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3. Postal Prosperity Zone: Part 1

Postal Prosperity Zone (PPZ)

Part 1:  How Designated Operators Lost Control of Cross-Border Ecommerce

In today's rapidly evolving global ecommerce landscape, postal operators, regulators and commercial suppliers (marketplaces, online merchants and their logistics service providers) are experiencing significant structural changes and disruption.

The growth of digital marketplaces and the increasing complexity of cross-border logistics have led to major changes in traditional business models and the role of postal Designated Operators.

Part 1 of this 2-part series (below) analyses the current state of the postal network and explains recent developments, while Part 2 offers a blueprint for Designated Operators to return volumes and revenue to their networks as part of the Postal Prosperity Zone (PPZ).

How Designated Operators lost control of cross-border ecommerce

(LINK Part 2: The Postal Prosperity Zone (PPZ) A blueprint for the next generation of cross-border ecommerce infrastructure. )

For decades, the cross-border movement of postal items, including parcels, was built on four functional pillars:

Pillar 1: Division of Labour Between Designated Operators at Origin and at Destination

The Designated Operator (DO, the national post) at origin, serving merchants and exporters, was responsible for collecting parcels, managing cross-border transport, and transferring required data using the global UPU IT system, while the Designated Operator at Destination (DOD) handled customs clearance and final delivery, based on regulated tariffs.

The principle was clear: each Designated Operator was responsible for their domestic postal territory (delivering inbound parcels and collecting outbound parcels for transporting abroad) and did not operate in the postal territories of other Designated Operators.

Pillar 2: Competitive, Regulated UPU Tariffs and Products

A scheme of regulated UPU tariffs was used for commercial letter and parcel items.

Importantly, large volumes could not be leveraged – tariffs were cost-oriented. That meant major exporting countries and their Designated Operators were unable to exploit their market power within the UPU system.

The exponentially growing ecommerce market also relied heavily on small, lightweight consignments, and the UPU rates for commercial letter items suitable for their delivery were highly competitive at the time.

Pillar 3: Preferential Postal Customs Clearance As a Competitive Advantage

Historically, postal customs clearance has provided Designated Operators with a significant competitive advantage in cross-border ecommerce.

The legacy process was largely paper-based and governed by simplified procedures, including broad de minimis exemptions and minimal documentary or physical controls for most low-value shipments.

Parcels moved swiftly through the postal channel with limited regulatory scrutiny, allowing Designated Operators to offer rapid, low-cost international delivery, and positioning them as the preferred partner for merchants and consumers alike, while maintaining efficient throughput with relatively modest compliance obligations.

Pillar 4: Secure, Trustworthy and Highly Standardised Global UPU IT Ecosystem

Developed and operated by the UPU's Postal Technology Centre (PTC), an evolving IT system (based on UPU IPS) facilitates real-time data exchange for delivery, customs, transport and billing between Designated Operators – based on global standards and regulations applicable to Designated Operators and compliant with UPU treaties and agreements.

Together, these 4 pillars created a system that enabled universal, trusted and efficient global delivery. Designated Operators were competitive and the market leaders in many areas of cross-border ecommerce.

Disruption to the UPU model

Over the past decade, the globalisation of trade and exponential growth of ecommerce have fundamentally changed this postal landscape, with the emergence of new business models and a transformed regulatory environment:

A: Disruption through competing business models

1. Express carrier model

Express carriers (e.g. DHL, FedEx, UPS, DPD) offer end-to-end solutions, controlling the entire process from pick-up to last-mile delivery, using their networks or local partners.

By integrating directly into platforms and merchants using their own IT, label, and customs solutions, express carriers bypass the global postal network entirely.

Following the enormous growth in B2C ecommerce shipment volumes, they have expanded their products to include the standard delivery of ecommerce shipments, both domestically and cross-border.

Express carriers now dominate the domestic market in many countries. International express carriers are active in export markets, taking over shipments directly at origin at the expense of Designated Operators in their domestic markets.

2. postal consolidator model

The world of Designated Operators has also changed.

Some Designated Operators decided to expand outside their domestic postal territories and compete with other Designated Operators, usually through commercial subsidiaries which – not subject to the UPU model's restrictions – can aggressively acquire business in foreign markets.

This model has been successfully pursued by many Western European Designated Operators, creating service consolidators (e.g. Asendia, Spring, Landmark) or acquiring/creating express carriers (e.g. DHL, DPD, GLS).

This has largely undermined the UPU tariff model due to:

• parallel bilateral and multilateral contract and tariff models where market power is key;

• models that operate in parallel to the UPU (e.g. IPC); and

• the postal consolidation model in which one Designated Operator takes over volumes for an entire region, e.g. the EU, and passes them on to the Designated Operators in the destination countries according to bilateral tariffs.

As a result, many smaller Designated Operators have been relegated to the role of dependent last-mile providers for larger, cross-border Designated Operators.

The dominant operators secure a disproportionate share of the margins through the use of bilateral contract arrangements, with control over export volumes serving as a critical negotiating advantage.

