Envelopes aren’t licked yet

The demise of Australian Envelopes last June wasn’t an ‘unforeseen iceberg’ event, but it sank very quickly once it had been holed. The company’s undoing brought on a sudden drought of envelopes, shining a light on a commodity that usually receives very little attention.

But attention there was, and plenty of it, as suppliers, printers and mailers scrambled to fulfill orders and contracts left in the lurch.

There is a common thread in comments to ProPrint about the likely cause of the collapse – low prices. Several competitors of Australian Envelopes remarked that a price war, raging for nearly two years, had seen the company drop prices to unsustainable levels.

Paul Freeman, managing director of E-Bisprint, tells ProPrint: “With the limited knowledge that I have of it, I’d suggest that it was just the ridiculous pricing they were selling at. Prices just went down and down, and our products just couldn’t compete with their stocks. It was unsustainable.”

Trevor Franklin, managing director at PrintTMail, says that prices are still not at a profitable level, despite the fall of Australian Envelopes, and imported stocks are penetrating the market.

“It’s such a weird industry. When Australian Envelopes collapsed, the remaining manufacturers geared up to assist the market to maintain an envelope supply chain, but the enormity of the capacity requirement far outweighed the ability for local manufacturers to meet the demand, putting pressure on lead times and it had an impact on costs.

“I think what’s happened is a number of imports are coming in to fill some shortfall in demand. We’ve seen more imports in the past six months than we’ve seen in the past five years. While the imported product is competitive, the lead-times and quality has been the challenge.”

Mere mail

The company’s collapse is indicative of an envelope market that is declining in volume. Since 2007, Australia Post has recorded a decline in postage volumes of about 500 million letters, from 5.5 billion in 2006-07 to 5 billion posted in 2010-11. In Australia Post’s 2010-11 annual report, chief executive Ahmed Fahour commented on “the continued decline in the volume of domestic addressed letters mailed in Australia (down 3.7% this year)… Electronic substitution is having an impact beyond our letters business; it is also contributing to declines in the number of agency-based bill payment and banking transactions conducted via our retail network.”

To underline this intrusion of digital communications, Australia Post itself is going digital, and has launched its Future Ready initiative, a programme to restore a self-sustaining letters business, win new business in e-commerce and build “a trusted multichannel offer in digital and retail”.

In other words, the humble envelope is getting licked by other communication formats. Some of Australia Post’s losses in volume can be attribu-ted to lower demand for hardcopy bank, credit and utilities statements, and “cheques in the mail” to pay them. There has also been a decline in international mail volumes, most pronounced in outward mail, which was down 11.6% in 2010-11. This downward trend will continue as bank, credit, utilities and other business statements inexorably migrate further online.

“I’m going on what I’ve read from Australia Post, but there seems to be a reduction in postal volume of around 7-8% each year,” says PrintTMail’s Trevor Franklin. “The banks, telecoms and the utilities are a major part of it, but even small businesses are now emailing their invoices and statements, so even in the small end of town we’re seeing reductions in envelope volumes.”

Other uses of envelopes, such as direct mail, have also been affected by digital communications, although the death of DM has been greatly exaggerated.

Jodie Sangster, chief executive of the Australian Direct Marketing Association, tells ProPrint that while direct mail is still important, its role has moved with changes in communications.

“Direct mail isn’t the poor relation of marketing, but it has changed in terms of where it sits. Previously for a direct marketing campaign, direct mail would have been the foundation. That’s not necessarily true now. There are other channels now to choose from, and direct mail doesn’t always make up a component of the multi-channel mix. If it does, it’s often supporting other channels rather than sitting as the foundation piece of communication.

“What has changed now is we have the web, which is often the core that you’re driving to, and mail will support that. People say that direct mail is dead; it’s not the case at all, it just takes a different place as part of the campaign now.”

James Smeallie is the managing director of Sdirect, a boutique agency with clients from fashion and design to car manufacturers and blue-chip finance corporations. He long ago noticed the changes in marketing communications, and is a pioneering user of new media. 

“Direct mail definitely has slipped down in priority because people are tending to use cheaper digital options, but in saying that, a lot of clients who don’t have email databases will tend to use traditional direct mail. Often that is used to steer leads onto a website where they can collect email addresses.”

Another determining factor in the loss of direct mail volumes is the growth of targeted, personalised campaigns rather than “carpet bombing” a market.

Sangster explains: “There is a big move, not just in mail but across the board in all channels, to targeted, one-to-one communications that are relevant and speak to the customer rather than take the mass approach. There is a huge shift towards personalised, customised communications, not just in mail.”

Proud post

Nevertheless, envelopes are still a vital component in most direct mail campaigns. According to Don McCrae, general manager at Adelaide-based direct marketing company Post Haste, the envelope is the first point of contact, so it has a strategic role to play.

“The envelope is still a critical factor from a marketing point of view. I think a lot of people still underestimate the impact of the actual envelope in the way that it presents and captures your attention to open it and see what’s inside,” he tells ProPrint.

