When Nick Read became head of the Post Office in September 2019, he inherited a British institution in crisis.
Decades spent chasing profitability at all costs and an institutional distrust of its independent postmasters resulted in the largest miscarriage of justice in British history and a retail network on the brink of revolt. After beginning the ‘reset’ of the Post Office’s relationship with partnered stores, in April this year, the chief executive announced an ambitious plan to turn around the organisation’s focus by 2025.
With the fallout from the Horizon scandal, a pandemic and the government’s predicted belt-tightening all still overhead, Read is looking to the lessons he learned at Tesco and Nisa to be able to stay the course in the face of multiple existential challenges.
Rebuilding the relationship
A lot of work has already been done to bring independent retailers into the Post Office’s decision-making. Two subpostmasters were elected by their peers to become non-executive directors at the Post Office in April, and applications are now open for another senior position to be held by a branch owner – postmaster director.
Read says: “We’ve had 29 applications from the network already. We want a postmaster or postmistress come in and do that on a secondment basis on a 18-24-month basis. Their role is to be a conduit, the voice of the postmaster in real-time, day in day out and keeping people honest. “It’s a great opportunity, and one of the big roles they will play is the introduction of a new postmaster governmance forum.”
The chief executive adds: “We did a lot of it at Nisa, focusing on our franchisees, making them part of the strategy to shape the product, shape the pricing and really challenge us.”
The new approach also has a new mantra at head office: ‘Think like a retailer’. Read explains: “It means getting the 75 senior team members out into branches, engaging with postmasters, understanding that this is a consumer-facing organisation and we need to start thinking like a retailer. “Yes, we are government owned; yes, we need to be self-sustaining; and yes, we have a clear social obligation but it’s how to I get [the Post Office] to recognise we’re here to support subpostmasters and to help them to support customers.”
Payzone & Amazon trials
Read admits that plans to introduce limited Post Office services at Payzone sites (only just in trial stages) has been controversial. “It’s the issue of proximity,” he says, describing one of the concerns raised by existing postmasters. “It’s very early days, but I know there’s a great deal of concern that [sales] cannibalisation is going to occur done via the Payzone or Post Office Network, and I want to reassure everybody that [cannibalisation] is completely not our objective.”
He describes the small-scale trials as being motivated by the need to ‘lower the operating costs’ for franchisees, improving customer access and to defend market share from competitors opening rival outlets.
However, RN has uncovered all six trial sites through consultation documents sent to local residents. In at least one Payzone site being given Post Office services – 64 Computers in Cricklewood, north London, there are three existing Post Offices within a mile radius, and one is just 0.6miles away. Challenged on the potential cannibalisation of nearby sites, Read responds: “The new format, Drop & Collect, is a lighter format focused on the parcels market – specifically prepaid return and collection of parcels. As you will be aware, the parcels market is growing at pace and the market is increasingly competitive. Post Office must ensure it is meeting evolving customer needs; we cannot stand still in this competitive market. Our priority is to ensure that these new formats help us strengthen our existing network, working in partnership with our postmasters to deliver a more commercially sustainable Post Office.”
He adds the sites were “carefully chosen – based on detailed modeling” to identify areas of increasing competition and unmet demand. “For each pilot we will be liaising with nearby postmasters and closely monitoring the impact on the local market to ensure that any existing branches in surrounding areas are not negatively affected,” he says.
Payzone isn’t the only area of parcel trials for the Post Office. Under its renegotiated mails and parcels agreement with Royal Mail, the Post Office is free to work with additional carriers. The first to express interest was Amazon, where more than 200 PO branches are trialling pick up and drop off Amazon services. Read provides an update, stating: “We’ve had extraordinary feedback from Amazon about our ability to segregate our operations for their proposition and the way we engage with customers. I think it sets us up for a bigger and larger rollout.”
With more than a third of bank branches shut since 2015, the government is drawing up legislation
to give consumers a legal right to withdraw and access cash within “a reasonable distance” of their home. The move puts a spanner in the works for banks’ continued exit from the high street and give the Post Office greater leverage during ongoing negotations for its third banking framework agreement.
One of the most notable new schemes that could provide revenue and footfall for Post Office stores is the Bank Hub trials in Cambuslang and Rochford. This sees a branch in each town play host to a weekly cycle of bank representatives from the major highstreet players, allowing locals to access more complex banking services at their local post office.
Asked about a potential rollout of the trial to other Post Offices, the chief executive describes negotiations as “at a relatively delicate stage”, and tells RN: “I’ve had a number of conversations with those involved in the trials. They’ve been hugely successful but the critical component in this is the five major banks that constitute 82% of all transactions. I’m having bilateral conversations with the banks about whether we do something in partnership with them individually or as a group.”
Asked how he believes the new banking framework, due to start at the beginning of 2023, will support subpostmasters, Read says “value for money from a transactional perspective” was key.
He adds: “We think it will drive footfall, drive transactions, we will have to look more closely at what the rates are but it’s not something we’ve firmed up yet.”
Compensation for Horizon historic shortfalls
More than 2,500 former and current subpostmasters have put in claims for compensation related to financial losses they say they experienced as a result of problems with the Post Office’s Horizon till system. Applications closed on 14 August 2020, and nearly a year on, Read says 450 branch owners have now had their claim settled. Asked when he believes all claims will be resolved, he says just last week the deadline was brought forward to “late summer 2022”.
“Once we’ve established the process and what the independent panel is doing we’ll be able to accelerate progress but that is taking time and as you can imagine it’s quite complicated,” he explains.
Subpostmaster pay and Spar Scotland’s branch closures
Despite recent increases, the issue of remuneration remains contentious and postmaster pay as a proportion of the Post Office’s revenue remains substantially down from its peak. Read references a 16% average remuneration increase since 2018, with further potential gains pending the result of the upcoming banking framework agreement and the government spending review. “It’s my intention to ensure we make sure it’s a viable proposition to run a post office,” Read says describing the spending review, which is likely to include some level of government subsidy.
However, independent retailer confidence in improving pay rates was shaken by Spar Scotland store operator and wholesaler CJ Lang’s decision to remove Post Office services from dozens of its stores, which it said was due to the sbranches not being financially viable. Even after offering CJ Lang the ability to trial new Post Office formats, the retailer still pressed ahead with its decision.
Asked what small stores should make of CJ Lang’s Post Office exit, Read says: “It’s hugely disappointing CJ lang have pulled out, since that announcement I went and spent time with Henderson’s (Spar Northern Ireland). They are our biggest Northern Irish partner, with 400 PO franchises. I discussed it at length with the leadership at Hendersons and I said: ‘What’s your situation?’ and they said: ‘Every time we open a convenience store we want a Post Office there, it drives footfall, it’s a mission-based category’.
“They stood me in front of food to go and other categories and said ‘ultimately [the Post Office] is driving footfall into our stores and if you are a great retailer you will be able to upsell to those customers coming in on a single mission.”