The Post Office has embarked on a new wave of franchising as it continues its modernisation programme apace. It recently announced franchise opportunities at 37 of its Crown branches and has also created 39 new local branches in locations that previously had none. Debate rages among c-store retailers over the merits of opening a post office service and, of course, much depends on the circumstances of each retailer. The Post Office itself points to the positive impact on footfall, incremental sales and retailers’ community credentials.

Surveys conducted by HIM Research & Consulting certainly offer a compelling argument: according to its data, 82% of shoppers said a post office’s presence influences their decision to make shop purchases at a particular store, and 78% of those using the post office also bought shop items. In addition, a post office attracts customers from further afield; 32% of post office shoppers travel more than half a mile to visit a store compared with 21% of typical c-store shoppers.

It also says post offices can fill the gap left by banks moving off the high street - especially as 99% of UK personal bank customers and 75% of business customers can do their day-to-day banking at the post office. It says 14p in every £1 spent in the UK is channelled through a Post Office branch. Customers can make cash deposits and withdrawals, pay bills, access cash from a Post Office Card Account, and send funds abroad using Moneygram.

Paul Cheema, co-owner of Malcolm’s Stores, introduced a Post Office Local at their Elm Tree Avenue store last year. He has since noticed a 10% increase in customers, with many of them local residents who are likely to shop in the store, too.

Harris Aslam, owner of Greens of Markinch, in Fife, said he opened a Local franchise when the store underwent a refit in 2015. “The opportunity came up when the subpostmaster in the village retired. The bank was closing down in Markinch, too, so the community aspect was sufficient in itself,” he says.

“It’s difficult to distinguish the direct impact on business - based on assessing consumer habits, some people on a post office mission will walk out straightaway, but they may come back an hour later. Others will do their shop immediately afterwards. But for me it’s all about the in-store concessions, and being a one-stop shop is a clear winner.”

At Mace Hexagon Stores in Andover, Vip Panchmatia extended opening hours and introduced a front-of-store combi counter - in addition to the back-of-store fortress post office - under the transformation programme about three years ago, with positive results.

“Footfall has increased overall and more people come to the store in the evening now, which also frees up queueing time in the morning. The customers are really pleased about this, so it’s been positive for the community overall. It’s giving customers another reason to come to you,” he says.

CT Baker Group owns two Budgens stores in north Norfolk, both of which now have post offices. “For us it stands up as a profitable business in its own right and we have seen significant rises in footfall and incremental purchases,” says finance director Duncan Baker. The group inherited the post office in its Aylsham store after purchasing the site in 2013, and introduced a franchise in its Holt store in December. “In Holt we saw an immediate 7% uplift in footfall; the post office is excellent for that.”

Richard Dance, owner of a Welcome Co-op franchise in Marchwood, Southampton, which has a traditional fortress counter and a combi counter at the front of store, is a bit more ambivalent about the merits of the business. “It is definitely worthwhile from an overall business perspective, but as a standalone business it is becoming more marginal,” he says. “My subpostermaster salary has gone down in real terms, while my wage costs are going up with the minimum wage.”

Bolton retailer Baz Jethwa introduced a post office counter when he refitted his 1,500sq ft Plodder Lane store recently, but he is unconvinced of its benefits so far. “I think my store’s too small for it. The commission’s low so we can’t afford the extra staff,” he says. A spokeswoman for the Post Office said they understood “how competitive the retail environment is”, but she added: “The Post Office Local is a simpler model, with our services offered alongside the retail till; this enables savings in staff costs, as one person can serve retail or post office customers, whenever the shop is open.”

Sweating the assets

Ultimately, you reap what you sow, says CT Baker Group’s Duncan. “We’ve embraced everything the Post Office has thrown at us - whether it’s training courses they’ve suggested, advice on staffing or mobile operations, we’ve gone signed up for it.”

The mobile operation came about after the Post Office approached the Aylsham store to operate a post office van for outlying villages where it had closed branches.

The service operates once or twice a week, with the Post Office covering all costs. The van also enables the store to sell other products, too, such as Easter eggs, logs and kindling.

Building a relationship with customers is key, Duncan points out. “You need to be organised. Not all customers want to be badgered about insurance. We have a very organised customer relationship manager who asks questions and will know when it’s time to ask about insurance renewal. She’ll also go to lunch clubs and promote holiday insurance, and people will then promote us through word of mouth. You can’t just rely on people to walk through the door.”

