Courier companies get innovative to beat digital era

Kampala
In the 1980s, Mr Sam Matsiko had a female pen pal in Germany. The two friends kept in touch by writing and posting pleasant letters to each other to keep the bond alive.

Mr Masiko, 52, then lived in Rukungiri in western Uganda. He would write his letters then start the long journey of sending them to his friend. First, he delivered them at the sub post office of Posta Uganda, which was by then part of the Uganda Post and Telecommunications Corporation (UPTC). The sub post office would then move the letter to Kampala, before transporting them to Entebbe International Airport for delivery in Germany by air. The reverse would happen in Germany because the pen pal had to go through the same experience as Mr Matsiko.

The ex-post office worker told Business Power that it would take him at least one month to receive a response from his pen pal. And it was not until he received her reply that he was sure she had received his message.

New era
“But with technology, why would I have to go through that?” he asked. “These days we have mobile phones and e-mails. If I want to communicate to anyone abroad, I use SMS (Short Messaging Services) or I call them on my phone,” Mr Masiko said.
Mr Masiko’s story is not different from stories told by thousands of other Ugandans and billions of people in the world. With the advent of mobile phones hooked onto wireless broadband (high speed and capacity internet), global communication has made a great leap.
Today, if Mr Masiko was still in touch with his pen pal, they would be able to keep in touch either by google talk, Facebook chat, Skype or Yahoo messenger instantly by way of phones or computer connected to the internet.

But as consumers get ‘thrilled and hooked’ by today’s digital communication systems, courier companies that carried the bulk of messages and office documents are reeling from the effects of electronic communication. Uganda has a total of 25 local, international and regional courier services including: Skynet, DHL, Daks, Nation Courier, and FedEx International among others.

While the number of the players has increased over the last 10 years from just eight firms, the companies are grappling with the decline in the demand for their services by individual consumers.

Technology bug
In a recent interview with Business Power, Mr James Arinaitwe, the managing director of Posta Uganda, said the company has witnessed a decline of about 50 per cent in both mail volumes and revenues.
“More people now use e-mails and faxes as opposed to writing letters and there are fewer young subscribers for Post Office (P.O) boxes,” Mr Arinaitwe said. Posta is a public corporation which also faces aggressive competition from more efficient and net worked international and regional firms, which have snapped up some of its market share.

To fit in the digital era, Posta has invested in 20 new communication centres across the country, to offer internet, e-mail, photocopy, and e-fax facilities at competitive rates. The investment has been made to facilitate and compliment Posta’s traditional business. It has also automated its traditional money order service and now money can be transferred more quickly, in addition to increasing its delivery vehicles and motorcycles.

There’s an old saying that if you cannot beat them, join them. This is exactly what the courier companies are doing to survive the digital era adjustments.

But Posta is not the only victim of the inevitable change to modern means of global communication.

Mr Tonny Shawn Mugisha, the head of sales and marketing at East African Courier, (EACL) said the company has also witnessed a decline but only in international mail volumes. Skynet and FedEx International executives’ preferred not to comment on their businesses when contacted.

But globally, the number of posted letter items fell from 5.48 million letter-post items to 5.47 million in 2007 according to the available postal market data provided by the Universal Postal Union (UPU).

In Uganda, letter-post items, which constitute the largest part of postal revenues grew from about 29,000 to 30,000 in 2007.
Mr Mugisha said while information and communication technologies (ICTs) have significantly reduced the volume of the courier business globally, the situation is different at home. This is because many companies still have to send hard copies of documents, as well as stuff to repair.
“The local courier business is really growing very fast because companies are outsourcing their delivery of local mails. Our biggest customers are the banks, insurance companies, utility companies, NGOs,” he said.

EACL’s revenues are also better than they were nine years ago despite the decline in usage by individuals. The growth in local mail business is enhanced by the vibrant Uganda economy, which registered a real gross domestic product growth rate of 7 per cent in 2008/9 and is projected to rise to 8 per cent in 2011.

But the growth in revenue has not guaranteed the companies comfort to sit back, relax and watch the revenue grow further. They are getting more innovative to keep up with the pace of global electronic advancements.

“We are trying to find out where we can make money and meet the needs of our customers,” said Mr Mugisha.

EACL, which is a regional service provider, has increased its footprint in Uganda to 55 branches to be able to deliver mails like electricity and water bills to people’s homes across the country.
“Our footprint places us in a good position to serve our clients,” he said.

In addition, the company is putting up the “track and trace” system whereby its clients are able to track their shipment in the local market. It also reduces the risk of loss of parcels. International companies and to some extent Posta Uganda offers the service to their customers. EACL has completed 60 per cent of the work and is expected to launch the service by the end of this year.

Mr James Cokas, the sales manager of Nation Courier a regional service provider, said the company is also expanding into logistics to survive the electronic wave.

“We have also reduced our delivery time to at least 12 hours within Kampala and 24 hours around the country. And we keep up dating our clients about the delivery process of their mails until they are delivered,” he said. And like EACL, it is also widening its reach to all towns in Uganda.

Global picture
Globally, the Universal Postal Union sees growth opportunities for courier companies in advertising mail.

“Direct mail represents a lucrative market and an effective way to counter balance the effects of electronic substitution on traditional letter-post volumes,” says a report from the union.

Seven years ago, advertising contributed almost 30 per cent of the total letter post in the industry and the graph is aiming for the sky. It is expected that direct mail will be further boosted by global economic growth, domestic trade and also by rising levels of education in certain regions.

“Forecast of mail items containing goods is also positive, particularly in the international service, economic growth and the rise in online sales linked to e-commerce will play a key role,” the report reads in part. More opportunities are also seen in transportation of passengers and goods.

Industry challenges
Besides facing decreasing consumer demand from individuals, the companies also face the problem of “under the table” operators thereby causing unfair competition, according to Mr Arinaitwe.

“They spoil the image of genuine courier companies because they easily go underground when they fail to satisfy demands of their customers,” he said.

Postal mail business is also dogged by customer complaints of mail delays, thefts and violation occurring at various points in the mail chain locally as well as abroad.
But sector players are working with the Uganda Communication Commission to clamp down on the illegal operators. To overcome mail delays, Posta is also expanding the scope of its “track and trace” software to speed up its ability to investigate any clogs in its distribution chain, according to Mr Arinaitwe.
With increasing business both domestically and globally, postal services have been handed a new lifeline despite the surge in electronic communication. This means that courier companies will remain relevant in future because some business cannot do without their services.