Did CEO Cirillo make a mistake?: Swiss Post’s dangerous package problem

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Freight couriers had to do their best once again this week: Swiss retailers adopted Black Friday (discounts on the Friday after Thanksgiving) in the US. But despite the excitement of Black Friday and the triumph of online retail, the postal service delivered just 194 million packages last year; this is 4 percent less than in 2021. In the first nine months of 2023, volume fell another 5 percent. If this continues through the end of the year, the post office will carry almost 20 million fewer packages in 2023 than in 2021.

The yellow giant explains the decline with “very difficult” conditions. “Delivery bottlenecks, reduced consumer sentiment and the lifting of Corona measures are contributing to the fact that we are currently processing fewer packages,” says a spokesperson, but stresses package volumes are still “very high”. Approximately 30 percent more packages are transported compared to 2019.

However, this situation is still worrying for the state-owned company. Ultimately, the group management assumed that they would be able to compensate for the drop in letter volumes thanks to the package boom triggered by Corona. In 2021, CEO Roberto Cirillo (52) said in an interview with CH Media: “We want to compensate for the shrinking space of postal mail with higher volumes and earnings from the parcel business.”

Did you plan too ambitiously?

Cirillo and Chairman Christian Levrat (53) expected strong growth in packages, not a decline. Shortly after Corona, the postal service announced that it would invest around 1.5 billion francs in parcel infrastructure by 2030. Four new parcel centers have become operational since 2021: Buchs AG, Rümlang ZH, Wallisellen ZH, Pratteln BL. And in Härkingen SO, Bundestag Member Albert Rösti (56) inaugurated a new parcel classification system just a few weeks ago.

By the end of the decade, the post office wanted to be able to process packages at “at least 15 locations.” In 2022, many press releases stated that sorting capacity will be “doubled”. With 202 million packages in 2021, this will correspond to a sorting capacity of approximately 400 million packages.

Have those in charge made a plan that is too ambitious, considering the impact of the corona-related package boom?

The media outlet denies this: “We believe the trend towards online commerce will continue and package volumes will continue to increase in the long term.” The postal service is “basically” sticking to its expansion plans.

Päckli tranquility should only be temporary

The sorting capacity of 400 million parcels, which should have been assumed according to previous reports, was never designed: “The mentioned ‘doubling’ of the sorting capacity of parcels refers not to 2022, but to the time when the postal service expanded parcel infrastructure took the offensive even before the epidemic.”

The group talks about “hypothetical planning” for “a maximum of 300 million packages” over the next decade.
The previously announced “minimum” 15 locations has now become the “maximum” 15 locations. The spokesman says it is very difficult to make accurate predictions. “We are constantly adjusting our capacity based on forecast quantities.”

This seems more reserved than it was a year or two ago. However, the postal service believes that the lull in packages is only a temporary trend.

Huge competition among delivery drivers

But as interviews with experts show, there is no guarantee of this. Professor Marc K. Peter (50), head of the Digital Transformation Competence Center at the University of Applied Sciences in Northwestern Switzerland (FHNW), also believes that the trend towards online and e-commerce will continue. But he assumed that digitalization would be faster. “Research shows that technology adoption, and therefore digitalization, is taking longer than expected in Switzerland.”

In many companies, for example, the home office has been reduced or even eliminated, says Peter. “After Covid-19, the old normality in consumer behavior has returned and therefore people are increasingly shopping at stationery stores again.”

This is bad news for the postal service. In addition, competition between cargo companies is also intensifying. In the domestic package, express and courier services market, the state-owned company’s market share decreased slightly from 79 to 76 percent in 2022.

There is no figure for this year yet. But competitive pressure is likely to remain high. DPD Switzerland, for example, says it has seen a “positive development” in parcel volume. Digitec Galaxus, the number one in the Swiss online retail industry, has been increasingly working with the Planzer company since the end of 2022. Before that, Swiss Post was the exclusive partner of Migros’ subsidiary for nearly 20 years.

Source :Blick