in different regions such as “King of the Middle East” Aramex, e-commerce logistics companies Asendia and Lenton, etc., in an attempt to build a global logistics network. If there is a need to amend the Postal Ordinance or change the model of the trading fund (Postal Fund), the government should review it based on the actual situation and prospects of Hongkong Post. As for the future development of Hong Kong Post, it depends on the wisdom of the relevant authorities.

▲ The author believes that the key to Hong Kong postal reform lies in whether policy directions and services keep pace with the times, and also depends on the wisdom of the relevant authorities. (File picture)