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Austrian Post–high-tech and service quality

Austrian Post is indispensable. One cannot imagine everyday life without it. Just think of letter mail, parcels, PSK banking services, newspaper deliveries, advertising mail and the Express Mail Service (EMS). Each year, Austrian Post delivers about 5.6bn letters and direct mails in Austria, along with 41m parcels, about 650m newspapers, serves about 1m banking customers and generated revenues of more
than EUR 2.4 bn in 2008. Austrian Post is not only a reliable logistics provider and operator of one of the largest retail networks in the country, but also ranks as one of the largest and most value-enhancing companies in Austria.

The basis for this success does not lie in the centuryold tradition of Austrian Post, but rather in the decisions made during the last few years and the new course set by the company. In 1999, Austrian Post initiated an unprecedented transformation process, which in a short time managed to turn the company into what it is now, namely a successful publicly listed company, one of Europe’s most modern postal
service providers and a dynamic Austrian logistics company with a strong customer-oriented approach. As a result, Austrian Post was converted from a purely public utility into a modern service company, which achieves top performance in European comparison, not at least as the result of personal commitment and hard work of its employees.

The cooperation with PSK which has thrived for many years was further intensifi ed in 2007 by a 5% stake acquired by Austrian Post in BAWAG PSK. In addition to the sale and marketing of banking services through the branch network featuring 500 specially trained
banking consultants stationed in the branches, about 60 mobile consultants are working throughout the country. This approach has delivered real benefi ts. In 2008, 900,000 BAWAG PSK banking customers made some 10.3 million cash deposits.

This transformation of Austrian Post has also been made possible by considerable investments in the com pany’s logistics infrastructure, the underlying core of the company. State-of-the-art sorting centres, a high performance transport network and a highquality delivery service ensure that all mail items are delivered at the precise doorstep of the recipient within the shortest possible time.

High-tech and sophisticated logistics ensure delivery targets are met
In the last few years, the logistics infrastructure of Austrian Post has been restructured and streamlined. Delivery quality has improved enormously, so that more than 96% of all letters reach the intended recipient on the next working day. Each day, an average of 4.4m letter mail items are picked up at 22,000 drop-off points (letter boxes and branches) and transported to 3.9m households and companies throughout Austria. The logistical challenge is that only a few hours are available after postal pick-up to allow the mail items to be ordered, sorted, transported in several phases and delivered on the next working day. The underlying factor for this achievement is the logistics centres of Austrian Post, located throughout the country. The sheer dimensions are impressive. For example, a total of 1,200 employees work around the clock in three shifts at the Vienna Letter Center, sorting mail items in a hall which is as large as seven football fi elds. Conveyor belts which total five kilometres in length first take the mail items from 57 loading ramps, which collect the unsorted mail picked up and transported by the delivery vehicles from the letter boxes or collected according to size from the branches or in pallets from large customers. The mail items are sorted according to postal codes, and then transported by the vehicle fleet to the other sorting centres and delivery bases, where they are assigned to the respective delivery districts or directly to the responsible delivery staff.

Innovation management

Customer requirements and the demands placed on products and services offered by postal companies are continually changing. Austrian Post is responding to this challenge through the ongoing upgrading of its products, services and processes as well as internal facilities and equipment. In 2008, the company implemented a broad range of solutions, enabling customers to save time, reducing costs and improving the working environment of employees.

The individual steps in this process must be optimally coordinated and harmonised, and be perfectly intertwined like the gear wheels of a mechanical clock mechanism. For example, unproductive standstill periods at the terminals for the 300 delivery vehicles transporting mail items to the sorting centres should be avoided. For this purpose, Austrian Post has set up a route database. This behind-the-scenes, hightech
management instrument is designed to ensure that route planning is improved, managed, more precisely coordinated and the data effectively compiled. It also makes sure that quick responses are initiated to counteract any undesirable developments. At the same time, measuring systems in the logistics centres monitor the door-to-door delivery times for letters, in order to maintain an overview and optimise the
logistical processes.

Top performance in European comparison
Austrian Post’s customers are always the focal point of its efforts. For this reason, Austrian Post is successfully being transformed from a monopolistic company to a market leader. Austrian Post ranks among the best European postal providers in terms of its overall performance. However, the tariffs it is allowed to charge are in the lower mid-range category, enabling Austrian Post to offer its customers an excellent
price-performance ratio. Despite this achievement, Austrian Post continues to focus on ensuring an ongoing improvement in productivity in order to maintain and further increase the company’s competitiveness. Three-quarters of Austrian Post’s total revenues are already generated in sectors which have been completely liberalised.