He also points out that people are also looking for alternatives. “We’ve seen an increase in plastic wraps with flysheets as direct mail pieces, and we’re doing a lot with self-mailers, and seen growth in that.”

James Smeallie has a similar view. “I still think there’s a place for the envelope, and there are still opportunities for putting stuff in envelopes because the person receiving it becomes inquisitive about what’s inside. For example, we use envelopes every month for a campaign for a large financial institution, and that still works really well. But self-mailing pieces are more interactive.”

ADMA’s Sangster agrees that variations on the envelope theme are adding new scope for innovative direct mail.

“There is an absolute science in what makes a person open an envelope,” she says. “Australia Post has done an awful lot of research on it. If you receive something that is different, it attracts your attention. There are a number of factors that go into what you can do with the envelope itself. Sometimes the mailer can be turned into a CD you can put in your computer, or a USB stick that you can download.

“There are new ideas that people have brought to market to make sure that mail is bridging that gap between technologies,” adds Sangster.

Costly communications

However, James Smeallie points a finger at Australia Post’s direct mail pricing regime as a disincentive for marketers to use direct mail.

“Australia Post need to have a good hard look at themselves, and figure out that if they want to increase their volumes of direct mail and make it more attractive to marketing executives, they need to be smarter because the cost of mailing a direct mail piece is nearly the same as the cost of producing the piece itself. That’s a big concern.

“I still think there’s a real need for the envelope. I think people will become more innovative with envelopes. They’ll take envelopes to the next level to interact with customers.”

Don McCrae says: “I think envelopes are still a critical part of everyone’s future. It will always play a part as a complementary piece in the full suite of communications. I don’t think it will ever be fully replaced.”

PrintTMail’s Trevor Franklin adds a sober prediction. “There is a shrinkage in demand for envelopes, and eventually, if we’re talking large volumes, there will be a contraction in the envelope market in the future, but can we say that will happen in a year, or five years? That’s too difficult to predict.”




Case Study: Digital Post Australia

Today’s bulk mailers have two options: mail or email, right? Not anymore. There’s a third path opening up, which promises to combine the security and trustworthiness of the postal service with the immediacy and cost savings of electronic communications.

These ‘digital mailbox’ services could be about revolutionise the Australian postal sector. Transactional print and communications giants Salmat and Computershare have launched their first-ever joint venture to create Digital Post Australia. The service, which is built on a platform created by US developer Zumbox, aims to offer a “communication delivery service that will provide a free, secure online digital postbox for every Australian”.

Computershare and Salmat each have a 40% stake in the venture, with 20% held by Zumbox. Computershare Communication Services managing director David Hynes has taken the role of DPA chairman. The group has been in discussions with the top 30 mailers over the past six months to get them onboard before the service launches to consumers in the second half of the year.

The idea is that the first time a consumer opens up his or her digital postbox, it will already be filled with PDF versions of essential mail, such as bank statements and bills.

It is not a new idea. New Zealand Post announced a similar tie-up with Zumbox back in April 2011. Meanwhile, talk of a digital postal service emanated from Canberra last August, when shadow communication minister Malcolm Turnbull told the National Digital Inclusion Summit of the Opposition’s plans to launch an electronic “pigeonhole” for every citizen if the party is returned to power at the next election.

The birth of DPA is a clear example of partnership – the joining of Salmat and Computershare being a landmark cooperation between the two long-term competitors – but it also brings a potentially fractious new rivalry to the market. The DPA website makes it clear that the project “is not an Australia Post business”, and the pair’s move into electronic mailboxes seems to have stolen a march on Australia Post. It is unclear whether the postal service was caught napping or simply had been keeping its plans under lock and key.

When ProPrint contacted Australia Post in early March, a spokesperson told us: “I haven’t been able to find out any information about digital mailboxes but we’re always looking a new ways to improve our services and make it easier for customers to access mail.”

Only weeks later, after Salmat and Computershare revealed DPA, Australia Post was in damage control, telling The Daily Telegraph it will launch its own digital post service “within a few weeks”.

There are other platforms available, though Zumbox itself had stolen a march on its much larger and more established US competitor Pitney Bowes, a $5 billion corporation with an esteemed 90-year history.

Last year, Pitney Bowes announced its digital mail platform, Volly. The vendor is bullish about the product’s prospects. Its conservative estimate is that within three years, a minimum of 2 billion bills and statement will be delivered electronically in the US. At the high end, up to 6 billion could be distributed by Volly or similar systems, said Pitney Bowes.

Chuck Cordray, Pitney Bowes’ president of Volly, stressed whatever number, it would remain a minority of the market. “In any scenario, 80-90% will still be in paper.”

Asked why DPA chose to use the Zumbox platform over Pitney Bowes’ Volly, Hynes tells ProPrint: “In building a secure and trusted platform for Australian consumers, it was paramount to not only select a platform that could provide a unique and innovative digital offering to Australian consumers, but could also deliver on the security and platform maturity requirements necessary to maintain consumer privacy and trust.

“Zumbox is a technology platform that has been tried and tested in other markets.  Zumbox is a provider whose core technology is already up and successfully running in the USA,” adds Hynes.

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