They have their supporters, but Elaine Watson wonders if the business case for retailer post offices has become unconvincing

If taking on a post office was once a surefire way of earning extra revenue and driving footfall for enterprising retailers, growing numbers are coming to the conclusion that there is more money - and considerably less hassle - in using extra space to sell groceries rather than issuing TV licences and tax discs.
The fact that Tesco and Morrisons are generally closing or relocating post offices when they convert One Stop and Safeway stores is hardly a ringing endorsement of the business case for running a post office, admits Paul Siviter, MD of Stars News which has some 60 post offices in its estate.
It’s all very well being at the heart of the community, he points out, but it helps if you turn a profit as well.
“I do believe there is a future in post offices, and we have actually just bought one that used to be in a One Stop store before Tesco took it over,” he says.
“However, my personal view is that the driving footfall argument is a weak one, whether you are talking about utility payment terminals, the post office, lottery or anything else. These services should be able to sustain themselves. Besides, there is a lot of evidence to suggest that people going into c-stores to use these services do not actually make additional purchases.”
Royal Mail Group has come up with a range of financial products including personal loans and car insurance to woo punters in recent months, he observes. However, in many cases these will only serve to recoup business lost now that benefits are paid directly into bank accounts and are no longer collected from the post office.
“We are trying to maintain the standards of service that are required in the contract on a rising cost base and a falling customer base, so profits are inevitably squeezed.”
Combi retail/post office sites, whereby customers can pay for groceries and access post office services from the same till, can reduce labour costs, free up space and boost post office opening hours, says one senior c-store executive. But they also have drawbacks. “The slow roll-out of this format speaks for itself,” he says.
“Many post office customers do not like the lack of privacy, while a shopper trying to buy a chocolate bar can get stuck in queues behind someone discussing their banking
However, one of the biggest bugbears remains the contract between sub-postmasters and Post Office Ltd, which is one-sided and unduly restrictive, he adds. “It’s galling when you take over a post office and the Post Office suddenly gets a percentage of the commission you make on the lottery - it just doesn’t seem fair.”
Spar, which has more than 500 post offices in its network, has seen a small increase in numbers over the year, but probably has fewer post offices as a percentage of its estate than it did last year, says retail director Steve Blackmore. “Post offices pay out cash, and when people have it in their hand they are very likely to spend it in your store. However, the bureaucracy can be bad and a lot of the services that were unique to the post office are diminishing.”
Association of Convenience Stores public affairs and commercial manager James Lowman is blunt. “Convenience stores are where post offices belong. The emotional link is so strong. But the contracts are so unattractive and post offices are closing down. It’s a massive missed opportunity.”