Expansion


Austrian Post does not only operate in Austria. Up until 2001, the company was exclusively focused on its domestic market. Its international
expansion drive started in the same year. Austrian Post has systematically invested in acquisitions since its Initial Public Offering in May 2006. The stable business in the domestic market is complemented today by attractive positions in growth markets. Austrian Post now has parcel services or direct marketing subsidiaries in Slovakia, Hungary, Serbia, Bosnia and Herzegovina, Montenegro, Croatia, Germany, the Nether lands and Belgium. It has also established itself as a signifi cant player in these markets or market segments. Niche markets for new postal services have been successfully occupied. On balance, more than 30% of total Group revenues was generated outside Austria in 2008.

Company overview

Mail Division

The Mail Division comprises three business areas, namely Letter Mail, Infomail and Media Post. The division’s core business consists of the acceptance, sorting and delivery of letters, postcards, addressed and unaddressed direct mail items, newspapers and regional media. Austrian Post delivers mail each and every working day to every delivery point in Austria. This range of services is complemented by new business services along the value chain for business and advertising mail (e. g. analysis, consulting and planning, address management, production, mailroom
services, intelligent scanning and response management).

Lettermail
■ Acceptance of letter mail at approximately 22,000 postal pick-up points in Austria
■ Delivery of an average of 1.1bn letters annually to 3.9m households and companies in Austria
■ Highest quality, daily, nationwide services (more than 96% of domestic letters are delivered on the next working day)
■ Mailroom services for large customers

Infomail
■ Delivery of about 790m addressed direct mail items annually in Austria (including Sponsoring.Post)
■ Delivery of roughly 3.7bn unaddressed direct mail items annually in Austria (including regional media)
■ Delivery of approx. 2.0bn unaddressed direct mail items annually in Slovakia, Hungary and Croatia
■ Preparation of geomarketing scatter plans for addressed and unaddressed direct mail items
■ Services and related services in the fi eld of direct marketing (address management, lettershop services,
market studies, etc.)

Media Post
■ Delivery of about 650m print media (newspapers and magazines) throughout Austria
■ Subscription marketing services and related services


Parcel & Logistics Division

The Parcel & Logistics Division is represented by its own subsidiaries in 10 countries. In all countries, the portfolio of products and services (parcels, pallets, express) is tailored to individual market requirements. The combined freight business area (acceptance, transport and delivery of parcels and pallets integrated into a particular shipment) as well as temperature-controlled logistics were expanded in 2008. Combined freight services are offered in 21 European countries on the basis of Austrian Post’s partnership with the EURODIS network. Austrian Post and its subsidiaries have achieved an outstanding market position in each of these markets, which is attributable to the availability of a nationwide infrastructure and a broad spectrum of high value services.

Domestic market of Austria
■ 41m parcel shipments annually
■ 7 own sorting centres
■ 13 own delivery bases

Speciality logistics market of Western Europe
■ 51m shipments per year
■ 38 trans-o-flex locations
■ 45 Thermomed locations
■ 7 logistics warehousing locations

B2B market in South Eastern and Eastern Europe
■ 9.0m shipments annually
■ 66 logistics locations
■ 6 countries: Slovakia, Hungary, Serbia, Montenegro, Bosnia and Herzegovina, Croatia

Branch Network Division

The Branch Network Division operates a high performance, nationwide distribution network throughout Austria, consisting of more than 1,500 postal service points. These are complemented by 400 postal pick-up points and postal service points. The product and service portfolio primarily encompasses postal services, banking services and a broad spectrum of retail products.

Postal services
Handling of the products and services of the Mail Division and the Parcel & Logistics Division
(e. g. PO boxes, holiday mail holding service and franking), customer care services for SMEs and
the sale of philatelic products (commemorative stamps).

Retail Products
A broad range of telecommunications products (e.g. mobile, fi xed line and Internet) as well as
post-related retail products and services, such as paper, stationery, offi ce products, IT and entertainment
products (CDs, DVDs), and lottery products.

Banking Services
Sale of PSK banking services in the following fields: savings accounts, loans, private retirement
plans, insurance, securities and home loan savings products.
■ 1,512 postal service points for postal and banking services ensure nationwide service
(of which 1,302 company-owned branches and 210 postal partner offices)
■ 3 mobile post offi ces and 2 philately shops
■ About 400 postal pick-up points and postal service points offering reduced and standardised postal
and banking services

Successful internationalisation and growth

Since 2001, Austrian Post has been focusing on the ongoing optimisation and expansion of its core business on the domestic market of Austria as well as the targeted expansion in neighbouring countries in Eastern Europe, South Eastern Europe and Western Europe as well. The top priority has been to expand into markets with which Austria has extensive trading ties, in particular services in the fi elds of parcel logistics
and advertising mail.