Harris also emphasises the importance of offering the other services, such as providing passport photos, which has been a great success since he “stole the idea from other retailers”. “You just need a white wall in the store and you get £5 each time - and it only costs us about 5p,” he adds.

Richard says the travel products have “really worked well” in recent months at his Welcome Co-op store, especially since publicising their currency rates on external A-boards just before Christmas. “We’re well ahead of target on that,” he says.

Running a Post Office branch is not without its responsibilities, so choosing the right staff to help run it is crucial. “You’re responsible for it, so you need people who are trustworthy and can take in all the information,” Vip points out.

“You also have to be up to speed yourself in case any staff can’t come in on the day. But the Post Office is good at sending out manuals to keep you up to date with new developments.”

Training and support

Thevarajah Velauthapillai of Spar Nyetimber Stores in Bognor Regis, West Sussex, says staff training is “more or less ongoing”. He adds: “The basics can take up to three to six months to teach. However, as every customer is different and with the increased product availability, full training can take up to a year.”

Richard says he would welcome more support from the Post Office on staff training. “It’s difficult to upskill shop staff to a necessary level to process transactions due to time constraints and staff turnover,” he says.

For Thevarajah, a more modern Horizon accounting system “is a must in the very near future”. Unlike some subpostmasters in the past, Horizon has not resulted in major problems for him, but he is frustrated by the Post Office “constantly evolving the way they update the system”. Baz agrees that Horizon needs updating. “It feels like it’s stuck in the 1960s, especially the touch screen,” he says.

Vip points out that the Help Desk has always been helpful regarding problems with transactions and hardware issues, but he has yet to experience IT problems. Duncan says they have an “excellent” regional manager who always comes to help when required. However, Baz says he has been disappointed with the support received. “I’ve only seen one person once in 12 months. When I’ve requested assistance they haven’t come,” he says.

Paul Cheema advises retailers to run through their contracts thoroughly before signing up with the Post Office. “Make sure everything’s lined up with all parties as agreed, and get a lawyer to read the contracts. You need to check what’s contractually payable.

“But if you do your research and leave no stone unturned, a post office is definitely a worthwhile addition to your business,” he adds.

He also highlighted the importance of ensuring all systems are go ahead of opening. “Your broadband might not be turned on. That happened to us on the first day of business so we had to delay opening by five days. The Post Office got it sorted in the end, but it was a massive inconvenience.”

The Post Office is not perfect, Duncan concludes, but he urges retailers to look at the bigger picture. “It’s a £1bn organisation that is experiencing enormous challenges. It is filling the gap being left by the retailer banks who are turning their backs on their customers.”

The consumer view

Research by Citizens Advice suggests that consumers are satisfied with Post Office Locals. Almost nine in 10 (86%) customers report that their PO Local is accessible and 84% are satisfied with the service they receive. PO Locals also have a loyal customer base, with three in four visiting at least monthly.

PO Locals appear most popular among younger and more affluent customers, who are particularly likely to use premium mail and parcel services. In contrast, many of the Post Office’s core customers, such as older, disabled and lower income consumers, are slightly less satisfied with PO Locals and are less likely to use the extended hours.

However, the results highlight four areas that Post Office Ltd (POL) and operators should address to avoid consumer detriment and to protect the network’s sustainability:

Accessibility is better than for previous waves and sub-post offices, but still leaves significant room for improvement. More than one in five disabled customers do not feel that PO Locals cater to their needs. Its mystery shopping shows that hearing loops were visible in only one in four.

Service communication and provision should be improved, as 17% of customers say they have been unable to access services that they expected to be available.

Single, appropriate recommendations were generally not made without additional prompting. Most staff across three of its mail mystery shopping scenarios - particularly outside core hours - provided a correct product but alongside other options.

Waiting times have increased for customers who are not served immediately. Although two in three are served without having to wait, the remaining consumers are waiting for an average of two minutes 35 seconds - an increase on research conducted in 2012.

Fast facts

Post Office Local

  • Retail premises need to have easy access and about 20sq ft of space to accommodate a Post Office Local
  • There is no average size of store as a Post Office can fit into most retail outlets
  • There are no joining fees
  • Cash and stock is delivered weekly
  • There is no minimum drop requirements
  • Services include Royal Mail and Parcelforce, Post Office travel, Post Office financial services