Argentine Post in Drive to Attract US Direct Marketers

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SAN FRANCISCO --- The Argentine post office plans to open a $40 million postal sorting plant near the Buenos Aires airport next March, part of a determined drive to give the country a state of the art DM infrastructure.


Direct marketing became the focus of postal concern for "growing productivity in Argentina" after SOCMA, a $3 billion industrial conglomerate, won a 30 year concession to run the post office as a private business.


"The post office formed a marketing team of DM experts," Marcel Avargues, a French DM executive with wide global experience including a four-year stint with the US DMA in New York, said.


"I was called in to help develop a three-to-five year program to create the postal infrastructure for growing direct marketing in Argentina," Avargues explained at last month's DMA conference here.


"The Argentine postal market is totally deregulated and that places the post office in a very different situation from those of other postal administrations in the US and in Europe," he added.


Competition is fierce with some 300 postal operators cherrypicking market slices from the larger operators. Correo Argentina has a 39 percent market share and its closest competitor, OCA, has 13 percent.


The concession has its costs. Correo Argentina must pay the government $100 million a year from profits and provide universal postal delivery across the vast and geographically diverse country.


Correo has 6,000 outlets. Some 1,600 are traditional post offices and 4,500 are franchise operations, including 800 agencies in convenience shops and another 500 in service malls.


Last year the post office lost $100 million on revenues of $500 million while this year revenues are expected to climb to $600 million with losses shaved to $50 million.


"Next year we will be profitable," Avargues said, "and we will have achieved the turnaround in two years."


Direct marketing is expected to play a major role in the turnaround and the Argentineans hope that US direct marketers will take advantage of the new infrastructure.


A new eight digit "alphanumeric" postal code has been introduced which will offer direct marketers "far better segmentation and targeted distribution capabilities."


A postal finishing facility should be operational early next year. "We are buying the equipment now."


The parcel delivery service is being revamped as "a vector for selling products." Avargues conceded that packages were "the weakest link" in the Argentine postal service.


Conclusion of a Global Package Link (GPL) agreement with the USPS last month and a direct entry agreement due for signature later this month underscores newly close ties between the two postal administrations.


"These services will allow US catalogers and publishers to send printed matter, catalogs and magazines directly to Argentina at special USPS delivery rates.


"We then take care of all the customs clearance formalities and procedures." Taken together, Arvagues said, "that should really make for easy testing of the Argentine market for any US company that wants to try."


Links to Europe have not been neglected in the postal update. Correo Argentina has a technical assistance pact with Royal Mail under a long term contract.


The list business remains the weakest part of the Argentine DM infrastructure. Arvagues conceded that he did not know how many reliable lists were available.


"This is an unstructured, immature market without a list culture," he said, where between 12 and 20 percent of all names on a list cannot be delivered because of poor list hygiene.


The Argentine Post is currently negotiating with half a dozen US list firms (he refused to name them) to offer list cleaning services in Argentina including appending the new zip codes.


He expects to announce his selection later this month and to begin US-style list cleaning operations before the end of the year as a first step in upgrading list quality.


Postal costs remain high with first class letters retailing at 76 cents. But in a deregulated market large bulk mailers can put their business up for bids "and to make a long story short everything is negotiable."


Price depends on the quality of lists, long term mailing commitments, timing of mailing and other factors. "For large volume mailings we can go as low as 36 or 32 cents a piece, about half the regular first class cost."


As for ownership, SOCMA holds around 70 percent of shares with the Banca Galicia accounting for another 15 percent. The rest was distributed to Correo Argentina employees.
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