The decisive factor underlying Austrian Post’s investments in South Eastern and Eastern Europe are the opportunities offered by these increasingly prosperous markets. The selective acquisition of existing com panies is an integral component of the corporate growth achieved by Austrian Post.

Numerous subsidiaries in the parcels, direct mail and postal services segments
Austrian Post is represented in the Belgian, Bosnian, German, Croatian, Montenegrin, Dutch, Serbian, Slovakian and Hungarian markets with parcel services companies, and with firms specialising in unaddressed direct mail items (advertising mail) in Hungary, Croatia and Slovakia. In addition, Austrian Post has set up its own sales subsidiary in Germany, Austrian Post International, which provides advisory services particularly to German firms in developing international postal dispatch solutions.

On the basis of its consistent expansion policy, Austrian Post has become increasingly independent of developments on the Austrian market. In the year 2006, Austrian Post generated less than 3% of total Group revenues from its operations outside Austria. In the meantime, this fi gure has risen to over 30% in 2008, and more than 75% of revenues in the Parcel& Logistics Division is now generated abroad. On balance,
Austrian Post has become a relevant regional player and an interesting partner for international cooperation. The focal point of its expansion drive is to extend its existing distribution network and implement further acquisitions to secure its position as a full service provider for expanding customers. This strategy lays the groundwork for Austrian Post being able to optimally support customers in their own expansion efforts abroad, particularly in South Eastern and Eastern Europe.

Occupy attractive niche positions and further develop competencies
Market niches arising as a consequence of changes in the European postal market offer the opportunity for Austrian Post to position itself as offering specialised postal services such as speciality logistics, or as a full service provider. In turn, this has strengthened Austrian Post’s
position in the light of growing competition, and opened up new market opportunities despite stagnating revenues in the classical letter mail segment.

Expansion in growing segments
The domestic market offers attractive market opportunities for Austrian Post. Austrian Post has already positioned itself in various submarkets, for example, the delivery of unaddressed direct mail items or transporting parcels to business customers. Austrian Post also believes its domestic market offers considerable growth potential in the future.

 

Excellently positioned in attractive markets


Country Company1 Field of activity
Austria Austrian Post Letter Mail
    Addressed direct mail items
     Media Post
  Austrian Post, feibra Unaddressed direct mail items
  Austrian Post Express and parcel, combined freight
  Scherübl Transport, 74.9% Temperature-controlled logistics
  Scanpoint Scanning/archiving of document
Germany trans-o-flex, trans-o-flex Thermomed Combined freight, speciality logistics, temperature logistics
  meiller direct Direct marketing services provider
  Scanpoint Scanning/archiving of document
  Austrian Post International Germany International Mail
Belgium VOP Combined freight
Netherlands trans-o-flex Nederland Combined freight
Slovakia Kolos Unaddressed direct mail items
  SPS, In Time Express and parcel, combined freight
  Scanpoint Scanning/archiving of document
Czech Republic meiller direct Direct marketing services provider
  Kolos Unaddressed direct mail items
Hungary feibra Magyarország Unaddressed direct mail items
  Road Parcel Parcel and speciality logistics, combined freight
Serbia City Express Express and parcel, combined freight
Montenegro City Express Montenegro Express and parcel, combined freight
Bosnia and Herzegovina 24VIP Express and parcel, combined freight
Croatia Weber Escal Unaddressed direct mail items
Croatia Overseas Trade Express and parcel, combined freight
1The precise shareholding is only listed if Austrian Post has less than a 100% stake.

The future of postal business

Current trends are significantly transforming society and the communications behaviour of people, thus also changing the future perspectives for postal companies. Several of these trends have already had a major impact on the postal market, whereas other trends will manifest themselves in several years’ time. Austrian Post is actively facing the challenges posed by the new requirements, business areas and services that are emerging, in order to successfully cope with the future.

Effects of social trends on Austrian Post

Individualisation of the product and service offering:
The diversity of life styles and forms of relationships has led to an increase in the number of households and thus to an individualisation in
mail volumes. The growing trend toward direct marketing opens up interesting opportunities for Austrian Post, including the support and training
of customers in creating strongly individualised communications vehicles. Austrian Post and its customer-oriented branch network can potentially play a major role in these efforts.

