The German government is set to revamp the Postal Act for the first time in 25 years, following a quarter-century where the Internet had little impact on postal services. With emails and chats taking over written communication, the Yellow Giant, Deutsche Post, holds an 85% market share in letters and over 40% in parcels.
Politicians agree that it's about time to adapt to the changing realities, as letters decline and parcels increase in popularity. The Postal Act came into being in 1998 as a way to encourage competition while ensuring basic postal service provision to the populace.
What are the changes in the new Postal Act?
Postal law reform will bring substantial changes for Deutsche Post, reducing some of the time pressure in delivering letters. Currently, Swiss Post must deliver 80% of letters posted today by the next working day and 95% on the following day, with the percentage rebounds to 99% on the third working day. If the new proposal from the Federal Ministry of Economics is approved, the minimum value for delivery within 3 working days will be 95%, while 99% of letters should even reach the recipient on the fourth working day.
How will consumers be affected?
Consumers may witness minor changes in post office services, with improvements in suburban areas and larger villages. Some gaps in the branch network are due to the closure of retailers and supermarkets, causing difficulties in finding new locations. Vending machines can become an alternative, and proposals to approve their recognition in the branch network obligation may be considered.
Postal service users may also see a postage price increase in 2025, but regulations detailing these changes have not been released yet.
Significant controversy surrounds the usage of subcontractors in the parcel industry. Customs have reported undeclared work and illegal employment, while the trade union Verdi calls for a subcontractor ban. The proposed reform will tighten these rules, requiring clients to monitor their subcontractors based on defined criteria, although the FDP is sceptical of such a move.
Enrichment insights
- The Postal Act’s amendment has led to increased delivery timeframes for Swiss Post, potentially resulting in cost savings.
- The postal industry, including market leader Deutsche Post AG, faces competition from DHL, Hermes, GLS, UPS, and Amazon's delivery service.
- German consumers can expect a gradual expansion of post office services in suburban areas, thanks to the possible approval of new vending machine locations by the Federal Network Agency.
- Subcontractor practices in the parcel sector have sparked controversy over undeclared work and illegal employment.
- There will be a small price increase in 2025 for postage, but the Federal Network Agency will set a price increase corridor for Deutsche Post.
- The revised law will enable the Federal Network Agency to impose fines on Deutsche Post for quality deficiencies in delivery services.
Adjustments:
- The revised proposal from the Federal Ministry of Economics offers relaxation for Swiss Post in delivering letters, eventually leading to cost reductions.
- Deutsche Post AG remains the leading player in the German postal market, but faces challenged from DHL, Hermes, GLS, UPS, and Amazon’s delivery service in the parcel sector.
- The new postal reform suggests an incremental improvement in suburban areas and larger villages, thanks to the potential acceptance of post offices in new vending machine locations.
- Subcontracting has been a contentious issue in the parcel industry, with reports of undeclared work and illegal employment.
- Cheaper postage costs in 2025 might be on the horizon, but the exact figures have not been finalized.
- The Federal Network Agency is reconsidering imposing severe penalties on Deutsche Post for delivery quality deficiencies.
