Comprised of 2,818 employees, with an average salary of ₾914, the Georgian Post, led by Levan Chikvaidze, has successfully transformed its much maligned image, and in the process, has managed to funneled more than ₾40 million into the state budget over the past six years.
In the 21st century, communication difficulties are hard to imagine. In the age of the internet, roaming and social networks, sending messages has become easy. Yet there are certain messages which always have and always will require the same service – the post. A lot has changed over the past few years, not least with regards to the options available to the customer, who can either choose to trust the national carrier, or a private courier service. For more certainty, packages can also be insured. Furthermore, whilst in the past, the Georgian Post was not considered a reliable alternative, today that is no longer the case.
Forbes Georgia has decided to put the spotlight on the company and its head, Levan Chikvaidze. Against the background of a recent well-publicized conflict with competitors, Mr. Chikvaidze speaks about the company’s recent achievements and challenges in a broad context.
What are you exactly – a state company manager or a businessman?
It would be much easier to have one clear role.
Chikvaidze admits that he is still not sure why he agreed to take on this role – whether it was because he could fully use both his business and public sector experience to manage the state company, or because he saw more challenges and risks than guaranteed successes along the route towards achieving his set goals. Despite this dilemma, he decided to take all his experience and direct it towards one cause, and agreed to become the director general of the Georgian Post.
Mr. Chikvaidze is familiar with working in both the state and private sectors. From 1996, he was a member of the local self-government, later becoming a member of parliament, before once again returning to self-government. In 2005, he tried his luck in the private sector: first, he led one of the earliest American investment missions in Georgia, before himself moving to the United States and conducting business activities in Los Angeles and New York. In 2012, having returned to Georgia, he decided to accept the offer from the then Minister of the Economy to oversee the Georgian Post.
According to Mr. Chikvaidze himself, when he agreed to manage the Georgian Post, the company was lacking in two fundamental areas – a proper business model and consumer trust. Therefore, he viewed his job not as the continuation of an ongoing process, but rather as a fresh start. Resolving the aforementioned two issues is what he views as his greatest achievement as Director General thus far.
What does the new approach and business model look like?
A company that used to rely on indirect subsidies from the state has been transformed into a modern organization that is oriented towards new technologies, and is capable of providing a universal postal service across the whole country, as well as financing development projects through its own means, without being a burden on the state budget. The company’s performance has allowed it to be ranked next to its Danish and British counterparts in terms of quality, and to receive votes from 108 countries in executive council elections.
How do you measure growth in customer trust?
Through growth in customer numbers and specific figures. Perhaps the most important indicator is the company’s contribution towards the state budget. Between 2009 and 2011, the company contributed a total of only H4,750,000 towards the budget during a three-year period. Since 2012, the average figures have quadrupled, with more than H40 million having gone into the state budget between 2012 and 2017. I think that this is a significant achievement.
The Georgian Post received significant international recognition from the Universal Postal Union in April this year with regard to its Express Mail Service. The EMS network of premium-category registered international postage services covers more than 180 countries. According to the postal association PRIME, the work carried out by the Georgian Post since 2012 has resulted in a significant improvement in the company’s premium class services, and as of 2017, the Georgian Post is viewed among the 10 best service providers in Europe.
Chikvaidze explains that the postal service operates 24 hours a day. Regional distribution services start working at 3 a.m., activating a continuous cycle that includes receiving, processing, registering, sorting, distributing and delivering the mail. The IT and quality control sections also work around the clock. The Georgian Post has a total of 2,818 employees, with an average salary of about H914. Chikvaidze himself is present at the Monday meetings. According to him, this allows him to keep up-to-date with all ongoing processes, while also facilitating information exchange among the various services at the Georgian Post. He also conducts individual meetings throughout the day. When necessary, he personally delivers mail to problem spots, and is actively involved in events designed to improve postal operations and services.
What difference does the status of national operator make?
