The results of a recent Universal Postal Union (UPU) survey indicate that postal networks are increasingly trusted to further the growth of e-commerce and provide financial services. This trust is keeping this postal sector's head above water as the financial crisis wreaks havoc on the global economy.

While operators are feeling the pinch, especially in the letter-post and express business segments, financial services and some areas of parcel post are showing signs of growth.

This is what the UPU reported today during a high-level conference on the impact of the financial and economic crisis on the postal sector, held at its Berne headquarters. More than 200 participants from 100 countries, including about 40 of the world's postal CEOs and leading sector stakeholders operating in e-commerce, direct marketing, consulting and equipment and technology manufacturing, attended the special debate.

Results of the survey conducted among 15 of the world's largest Posts and private courier companies show that the sector is certainly feeling the effects of the crisis, but it is not showing signs of an economic depression like other sectors. Surveyed operators account for 66% of total worldwide letter-post volumes, 88% of parcel-post traffic, and up to 75% of express volumes, providing a statistically valid sample to analyze market evolutions, according to UPU experts.

The worldwide postal sector employs more than 5.5 million employees and operates 660,000 post offices, making it one of the largest industry workforces and the world's largest physical distribution network.

Strong competition in the parcels and express business segments prevents the UPU from sharing detailed information about country-specific mail volumes, but analysis of survey results provides positive and negative growth rates and thus a good overview of the worldwide postal sector's situation.

Here are the key findings by business segment (unless otherwise indicated, all figures reflect same-quarter comparisons in 2007 and 2008):

Financial services
Postal financial institutions are experiencing tremendous growth since the crisis began. Some European operators, such as Swiss Post and Deutsche Post, are experiencing annual growth rates above 50% in the number of postal deposits and savings accounts opened in 2008. Interestingly, a similar phenomenon occurred during the Great Depression, according to UPU statistics.

Parcels
After dropping from 0.5% in the first quarter of 2008 to 3.4% in the third quarter, compared to the same periods in 2007, domestic parcel volumes recovered 1.1% on a year-to-year basis in the fourth quarter. Experts say the increase could be due to record e-commerce sales during the last quarter of 2008 or strong resilience of online sales to the crisis observed in several countries.

The news is not so positive, however, on the international parcels front. After experiencing growth in the first three quarters of 2008, volumes decreased by 4.5% in the last quarter among surveyed operators. Experts again believe that international parcels are not benefiting from e-commerce as cross-border sales remain challenging.

Letter post
Domestic letter post is feeling the brunt of the crisis' impact. In a year-over-year comparison, operators reported a 5.9% decrease in volumes in the last quarter of 2008, due in part to less direct mail being generated, especially by the financial sector as credit thresholds have increased, experts believe.

As direct mail is less developed in the international arena, international letter post is showing more signs of stability. In a year-to-year comparison, Posts reported volumes varying between 3.7% and - 2.8% in the last quarter of 2008 in terms of quarterly growth rates.

Express services
Survey respondents reported a 4.4% decrease of domestic express service volumes in the last quarter of 2008, compared to the same quarter in 2007, while international volumes went from a 7.1% increase in the second quarter of 2008 to a 2.2% decrease in the last quarter.

In last-quarter comparisons of 2008 and 2007, express revenues declined by 7.9% worldwide. Experts explain this drop as a consequence of consumers and businesses moving more towards low-end express services.

Stock-exchange listed Posts
Five Posts - from Austria, Germany, Malaysia, the Netherlands and Singapore - are listed on stock exchanges as well as two express courier companies, Fedex and UPS. A comparison of the evolution of their share price with their reference index from August 2008 to January 2009, the six months covering the worsening financial crisis, shows that, while the share prices of some operators were closely correlated with their reference index, those of others evolved much more positively than the market (see graphic in full report; link indicated below). Considered defensive stocks, listed postal services' shares tend to resist better during a crisis and can even gain value, say UPU experts.

Comparison with the Great Depression
To compare the effects of this crisis with the worst performances achieved during the Great Depression, UPU experts also looked at historical postal statistics from the 1930s. Here's what they found (all statistics from the UPU, unless otherwise indicated):

So far, the sector has not reached performance levels recorded during the Great Depression, when postal revenues decreased by 12.3% in the United States between 1931 and 1932.

Between 1928 and 1934, franking revenues in the United States decreased by 21.9%, with the highest drop (12.3%) occurring between 1931 and 1932; postal employment dropped by 17.6%; and the number of post offices fell by 7.8%.

Postal savings account deposits multiplied eight-fold in the United States in the 1930s, reaching 1.2 billion USD (United Nations Department of Economic and Social Affairs).

In France, the sharpest decrease in franking revenues (24.8%) occurred between 1931 and 1932, following a 15.5% drop between 1929 and 1930.

In Germany, the largest decrease in letter-post traffic reached 16.6% between 1930 and 1931.

The full report "The global financial and economic crisis: initial insights into its impact on the postal sector" is available at http://www.upu.int/high_level_conferences/en/index.shtml