Letter volumes are in decline. Foot traffic at post offices is down. These two trends are key drivers behind postal operators’ quest to grow their returns business.

Postal operators are pivoting from a letters-focused business to a parcels-focused business, both in their delivery networks and in the post office networks.

Postal networks aren’t one-way “pipes”, and returning parcels via the postal network is hardly a new concept. What differs today compared to, for example, shoppers returning items purchased via mail order, is the role of technology and the value-added services offered via postal operators.

The Changing Postal Scene

The International Post Corporation’s Global Postal Industry Report 2023 found that more and more postal operators are diversifying their income. According to the report, almost 71% of postal operators (34 out of 48) derived less than half of their revenue from letters in 2022, up from 48% of postal operators in 2017.

Postal operators are investing in sectors that build on their core capabilities and expertise, such as e-commerce logistics.

The postal delivery and retail networks have traditionally offered first mile and last mile services, so incorporating e-commerce returns into this offering makes sense for postal operators. The challenge is to build on this infrastructure, using technology, to provide increasingly consumer-centric e-commerce returns services.

According to Escher Group’s Future of Posts 2023, postal operators are looking to offer alternative locations and home pick-up for returns, in addition to consumers lodging their e-commerce returns over the post office counter.

The US Postal Service nominated growing its e-commerce returns business as one of the goals of its Delivering for America 10-Year Plan and has stated it aims to be a provider of choice in the returns market.

“The postal service’s lower-cost returns services dominate in the low-value goods segment. While not as sophisticated as FedEx and UPS, their legacy network of nearly 30,000 post office locations with parking and easy ingress and egress, make the USPS a convenient option for simple returns solutions by the consumer,” says shipping consultant Dean Maciuba, Managing Partner, United States, for Crossroads Parcel Consultants.

Despite growth in the returns market, a recent USPS OIG report found that the US Postal Service’s Parcel Return Service volume has declined in recent years.

Returns at the Post Office Counter and Label-less Returns

The post office counter is an integral part of the postal network. E-commerce return volumes are a growing source of foot traffic for post offices.

“We’re seeing more and more returns being lodged at the counter after major seasonal and shopping events,” says Bob Chizzoniti, Director of POAAL, the national association for post office owners in Australia. About 80% of Australia Post’s post office network consists of privately-owned and operated Licensed Post Offices, which operate similar to franchisees.

“After Christmas 2023, I personally witnessed a boom in the number of returns we were dealing with at the post office. We were filling Australia Post’s vans with returns in the afternoon.”

Barcode scanning technology combined with smart phones enables fast processing of returns at the post office counter.

Amazon customers in Australia can return purchases via Australia Post at a post office, at a parcel locker, or by posting the item in a street posting box. Label-less returns are available at the post office. When customers select this option, a prepaid Australia Post return code is generated.

The code will be activated for use and can be scanned at the post office from the customer’s smartphone when the customer returns the item. Customers receive a proof-of-lodgement receipt.

When the barcode is scanned, it generates a shipping label on the office label printer. This label is then affixed to the parcel to be returned.

Portuguese postal operator CTT recently launched a new label-less returns service called Devolução Simplificada – Simplified Returns. Under this service, merchants receive returned products within one business day after the items were returned to a CTT delivery point.

CTT’s delivery point network has over 3000 points of presences across Portugal, including post offices, PUDO points, and parcel lockers.

Collecting Returns From the Doorstep

Swiss Post is one postal operator that offers to collect e-commerce returns from the customer’s doorstep via its pick@home service. The Swiss Post offering is facilitated by the fact that most Swiss homes feature a parcel box, where parcels can be delivered and collected.

Automated Returns

A growing number of postal operators are installing automated parcel returns technology in their post offices.

Austrian Post has implemented a self-service kiosk which enables unattended e-commerce returns. These self-service kiosks are installed nationwide in Austrian Post’s 24-hour self-service post offices, as well as selected regular post offices. There are over 500 kiosks operating in Austrian Post’s network, enabling customers to transact with the postal operator 24/7.

The kiosks enable customers to purchase postage, with service options presented based on the weight and size of their parcel. For e-commerce returns, customers can scan a pre-printed parcel barcode or a mobile QR code to print the shipping label at the kiosk. Parcels are then dropped into the parcel chute, and a paper acceptance receipt is printed.

Austrian Post’s kiosks are deployed alongside parcel lockers for parcel pick-up, and other automated services such as cash machines. The self-service post offices give customers the ability to return their unwanted e-commerce purchases round the clock.

Other postal operators are installing unattended returns drop-off points inside post offices, which allow for customers to quickly deposit e-commerce returns. Some have barcode scanning capability, while others are simply drop-boxes which staff members clear during the day.

Value-added Services

Post offices offer financial services, proof of identity services, passport services, as well as being responsible for the integrity of the mail. It makes sense to build on this trustworthiness to offer value-added services in e-commerce returns.

These services can be as simple as providing packaging for items to be returned, through to the counter operators having a checklist of items that are to be returned to ensure all are packed in the parcel before it is sealed.

It may be impractical for post office counter operators to inspect individual returns items for signs of damage or wear, or to assess if the returned items are in a fit state to be resold. Such services may be more practical at logistics centres where there is more capacity to do such inspections.

Austrian Post self-service kiosk (photo courtesy Escher Group)

National and International Coverage

The ubiquitousness of the postal network is one of its key strengths. Posties visit our streets up to six times per week, and post offices are located in communities in every corner of the nation. No homogenous network can match it for reach.

The international postal network make cross-border returns services possible. In a world where shoppers think nothing of purchasing from overseas, the demand for cross-border returns solutions will no doubt continue to grow.

Competition

The USA is a prime example of the competition postal operators face in winning e-commerce returns business. FedEx and UPS are both active in this space.

“UPS has nearly 5000 UPS Stores in the US and has led the way in label-less/box-less returns solutions,” says Dean Maciuba of Crossroads Parcel Consultants.

While UPS has bought Happy Returns, leaving FedEx out of the picture, Maciuba predicts that FedEx will refocus on consolidated returns solutions based at their FedEx staffed locations, which should allow FedEx to reduce the overall cost of the returns process for e-commerce merchants.

In Europe and other parts of the world, local postal operators find themselves in competition with PUDO (pick-up drop-off) networks, often operating out of local businesses such as florists, news agencies, or general stores.

A key differentiator between the post office network and third-party PUDO locations is that post offices make parcels their business, with dedicated secure parcel storage areas. PUDO points, on the other hand, may offer longer opening hours than nearby post offices.

Sustainability commitments

Postal operators worldwide are making commitments to reduce their environmental impact, through initiatives including fleet electrification, installing solar panels on logistics centres, moving parcels by rail, and route optimisation.

Carbon measurement tools for parcel consignments are becoming more and more sophisticated, so customers will have increasing visibility over the environmental cost (in delivery emissions, at least) of their e-commerce returns.

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Ian Kerr
Ian Kerr is the founder and host of the Postal Hub Podcast, the weekly podcast for the global postal and delivery sectors. His lifetime in the postal sector and the international reach of the podcast allows Ian to connect with world postal and delivery leaders. He has a deep knowledge of the Australian postal network, both in retail and delivery, through his many years working for the Post Office Agents Association Limited (POAAL).