Postal Services Bill

Memorandum submitted by Association of Convenience Stores (ACS)

(PS 15)

ACS (the Association of Convenience Stores) represents 33,500 local shops, 4,000 of these include Post Offices.  Most other stores in ACS membership include some form of service offering which may compete with and / or be complimentary to Post Office services.  We welcome the opportunity to give initial views on the Postal Services Bill on behalf of all members.

Provision of Post Office Services in Local Shops

We are concerned to ensure that policy development surrounding Post Offices takes account of the current profile of the Post Office network and the development of related services. Therefore we believe it would be useful to provide a brief overview of the relationship of Post Offices and local shops.

Small stand-alone Post Offices are now rarely profitable and have closed both through national closure programmes and through insolvency.  Few professional retailers wish to purchase stand alone Post Office sites.  This had lead to a trend of Post Offices situated within a retail shop. Brought into a wider retail offer, Post Offices can make an important contribution to convenience stores. As well as offering remuneration on transactions, Post Offices and other services bring both new and existing customers more regularly into the store and this footfall generates additional sales for retailers.

The development of the Post Office in convenience stores cannot be viewed in isolation.  In recent years, we have also seen the growth of other models which offer some of the services traditionally only available through Post Offices.  Bill payment services now represent significant turnover and the mechanism for executing these sales outside of Post Offices (usually through one of two companies, Paypoint or Payzone) has been extended to other services such as London congestion charge payments.  Camelot have also applied to use their terminals for offering services (possibly in conjunction with Post Office Ltd) through their lottery terminals – this application is still under consideration by Government agencies.  Other services such as foreign exchange, cash machines and money transfer are also offered in non-Post Office convenience stores through third party suppliers, and even some mail services can be offered through third parties.

In considering the future the Government must view Post Offices as part of a wider competitive market place for a variety of services for customers and business alike.  As yet, there is no packaged offer to compete directly with the Post Office, but any local shop can pull together many of the elements of a Post Office service package and make them available to customers.

It is also important to consider the make-up of the Post Office network in terms of outlet ownership.  Not only are subpostmasters now likely to see themselves as retailers first who happen to include a Post Office as part of their services category, rather than as subpostmasters who also provide a retail offer, but also many Post Offices are run by multiple groups.  Companies like Tates, Martin McColl and the Co-operative operate around 750 Post Offices between them.  For these businesses, Post Offices must generate a clear commercial benefit when payment of staff at or above the National Minimum Wage, other operating costs, and the measurable benefit of footfall, is considered.  The future strategy for remuneration and structure of the Post Office network has to meet these hard commercial realities for all retailers, rather than being based on a view of subpostmasters as running a lifestyle-based business.

Finally, it should be noted that the in-store delivery of Post Office services is changing.  The traditional model of a "fortress" unit behind which Post Office business is transacted is no longer the only method of managing Post Offices in stores.  Post Office Local is a new model whereby retailers offer Post Offices services from the retail counter.  We welcome these developments but urge the Government to look carefully at the practical issues involved in these delivery methods before concluding they are scalable for large parts of the network.

Postal Services Bill

We understand that the provisions in the Postal Services Bill relating to Post Offices are solely enabling powers and that the decision relating to mutualisation will be taken after consideration and consultation on the report being prepared by Co-operatives UK. We look forward to the report and being involved in the debate going forward.

However there are some questions raised by the initial statement from Government regarding these proposals that we would like to comment on.

Contractual Restrictions

The Business Secretary rightly highlighted that ‘interests of the central holding company and locally owned branches are not always aligned’ and that this has caused tensions between POL and subpostmasters. Nowhere is this tension more visible than in the debate relating to contractual restrictions. Post Office Ltd’s contract with subpostmasters restricts them from operating services which may be construed as competing with the Post Office, a clause which in the view of the ACS has a negative impact on retailers and customers, though admittedly such a clause is typical across the services sector (for example PayPoint have a similar and other clauses).

Firstly, where POL has a contract with one supplier (a water company for example), a retailer is restricted from offering a third party bill payments service even when local customers may tend to use a different water supplier.  Therefore the contractual restrictions prevent a retailer from offering a comprehensive range of services covering all suppliers to customers, meaning that customers may have to travel some distance to an alternative outlet to pay their water bill. This limitation is mirrored by the impact of other service provider’s restrictions on operators at many other (non-Post Office) locations.

Secondly, some elements of these restrictions are plainly unfair.  For example, POL takes 20% of the lottery commission earned by retailers who have a Post Office in their store.  This is despite there being no link between Camelot’s policy on the allocation of terminals and the presence of a Post Office in that store, and despite the fact that most national lottery sales take place when Post Office counters are shut.

The effect of these restrictions is to bring a further set of considerations into retailers’ decision of whether to acquire and / or to continue to run a Post Office.  As well as the normal costs and margins associated with operating a Post Office, a retailer will have to factor in the lost revenue from the lottery and the full costs of other restrictions for their business.  These restrictions – particularly on the lottery - could be seen as an indirect subsidy for the Post Office provided by private businesses.

Negotiation

While announcing this policy the Business Secretary also said ‘Post Office is ideally suited to a John Lewis or Co-operative Group style structure – where employees, sub postmasters and communities get a greater say in how the company is run. This would be the Big Society in action.’ While a move toward greater employee ownership could indeed be beneficial for POL it is important to define at the start of the debate what structures will be used to facilitate such involvement.

Currently POL negotiates exclusively with NFSP on issues relating to Post Office. This is not a good representation given the changing face of the Post Office network as explained above. Most multiple groups of Post Office retailers are not members of the National Federation of SubPostmasters (NFSP).  Furthermore, the NFSP, which is an excellent representative body for its members, tends to under-represent those who include Post Offices as part of a wider retail offering whilst over-representing the declining proportion of stand alone Post Offices. The large proportion of Post Offices run by multiples must be taken into account when decisions are made regarding subpostmaster interaction.

If contracts are to continue to be negotiated centrally between Post Office and NFSP, rather than on a retailer by retailer basis, it is important that modern Post Office retailers’ interests are properly represented.  Therefore, we would ask that new structures are set up to do this.

Royal Mail & Government Services

We are concerned about the possible repercussions that may occur as a result in the change of Royal Mail ownership. If Royal Mail and POL become more separate, the mail offering through Post Offices may be undermined.  The mail offer is at the heart of the Post Office, and if this is diminished then one of the advantages that supports Post Offices will be eroded. 

The status of Royal Mail is in some ways reflective of a more general trend towards Government services now being offered through a variety of routes, not just the Post Office.  Each time a contract for Government services is awarded to a provider other than the Post Office, the network becomes less viable.  This is not necessarily wrong, but it does mean that steps have to be taken to mitigate this impact, whether that it be through further subsidy, a reduced network (which we note the Government is committed not to allow) or other measures to protect the Post Office network.  There needs to be a clear strategy to either protect the network through contract award decisions or to plan for the continued loss of Government services going through the Post Office network.

We would of course be pleased to meet with officials and Ministers to discuss these issues further.  We have a Post Office Committee which might be the ideal opportunity to do this, and on 12th May 2011 we are holding a services forum which might prove to be a useful event at which to have a two-way discussion about the strategy for Post Offices and services in local shops. 

November 2010