Time may be up for Post Office Ltd

This publication http://www.rugbyadvertiser.co.uk/news/local-news/long-lawford-post-office-will-close-next-month-despite-battle-to-save-it-1-7178828 sums up the crisis that Post Office Ltd now face.

The COOP do not make decisions like this easily and without a good business case.   There are hundreds more similar examples even from Martin McColls who boast of having 600 Post Office outlets.  McColls have recently placed many of these on the market and not surprisingly they remain unsold.   Registered users of the business sales agency Christie’s web site get to see the recent financial performance of these outlets and it is clear that the strategy of combining high turnover newsagents and/or convenience stores is not the magic potion that POL promised NT would deliver.

The Newsagency business has been in decline for years as has the Post Office business.   What NT has now delivered is a 50% reduction in Post Office income to the retailer on top of the natural decline.   These CNT and Post Office outlets are now practically unsaleable to anybody but fools with money to burn.   NT promised to make the network sustainable and now it can be seen it has had the opposite effect.   POL continue to hide the true numbers but with over 1000 outlets on their own website for sale and hundreds more on other internet sites for sale it can be seen that not many people want to take on a post office these days and a significant number of those who already have one want to get rid of it.

There will come a time when the Post Office business sales market collapses completely and shrewd investors will see opportunity.   That opportunity could well be the footfall that the Post Office brings to the business but without the hassle of owning one.   For example purchase a Convenience Store with a Post Office except don’t take the Post Office on but rather invest in a franchise that provides Mailing services to the customers that previously used the Post Office.   These customers will be provided with a cheaper service for sure and not have to wait in line because the customer in front is being fed the hard sale for POL financial products (the same hard sell he got the week before)

Royal Mail Group may well consider such a mailing franchise as a replacement for dwindling numbers of Post Office outlets.  They certainly cannot afford to take the risk of the network collapsing inwards to its optimum commercial size as has often been mooted and indeed threatened by none other than POL themselves when applying for EU State Aid approval.  That optimum size will now surely be well below the 3600 they previously forecast.  Probably closer to 2000.  RMG will also have to consider the fact that if they don’t enter the direct franchise market then someone else will and that will be outside of their control.

An RMG franchise would offer the retailer the opportunity to provide Mail services to their customers at a significant premium to what POL pays.   No hassle from having to provide any underpaid financial services such as banking and more importantly not having to deal with the arrogance of POL management.   In my model the Retailer would purchase Postage credits from RMG (online) on a sale or return basis up front (quite a significant permanent cash flow advantage to RMG) The retailer would be part of a local hub of RMG outlets, and RMG would appoint one of them to act as an area supervisor for standards etc letting at least one retailer in the group earn more.   There would be very little management structure above that required and only a small team to supervise the Franchise structure as well as a help desk of course.   RMG could expand the network as they required and in doing so (with adequate demographic protection for the franchisee built in) would make them more attractive to the growth industry that is Click and Collect.

The key advantage though over all else that it would be a franchise that was sought after and when that happens you not only get a massive increase in customer satisfaction but you get a sustainable network which from a government perspective is in Private hands without the need for a subsidy.  There would also of course be the hidden advantage that politicians who to this day still think the Post Office is part of Royal Mail will not have to change their minds.

From the retailer’s perspective the risk reward factor is significantly reduced.   The high risk of armed robbery is reduced as their would be no additional cash held on the premises from banking and pensions etc.

In my opinion – there are greater minds than I considering this very option – that this proposal is no longer a possibility it is more likely a probability.

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