Is the Time Right for Digital Postal Mail?

By Cary Sherburne
Published: August 3, 2012

The recent financial announcement by Zumbox caught my attention, especially in light of the uncertain future of the USPS. While Zumbox isn’t the only digital postal game in town, it arguably has the largest consumer participation in the U.S., considering that Pitney Bowes’ Volly has yet to fully launch. However, since the firm will not confirm how many actual U.S. households are using its digital mailboxes, it is difficult to say for sure. I checked in with Andy Jolls, SVP of Consumer Marketing for Zumbox, to see what is new with the company and to gain their insight into this evolving part of the marketplace.

WTT: Andy, why do you think this is the right time for digital postal mail?

AJ: What’s very clear about this category and this opportunity is that no one disagrees that this is going to happen. We are going to see the day when a lot of what comes to you in physical form in the mail will transfer into digital form. We are seeing the same thing happen with music, books and photos, and mail is the last piece of the pie. The question is the timing. I think there is a combination of factors, including what’s happening with the USPS and the move toward a more digital lifestyle with the growing adoption of smartphones and tablets. This creates an interesting pivot point. Consumers have to move from familiarization to trust development and experimentation, and finally to acceptance. I think people are much more comfortable these days with digital and online and are moving into that acceptance phase.

WTT: What do you think specifically attracted Computershare to make the most recent investment in Zumbox?

AJ: Investors realize that paper mail is both a really big problem and a big opportunity. In the case of Computershare, the leading transfer agent for Fortune 500 companies globally, they were able to see what it was like to work with us as a result of an Australian joint venture we were involved in with them. They got to learn more about our approach, and they realized they have a big problem to solve that Zumbox could help with. The documents they send out are very bulky and expensive, and they were looking for a digital solution for themselves. They like to make investments in disruptive technologies like ours, and that all led to this announcement.

WTT: This may be a bit of an obvious question, but what sets you apart from the USPS?

AJ: The USPS is fundamentally in the logistics business and we are in the communications business. We are never going to try to get into the business of trying to figure out how to ship medications to people who need them, as an example. I see them as continuing to have an important role. But they are prohibited from entering the digital business by regulation. It would literally take an act of Congress for them to enter the digital space. To be fair to them, it’s not that they are not thinking about it. They are.

WTT: And if they really wanted to pursue it, they might be able to get an act of Congress. But these things don’t move quickly, that’s for sure. We have been talking about some form of digital mail in some form or another for a decade now, starting with electronic bill presentment and payment. Why do you think EBPP adoption has been so much slower than everyone thought it would be?

AJ: I think the market has evolved in a less-than-efficient way. It is too siloed. Consumers really don’t want to have to go to a dozen different web site to view and pay their bills, which are already aggregated in their physical mailboxes. And every issuer has different retention policies—for example, how long can you access your electronic bank statement before it is archived? When you think about music and how that market moved to digital, the service was an upgrade. I went from 100s of CDs to music at my fingertips. We want to do a similar thing with mail, move it from pull and disparate, where the consumer has to go out and pull from different sources, to push and aggregated. And mailers are starting to wake up to the fact that this is what consumers want. The same thing is happening in the receipt space. Nordstrom or Apple or the Gap will email you a receipt, and at first you think that is cool, but imagine getting email receipts for everything you purchase, down to a cup of coffee. It would be really annoying after a while and the consumer doesn’t get a great experience.

WTT: So you won’t reveal consumer usage numbers for competitive reasons. But what can you share with us along those lines?

AJ: I can tell you that through the providers we have committed to us, we have coverage for 60 million Americans through a network of third-party service providers. One challenge in putting that coverage together was that it had to be a process that was not IT intensive for the mailers, and we have been able to do that. We already have digital mailboxes set up for nearly every household in America. Service providers like Kubra and DST can already be sending—and are already sending—digital mail to Digital Postal Mailboxes.

WTT: So the primary focus is getting to paperless?

AJ: No, it is more than that. It is solving a digital problem. A lot of companies have a low paperless adoption rate, and a low digital interaction rate. The only way they interact with consumers today is through physical statements. We realized that by building an address-based system, we have a much larger addressable market. We have some competitors that are account based, where you have to provide your online user name and password as part of the registration process, and ultimately, I believe that approach will capture much smaller piece of the market. More than 60% of Americans don’t have user names and passwords for all or some of their accounts. They might for their bank account, but on average they have 20 accounts and they don’t have coverage past a few accounts. With our process, we verify that you are who you say you are, and that you actually live at that address. People who travel a lot, have secondary residences, live outside the country, get lots of mail—these are the people that have the pain points that can be solved by a service such as Digital Postal Mail.

WTT: How do you see Pitney Bowes’ Volly playing in the market? They indicate they plan to go live in the 4^th quarter of this year.

AJ: I can’t even answer that question since it is not operational yet, and we really don’t know the details. But I will say that at Zumbox, we believe we have a responsibility for building a category. It isn’t just about building a company. And Pitney Bowes’ participation with Volly validates the category.

WTT: What is your financial model? Consumers don’t pay anything for the service, right?

AJ: We make money when the issuing companies save money. A consumer has to sign up for the service and elect to go paperless on a particular document, and when they do that, if that consumer is not already paperless with the company, then we essentially charge digital postage. A cable bill might cost 40 cents for a company to mail out, including postage, printing etc., and what we are charging is substantially less than that. We also have volume pricing for large mailers. Digital Postal Mail can save corporations up to 70% on delivery costs, while having the added advantage of enhancing interactions with their customers.