Moving forward against the tide

Amazon has halted work on its $2.5bn Virginia headquarters, laid off thousands of staff and announced the closure of warehouses across several continents.

At first glance though, the eCommerce giant’s cost-cutting measures appear to have little, if anything, to do with Jersey. After all, Amazon does not employ any staff in the Island and any orders placed by residents are continuing to arrive.

However, the problems faced by Amazon are having a significant impact on Jersey Post, for whom Amazon is one of its biggest customers.

‘The entire fulfilment and logistics industry is facing incredibly difficult trading conditions at the moment,’ explains David.

‘Our two biggest customers are Amazon and Royal Mail, both of whom are facing significant challenges. Amazon has announced plans to close three UK warehouses this year as it implements a raft of cost-cutting measures across the group. Royal Mail has recently been hit by both a cyber-attack and considerable unrest among its workforce, leading to industrial action, and which has prompted many businesses to look for alternative delivery providers. If they lose business to these competitors, we lose that business from them.’

But what is behind these problems? In simple terms, says David, the ‘perfect storm’ of Brexit, Covid and the Russian invasion of Ukraine, all of which have contributed to today’s cost-of-living crisis, have driven a sharp decline in a sector which had been booming. ‘While I am confident that eCommerce will continue to grow, and that the long-term future is bright, there is no doubt that we are in a tight spot at the moment because of that perfect storm,’ he reflected.

‘Trading conditions are very complex and consumer confidence is at an all-time low. With the Bank of England interest rates going up, mortgage costs rising and the cost of everything from fuel to food increasing dramatically, people do not have the disposable income that they had a year or two ago.

‘As a result, the money that might have been spent with Amazon or other online retailers is now being used to heat the house or put food on the table, which means that parcel volumes are dropping significantly.’

Acknowledging that Jersey is in some ways, ‘insulated’ from this decline, David says that, from a global perspective, Jersey Post – which last year gained 40% of its revenue from our international operations – has seen a ‘massive decrease in volume while continuing to win new business and hold onto existing contracts’.

‘That has had an impact on the cost of doing business as logistics is very much a game of volume,’ he said. ‘The cost of transporting goods around the world has gone through the roof because of fuel shortages. The cost of running the aircraft or ship is the same regardless of how many parcels are on board, so if that carrier is not full, it is not economical to operate.

‘Competitors are looking to hold on to volume at lower prices to have some contribution to costly networks, which means that there is a risk of a race to the bottom at which mail workers are at risk of being squeezed.’

Faced with this picture, it is unsurprising that a number of postal operators. This includes Guernsey Post which this year announced that it would be making a tenth of its workforce redundant after posting a £2m loss for last year.

In contrast to this, at Jersey Post we have no intention of ‘managing decline’ but are instead committed to growing the business – despite the short-term costs associated with such an approach. »

‘While eCommerce may be seeing a short-term decline, it will bounce back so we just need to weather the storm over the next two or three years,’ David said. ‘To do this, we have to find more new and diverse business opportunities to bridge that revenue gap. It is vital that we do this through both our domestic and international business so that we can continue to deliver the local services which are so important to the Island.’

In many ways, says David, the removal of low-value consignment relief in 2012 –which ‘decimated the Island’s fulfilment industry’ – has provided some valuable lessons and as a postal operator has put us in a stronger position to adapt to current trading conditions.

‘When LVCR was withdrawn, the fulfilment business – something which had been our bread basket for many years – left the Island overnight. At the same time, letter mail was in terminal decline – in fact, traditional mail volumes have fallen by 90% in the past ten years – so we recognised that we had to reorganise and reprioritise the business. As a result, we adapted, amended our strategy and recovered strongly,’ he said. ‘And that strategy, which saw a considerable investment in automation and parcel-sorting technology in Jersey, put us in a really good position to reinvent ourselves.

‘In the intervening ten years, we have capitalised on that and, although inflationary pressures are impacting on the short-term sustainability of many areas of our business, we are confident that the future is bright.

And not only are we committed to its existing business operations both locally and overseas, but we are continuing to expand and compete for increased market share.’

‘We are still investing, growing and diversifying,’ said David. ‘Our revised strategy, at a time when people were beginning to trust online shopping, recognised that we needed to capitalise on the impending uptick in inbound parcel traffic. »

‘Having invested in the necessary infrastructure to support this, we recognised that with a limited population in Jersey, we could only grow the business so much within the Island. Therefore, to continue to fund our universal service obligation and maintain the standards that Islanders expect from their post office, we needed to look beyond our own shores.

‘There began our investment in UK businesses, freight-forwarding companies and Customs clearance to bring us closer to the supply chain and give us greater control over our margins.’