More convenience and excellent service:
The population in Western industrialised countries is increasingly aging. At the same time, elderly people are resembling their younger counterparts more and more in terms of their needs and requirements. They are increasingly demanding convenience and excellent service. This development will require Austrian Post to offer flexible solutions and customer care at the highest level of service quality.

Modern work structures:
The conventional career paths pursued by people in the last few decades are being replaced by more innovative career models featuring higher flexibility and the willingness to change. For one thing, this represents a major challenge to Austrian Post to adapt the existing structure of its staff to the new situation. In addition, it offers the opportunity to professionally take advantage of the creative potential of employees to support the further development of the company.

Increasing flexibility:
Mobility is rapidly expanding due to changes in family structures and in employment as well as the quest for individualisation. In addition to higher demands placed on postal delivery services, postal service providers also have the opportunity to strongly establish themselves as a kind of mobility manager in the lives of their customers.

Focus on "health care":
Growing sections of the population are clearly striving to adopt more sustainable life-styles in the spirit of ensuring a greater ecological orientation and in line with ongoing wellness and fitness trends that have shaped society for years. The future demand for healthrelated
services opens up interesting opportunities for Austrian Post on the basis of the company’s proximity to private customers. Trans-o-fl ex
is optimally positioned in the health-care market and is profi ting from this development.

Austrian Post responds with attractive products and services

Austrian Post’s approach has undergone a far-reaching transformation in recent years. Once serving as a simple deliverer of news and information, the company has evolved into a full-service provider. Today Austrian Post sees itself as a partner to its customers
along the entire value chain. All important steps along the value chain of physical information exchange are offered by a single provider, from the design of letters and direct mail items to response management and the integration of incoming mail in internal fi ling systems. The focus on delivering physical letters is also losing importance. Austrian Post is not only offering its customers attractive new services and thus supports them in their own development, but is safeguarding the viability of its own future by extending its value chain.

■ Address management: The address management services of Austrian Post offer various high quality services such as Address.Check or the Address.Shop, to help customers verify and update their address databases.

■ Document management: The services provided by Austrian Post do not begin with the acceptance of finished letter mail items for delivery, but earlier, with printing and enveloping. The customer only has to provide the particular data medium containing the addresses and contents. Austrian Post will do the rest.

■ Direct mail production: State-of-the-art technologies and printing facilities ensure the faultless printing of any kind of document, such as advertising mail and insurance policies, and guarantee their delivery.

■ Scanning and digitalisation: The electronic document fl ow enabled by the scanning and online distribution of incoming mail items leads to considerable time savings, cost reductions and greater transparency.

■ Mailroom management: Austrian Post supports customers in optimising their internal mailrooms, from assuming responsibility for individual processes to the entire processing of mail items. Austrian Post services are tailored to the specifi c requirements of the individual customers, and also encompass enhanced services such as security scans, individualised postal processes, messenger services and the digitalisation of mail items.

Trends in the postal market

The ongoing further development of the company and its range of services is designed to maintain the competitiveness of Austrian Post. Accordingly, Austrian Post reflects the latest trends and new challenges which have become evident in the postal sector.

Consolidation:
The full-scale opening of Europe’s postal markets and the increasing tendency of customers to operate on a regional or multi-regional basis will likely lead to a consolidation process in the medium-term or long-term, both in respect to traditional postal companies but also regarding
new providers. Austrian Post is positioning itself as a multi-regional provider. At the same time, an increase in the number of competitive providers is expected.

Increasing electronic communications:
The trend to electronic substitution of traditional letter mail will continue. However, experience gained in the past demonstrates that also new forms of letter mail arise, for example, the identification of new customers by direct or Internet banking providers, or new legal regulations on absentee voting. Moreover, the growing popularity of e-commerce opens up new opportunities for classical postal companies which traditionally offer letter mail and parcel delivery services.

Upstream and downstream integration
Postal operators are increasingly expanding their value chain in order to fulfil customer demands and occupy important niche positions for key customer interfaces within a liberalised market. Austrian Post has also made great efforts in this regard. Many customers are already taking advantage of the new products and services offered by Austrian Post, such as document management or mailroom services.

Increasing importance of direct communications:
Undifferentiated forms of mass communications are becoming less and less appealing to modern consumers and customers. In addition, mass
media are losing circulation and influence. Mailing communications supported by CRM solutions or advertising distribution backed by professional geomarketing ensure more effective target group orientation in market communications efforts.

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