Swiss Post is tackling challenges

New digital and international competitors are forcing their way onto the market. Customers expect individual and flexible solutions – around the clock, both physical and digital. Changing letter volumes, competition in the parcel market and the ongoing low interest rate situation in the banking environment are exerting a greater impact than ever on Swiss Post and require constant further development.

Swiss Post’s 2017–2020 strategy is based on our vision: “Simple yet systematic – Swiss Post.” Despite the successful implementation of measures such as the expansion of its parcel infrastructure and physical access points over the past three years, Swiss Post is facing a number of challenges of a magnitude it has never faced in its long history.

New digital competitors

Ongoing digitization has led to more competitors from outside the sector with new business models entering Swiss Post’s markets and competing with its core business. Platform-based business models in particular are gaining importance in the online retail and logistics markets. These new players are competing with Swiss Post by developing their own distribution networks, resulting in more intensive price and supply pressure in the logistics market.

The competitive pressure is also increasing in the Swiss banking market. For PostFinance, this is further aggravated by the fact that it is still not allowed to issue its own loans and mortgages. Driven by technological advances, new types of enterprise such as fintechs and so-called neobanks are emerging with the aim of bringing the traditional banking business into the digital age. Swiss Post must therefore offer physically and digitally integrated services and access points, and continue to develop its expertise in the digital world (for example, in online payments and smart data).

Customer expectations are increasing

New technologies are not just exerting an impact on the market and the competitive situation, but also increasing customer expectations. Smartphones make it possible to shop whenever and wherever we want, and online retailers are offering faster and faster delivery for less money or even free of charge. The resulting trend towards ever-increasing convenience for the customer necessitates continuous development and optimization of Swiss Post’s service range. The requirements are growing in particular with regard to delivery time, delivery flexibility, price and service quality (digital and physical).

For Swiss Post, the customer experience remains the most important thing.

Income and margins under pressure

The shift from bricks-and-mortar retail to online retail means that the cross-border parcel business in particular is growing disproportionately. Owing to the growth in digital commerce and ongoing internationalization, Swiss Post is benefiting from higher revenue. However, the pressure on prices is also rising, which is ultimately causing margins to fall. The strong volume growth is also forcing Swiss Post to construct additional infrastructure within the shortest time possible in order to continue meeting the high quality expectations. Swiss Post achieved an important milestone with the opening of the first new parcel center in Cadenazzo in the autumn of 2019.

Changes in the regulatory framework

Letter volumes are falling, and over-the-counter services are experiencing lower demand. This effect will increase. As well as the falling volumes, the low interest rate level in particular is hitting Swiss Post hard. Because PostFinance’s revenue is particularly dependent on the interest rate situation, it is heavily affected by the ongoing circumstances in comparison with other banks. But the changes also open up possibilities. Digitization, for example, offers new opportunities for more flexible public transport. Alongside partners within the industry, PostBus is working to develop public transport in Switzerland and make it more customer-friendly and efficient, to better utilize operating capacity and to participate in new mobility solutions.

Conflict between regulatory and political demands

Regulatory requirements and political initiatives are changing market conditions and influencing the options available to Swiss Post. As well as the changed market situation, the regulatory requirements in some submarkets have also been tightened. The universal service requirements in payment transactions have been increased, for example. Services must now be accessible to 90 percent of the population within 20 instead of 30 minutes on foot or by public transport. FINMA has also increased the regulatory capital requirements for PostFinance. While the former primarily affects the further development of the postal network, the latter calls for additional capital generation at PostFinance.

The declines in profit are exerting an increasingly negative impact on the Group, and its financial strength is decreasing. Swiss Post must therefore realign its strategy in the medium to long term in order to achieve its owner’s targets. An important success factor in this will be the achievement of a balance between the requirements of the market and the expectations of the public, employees and politicians.

Swiss Post will continue to achieve its transformation in close dialogue with regulators and the public.

Strategic thrusts:

To meet its goals, Swiss Post is pursuing four strategic thrusts in the 2017–2020 strategy period:

Transformation

Changing customer habits require ongoing development of the core business in order to continue creating a positive customer experience. The focus is also on the physical-digital merger and use of data, as well as solutions for business customers.

Growth

Growth from the core business and targeted, innovative development areas are the primary factors that will secure the future of Swiss Post. These include digital commerce and cross-channel communication.

Optimization

Interest rates, margins and volumes are coming under increasing pressure. Swiss Post is therefore increasing its cost efficiency. In Procurement, for example, this is achieved through a functional management model and optimized IT.

Regulatory framework

As a closely regulated company, Swiss Post finds itself trying to reconcile the conflicting demands of the market and politics. It wants to fulfil its universal service obligation in such a way that it reflects changing customer requirements. To do so, it requires entrepreneurial freedom. In dialogue with the regulators, Swiss Post is committed to creating the greatest possible benefit for its customers.

Our vision: Simple yet systematic – Swiss Post.

“We connect the physical and digital worlds, setting new standards with our products and integrated solutions. We make it easier for our customers to operate in today’s complex environment, giving them greater scope to succeed.”