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Postal Service: Send good thoughts!

The relatively-short delivery time for both letters and packages is one of the main pillars of a healthy society nowadays. However, the shipping system has been extensively modified over the years and many threats have arisen for the incumbents in the industry. The following article will deal in particular with Italy and the challenges Poste Italiane has been faced to.

After a series of legislative amendments, the monopoly power of Poste Italiane has become much weaker than before. For instance, the last intervention by the Gentiloni government gave to private competitors the possibility to ship both judicial acts and notifications concerning violations of traffic laws. At first glance, as every move towards a more competitive market, this choice may well lead to an increase in the efficiency of the sector, since the new entrants’ will to impose themselves is likely to spur the incumbents to improve their business practices. However, a broader knowledge about the sector might come in handy to get a better understanding of the topic.

There are more than 4 thousand postal operators in Italy nowadays, yet Poste Italiane has been perceived as a fairly stable business by the market over the years. One might argue that this may also stem from the diversification strategy undertaken by the company, which now offers both mobile communication and financial services throughout the country. Indeed, the capillarity of the company’s distribution is likely to be one of the key assets of the company in all its business lines.

Looking at market perception, one might claim either that the market is still far from competitive or that the other postal operators are not able individually to credibly threaten this company’s future prospects. Let us discuss both possibilities.

Even though Gentiloni’s amendment aimed to reduce its scope, the company has enjoyed a sort of monopoly power on the shipment of everything whose weight is lower than 50 grams since 2006. This does not imply that other competitors cannot perform this service, however they are required to charge a much higher price than Poste Italiane. Considering that this consists of the majority of objects shipped, it follows quite sensibly that this non-competitively-flavored policy might have contributed to the fore-mentioned perception about stability.

Moving to competitors, it is now less clear, whether the second claim will hold in the next future. After being fined 300 thousand euros for unauthorized practices in the sector, Amazon applied for and subsequently managed to get the license to be a postal operator in the peninsula. Thus, Poste Italiane will face the competition of a rival which is endowed with a great logistics system, a huge network, consumers’ confidence and even an interest to open a new business line in the financial sector. In addition, it was claimed by the US company the intention to build on technology as a driver of market penetration. Of course, this is not the first technological assault to Poste, however this time the expected velocity and strength of the rival is not only non-trivial but also part and parcel of the overall company’s usual strategy. Even President Trump confessed his worries about it last year.

For what concerns the consumers, it is not clear a priori how they will be impacted in the near future, since the government may well decide to intervene, and it is even more thorny the way the latter might decide to do so. However, what is crystal-clear is that the evolution of the sector will be much quicker than expected.




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