by Daniel Arrandale
The network transformation of the Post Office has not yet been fully rolled out, when the process is complete there could be huge opportunities for convenience retailers, should they chose to take advantage of the new Local format.
Over the next three years there is going to be radical changes to the way the Post Office network looks. An extensive modernisation process, which will give sub-postmasters the chance to move their businesses forward is already underway, and by 2015, the Network as we know it, will have changed forever. When it comes to the new Local format, this could be of great benefit to convenience stores.
Whilst the future shape of the Post Office or postal services network in a possible new era of competition is still to be defined in statute, it is almost inevitable that the days of smaller Post Offices are more or less numbered in their current format. It is widely known that the Post Office is seeking to reduce its costs, probably in an attempt to remain competitive in a future landscape that sees it forced to compete alongside other mail and postal service providers. An element that has already been identified as a cost-reducer is the core-payment element of the remuneration package currently paid to smaller Post Offices.
This leaves these Post Offices to increasingly rely on pure sales which, when situated next to other, better-placed, convenience stores offering similar products and facilities, will make the Post offices more or less redundant. We will undoubtedly see the demise of many poorly or under-performing Post Offices.
Whether by accident or design, this could open up a raft of opportunities for convenience stores, pharmacies, petrol stations, off-licences and their ilk to deliver new-style Post Office services at a fraction of the cost and using up a fraction of the space.
By the end of the summer it is anticipated that around 50 new main Post Offices and Post Office Local sites will be piloted across the UK in addition to the 16 main and 161 local pilot sites already in operation. The Post Office’s experiences from these pilots will help inform future roll-out plans.
Although at the moment the Post Office is working with sub-postmasters who express an interest in converting to a new operating model, and providing them with a £10k budget to invest in their branch, the most likely long-term outcome will see other retail outlets challenging to establish Post Office Local services.
At Christie + Co, we have sold a number of post offices this year, including, Scourie Village Store (Spar) & PO; Bargarran PO & News, Erskine & Kyle PO (details attached). We also have five others around Scotland currently under offer, so know how important they are to their local communities. However, it is a sad fact of life that without the core remuneration package, many will struggle to survive or will simply cease trading. Whilst the Post Office transformation alludes to working with existing sub-postmasters to transform their branches, the simple fact is that existing convenience outlets will be tailor-made to deliver Post Office Local services.
What happens next?
The Post Office phased programme of modernisation and investment begins in June 2012 and work is expected to continue to 2015, converting 6,000 existing Post Offices to the new Local or Main format, which is almost half of the current network.
Existing sub-postmasters have the choice of transforming their branch, staying as they are or alternatively leaving the network by relocating or selling their business. There is a tremendous opportunity for new operators to introduce the Local concept into their existing business.
The Post Office believes that the introduction of the Local concept into a retail business would help drive additional footfall, help retain and win new customers, provide a welcome additional income stream and add a new dimension to any business with many cross selling opportunities — by simply installing a Horizon terminal on to the retail counter, operated by retail assistants rather than dedicated Post Office staff.
It is anticipated that many business owners will look to introduce a Local concept, where there is no post office in the locality or the current small format office closes, or there is an opportunity to have both a Local format running alongside a Main format in an area.
Daniel Arrandale is Associate Director of Retail, Christie + Co.