As part of that diversification strategy, we started investing in businesses in the UK, America and the Far East, all of which gave the company ‘access to new revenue streams’.

But despite a ‘healthy growth’ in these business operations over recent years, David says that the current global downturn ‘is squeezing our international business’.

‘The disruption across the global supply chain means that the cost of doing business has exploded and become unprofitable in many areas,’ he said. ‘Therefore, while we have a business which is capable and ready to win new business and an infrastructure to compete in the cross-border space, these rising costs are cutting our legs from under us.

‘Having said that, while some of our business areas are now operating at a loss, we will continue to invest in, and win, new business so that when the economy recovers, we will be in a strong position to capitalise on that renewed consumer confidence.’

On the global front, the new business which we are targeting is, says David, ‘that which is easy to onboard and doesn’t require many infrastructure changes so it offers the greatest revenue-generating opportunities’.

Locally, meanwhile, we are seeing ‘resilience’ across a number of areas, with our philatelic business going ‘from strength to strength’ and the foreign-exchange arm benefiting from a renewed appetite for travel following the pandemic.

‘Our digital business, Vaiie, is also trading strongly and playing a key role in supporting the Government of Jersey with some of its digital objectives,’ said David. ‘This has included the launch of JerseyMe, an identity service developed to help Islanders to access services digitised by the government.’

And, of course, central to Jersey Post’s ethos is our commitment to the local community.

‘Ultimately, we are a community business employing a considerable number of people and having a presence on the doorstep of every household six days a week,’ said David. ‘As an organisation, our purpose is to keep Islanders connected and we are very aware of our social responsibility to residents.’

‘That is why our international networks and investments are so important because they enable us to provide an asset for Jersey.’

And, on that note, David returns to the importance of building on the organisation’s strategy to ‘weather the storm’.

‘The good news is that we are in a really strong position with the infrastructure, skills and people to grow and compete,’ he said. ‘We know that letter mail will not return. The future is all about eCommerce and our digital division. As energy prices begin to fall again and consumer confidence returns, eCommerce will bounce back.

‘While we fully expect the next two or three years to be difficult, we have to keep investing and looking forward to ensure not only that we can withstand the current turmoil, but that we continue to build a business with a vision for the future, and that in the meantime, we continue winning new business and supporting our key partners such as Amazon and Royal Mail.

‘In a nutshell, it is not pretty out there at the moment and many of the factors hitting our margins are beyond our control, but we know what we are doing. We are not sitting here feeling sorry for ourselves. We are creating opportunities and we are looking forward to a strong future.’

Jersey Post is braced and ready to tackle 2023 successfully, despite the current industry challenges we are facing.

On 8 March, International Women’s Day (IWD) was celebrated around the world and the 2023 theme is #EmbraceEquity.

The IWD 2023 #EmbraceEquity campaign theme seeks to get the world talking about why “equal opportunities are no longer enough” and can in fact be exclusionary, rather than inclusive. Everyone is now encouraged to embrace equity in the workplace.

Across the Jersey Post Group, we strive to embrace equity and are proud to support this every day. We strive for a world that’s diverse, equitable and inclusive for all. In honour of International Women’s Day, we invited all of our colleagues around the business to celebrate women in the workplace. We were inundated with lots of wonderful comments, and we brought colleagues together to enjoy a tasty cupcake and celebrate IWD!

UNDERSTANDING INTERNATIONAL WOMEN’S DAY 2023

If we breakdown equity and equality to their basic definitions it helps us to understand the difference.

- Equality means each individual or group of people is given the same resources or opportunities.

- Equity recognizes that each person has different circumstances, and allocates the exact resources and opportunities needed to reach an equal outcome.

Example of the key difference

Belgium-based YouTuber Tamara Makoni, founder of Kazuri Consulting explains the difference between equality and equity - and why it truly matters to #EmbraceEquity.

“Imagine that you are babysitting two children, and they are hungry. You go to the fruit bowl, and you start to pick up two apples to give them to each child. However, you remember at the last moment that one of the children is allergic to apples. Instead, you reach for one apple and one banana, and that way you’re being fair,” explains Tamara. “You still give one piece of fruit to each child, but you’re also being equitable because you’re giving each child a legitimate way of satisfying their hunger. If you had gone for two apples, the child who’s allergic to the apple would on the surface have a way to satisfy their hunger, but they couldn’t do that without getting ill. In this way you’re being fair,” says Tamara. “You’re giving each child a piece of fruit but, you’re also giving them something that is in line with their individual needs so they can be successful.”

Scan the code to see Tamara’s video.