3. integrator models

The true winners of the ecommerce evolution are global marketplaces and their logistics service providers who have adopted sophisticated, data-driven integrator models to maximise supply chain efficiency, control, and margin retention.

For B2B2C, the marketplace or its integrator manages the first mile, oversees international transport, and handles customs clearance through proprietary digital platforms. Shipments are customs cleared in bulk by a local entity (B2B) and often stored in domestic warehouses; individual B2C parcels are then created and routed for last-mile delivery based on orders.

This last-mile step is typically outsourced to local Designated Operators or private carriers at commercial, volume-dependent domestic rates, while the marketplaces retain full control over logistics, data, and customer experience. 

This model has developed into the emerging factory-to-consumer model (F2C, or direct-to-consumer - D2C) which is now rapidly expanding among leading Asian platforms and brands. In this model, the entire logistics chain – from manufacturer to end consumer – is orchestrated by the marketplace or its dedicated integrator, often bypassing traditional postal and logistics intermediaries entirely.

Cost-optimised cross-border transport (frequently using dedicated ecommerce airfreight, with significant cost advantages compared to the passenger flights/payload model traditionally used in postal transport) is based on streamlined inbound customs clearance, and integrated multi-carrier last-mile networks to further reduce costs and accelerate delivery.

This ongoing evolution places the marketplace at the centre of both data and value creation, sidestepping national postal infrastructure, and making it increasingly difficult for Designated Operators to recover lost volume, visibility, or margins.

B: Disruption through a changing regulatory environment

Parallel to changing business models, the regulatory environment has also undergone a fundamental transformation, particularly for customs clearance.

The exponential growth of ecommerce volumes has compelled customs processes to become fully digital and data driven. Authorities now require high-quality Electronic Advance Data (EAD), advanced risk profiling, and fully automated customs processing at scale.

Where postal customs clearance once provided Designated Operators with a clear advantage, it has now become a significant liability in most markets.

Result? 3 of the 4 pillars of the UPU business model have crumbled

3 of the 4 core pillars that once underpinned the traditional UPU business model of Designated Operators in cross-border ecommerce have now effectively collapsed:

Pillar 1: Division of Labour Between Designated Operators at Origin and Destination – GONE

Today, most volumes originate from international marketplaces or commercial logistics providers, bypassing Designated Operators at Origin.

As a result, Designated Operators at Destination are forced to compete for inbound volumes, both with other Designated Operators as well as powerful express carriers and consolidators.

Bilateral tariffs further compress margins and undermine the sustainability of the UPU-based model.

Pillar 2: Competitive, Regulated UPU Tariffs and Products – GONE

UPU tariffs are often no longer competitive; high-volume commercial actors and internationally oriented Designated Operators negotiate bilateral agreements at rates significantly below UPU standards, further diverting volumes away from the UPU channel.

UPU products and services also struggle to keep pace with the rapidly evolving demands of the ecommerce market and consumer expectations, with necessary adjustments either lagging or failing to materialise.

Pillar 3: Preferential Postal Customs Clearance as a Competitive Advantage – GONE

Simplified, paper-based postal customs clearance, once a competitive strength, has become a critical vulnerability.

Most Designated Operators lack the automation and digital processing capacities now required, while commercial logistics providers embraced digital, data-driven processes and now surpass Designated Operators in efficiency and compliance.

The customs clearance costs embedded in UPU tariffs and charged by Designated Operators at Destination are increasingly uncompetitive, prompting further volumes to be lost to alternative channels.

Pillar 4: Secure, Trustworthy and Standardised UPU IT Ecosystem – UNDER STRAIN

The sole remaining pillar is the global UPU IT ecosystem, which continues to function and evolve with the development of new systems and standards (e.g. CDS, UPU/WCO Global Postal Model).

However, the system faces resource constraints and was originally designed exclusively for post-to-post exchanges – an area that has lost much of its commercial relevance as volumes shift to parallel, commercially managed IT platforms or the parallel systems of Designated Operators.

How can Designated Operators regain access to ecommerce parcel volumes?

Desperate to regain revenues and relevance, Designated Operators are now looking for ways to access ecommerce volumes from commercial suppliers (mainly marketplaces).

To date, the standard approach has been to create a commercial parcel logistics model which runs parallel to the UPU model & UPU IT system – in other words, to replicate express carrier IT systems.

The challenge here is twofold:

• The commercial parcel logistics/express models are based on costly IT systems that Designated Operators must meticulously replicate. Many Designated Operators lack the advanced IT capabilities & resources this requires.

• This upgrade automatically loses the key advantage of the traditional UPU model – a global, standardised and harmonised network into which worldwide access is possible with just one integration, one ID (S10) and one label (incl. CN22/CN23 for customs clearance). Replicating the commercial parcel logistics/express model reduces a Designated Operator to one of several last-mile carriers in its often relatively small domestic market.

A different solution is needed if the postal sector is to remain sustainable.

The good news? It’s here.

Part 2: The Postal Prosperity Zone (PPZ) – A blueprint for the next generation of cross-border ecommerce infrastructure.

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