Korea Post diversify revenue sources

Korea Post President Kim Joon-ho speaks during a recent interview at his office in Gwanghwamun, downtown Seoul. / Courtesy of Korea Post

Agency looks for opportunities abraod

By Kim Yoo-chul

The president of Korea Post said the nation’s postal service is trying hard to enter new business territories and find opportunities abroad in order to address its falling profitability and ensure sustainable growth.

“Korea Post is working to diversify its portfolio by cutting its heavy reliance on traditional postal services. Postal services are a backbone industry in every country,” Korea Post President Kim Joon-ho said in a recent interview with The Korea Times at the agency’s headquarters in Gwanghwamun, downtown Seoul.

“However, the business isn’t as strong as it was decades ago, so Korea Post is pursuing new opportunities,” he added.

Kim said the postal services market has changed significantly. Its original value proposition no longer applies today.

“It is true that the market has changed with the widespread and free availability of the e-mail. Mobile devices enable people to communicate through texting and social media, instead of through physical letters. There are fewer people today who write letters,” he said.

Despite the bleak outlook for the agency, Kim remains optimistic. He believes that it can turn rebound and become profitable.

“A common problem among national postal services is the fact that it’s not easy to stop snowballing losses. Diversification may be a good strategy. The government needs to persuade the people of Korea that diversification is what the postal service needs,” said the senior government official.

Kim said Korea Post is burdened with huge fixed costs like employee salaries, and utilities and system upgrades.

“If the government lets the current system go, Korea Post may report over 1 trillion won in annual operating losses. Support plans should be implemented,” said the president.

In addition to postal services, Korea Post also provides postal banking and insurance services.

Kim said the agency has been consistently working to find solutions to its declining profits, but its non-postal businesses aren’t yet competitive enough.

“Regarding its financial services, Korea Post invested more than half of customers’ deposits in fixed incomes, not stocks. Because Korea’s economy isn’t as big as those of developed nations, investment in local assets yields small returns. Regarding its insurance services, the market is also dominated by private financial firms, making it difficult for us to expand,” said Kim.

Korea Post accounts for 4 percent of the local postal banking market. Kim said it has many branches nationwide, but not as many branches as banks do, so it can’t charge high fees to its customers, who are mostly in rural areas.

“We have 3,600 post offices across the nation. But people who save money at post offices are those from agricultural industries and over 70 years old. When you only think about profitability, then all post offices should be closed,” he said.

“But we can’t close a post office in one rural town just because it’s not profitable — lawmakers and residents in that town will not let that happen. We are not operating in a purely market economy.”

Overseas expansion

The agency is turning to overseas markets to find new business opportunities.

Kim said Korea is well known as an IT powerhouse and Korea Post can sell its patented postal services-related technologies.

“Foreign companies have already adopted Korea-developed IT systems. For example, our postal tracking system, PostNet, has received positive feedback from overseas markets to which major Korean companies have advanced. Korea Post has made substantial progress in its talks with the Costa Rican government about the PostNet system. The deal will help us expand to other nations,” said Kim.

PostNet is real-time service that tracks letters and packages from registration to delivery. Kim said the agency plans to team up with other firms and government agencies to expand its business territories.

But he declined to name any organization, citing the confidentiality of the issue.

Korea Post is also in talks with the Korea Customs Service about providing postal services to transit passengers.

“For example, passengers who enter Korea and then move to another country can send packages in Korea by using our service. If we reach a deal with the customs service, Korea Post can generate profit,” said the president.