It means that you have obligations and responsibilities towards the state and the public, which also helps me publicly evaluate my capabilities. I am proud to be able to represent Georgia when interacting with our counterparts from other countries. From a commercial point of view, having this status means making losses.
The main objective of the Georgian Post is to deliver universal service across the whole country, including places that are difficult to access due to geography, poor weather or other obstacles. In order to fund this service, it is necessary to create and deliver other, more profit-oriented products.
Who do you see as your main competitors?
In terms of delivering a universal postal service, the Georgian Post has no competitors. Bearing in mind that we are talking about a loss-making business model, there may be no candidates who would even wish to create competition for us. As for the profit-oriented segment, we have numerous competitors that include experienced, well established companies such as DHL, FedEx and UPS. These international giants also have Georgian partner companies operating on the local market.
The subject of competition on the local market stood firmly on the agenda for the Georgian Post several years ago, when the company was increasingly being accused of trying to monopolize the market with help from the state.
What happened then?
We did not communicate properly. We did not manage to explain to the public that we had the right to act the way we did until 2019, and that by doing so, we were acting in accordance with European practice, rather than contrary to it. Some of our competitors took advantage of the circumstances and attempted to further weaken the national operator in order to maintain the status quo and high tariffs on the market.
Does the Georgian Post currently enjoy any privileges on the market?
The Georgian Post enjoys certain advantages, rather than privileges. Our competitors are in a more privileged position, since they have no obligation to provide universal postal service, meaning that they operate only in those segments and territories where they can make substantial profit with low operating costs. The universal postal service costs our company H7 million each year on average. However, obtaining information at an affordable price and in a convenient location is a UN-recognized human right, and we are happy to deliver it.
Your competitors are still talking about your privileges – namely, the section of the State Procurement Law which states that public institutions may purchase services from you without a tender, while in the case of your competitors, a tender has to be announced. The industry is awaiting a decision from the Constitutional Court in this matter, and it is being said that there has been a considerable delay in the decision making process.
The legislation allows organizations to choose whether to purchase services from the Georgian Post, or to announce a tender. The section that you are referring to is designed to help the regional state organizations whose use of the postal services is so limited that should a tender be announced; I can assure you that no one would take part in it. This is a loss-making service for the Georgian Post. The lawsuit is destructive in its nature, as it aims to leave regional state organizations without a postal service altogether. People who brought the lawsuit know perfectly well that nobody would pay H50 to participate in a tender for postal services worth H100 per year, then travel to Mestia twice a week for the remaining H50. Once again, this is an attempt to present reality from a skewed angle.
According to Chikvaidze, it is evident that his company is not afraid of competition. Even though the company is no longer being subsidized, and is operating on a free market, burdened with the obligation to provide universal service, it has still managed to develop itself, and has already drawn up plans for the future. Chikvaidze sees the company’s main advantages not only in its infrastructure, but also in its technologically sophisticated products, such as hybrid post – an open electronic platform where corporate clients can register and track their mail. For Mr. Chikvaidze, another competitive advantage lies in the low cost of its services (for example, H3 for mailing a package anywhere in Georgia), as well as the low tariffs on electronic commerce.
Chikvaidze views e-commerce as a major challenge for postal services both in Georgia and throughout the world. Soon, he plans to offer entrepreneurs an open platform through which the Georgian Post will deliver electronically purchased products to any place in the world.
How can the Georgian Post respond to the challenges associated with the rise of e-commerce?
We need the appropriate technology and infrastructure. As of 2016, e-commerce accounted for more than a billion packages a year, but technological advancements mean that this number is growing rapidly. Therefore, we will need to do everything we can – from expanding the rapid logistics network to taking advantage of our geographic location. We must work on transit routes to ensure that mail sent from China and other Asian countries to Europe passes through Georgia.
What is the priority for the Georgian Post in 2018?
To establish a logistics network that will allow us to process the mail enroute from Asia to Europe. Chikvaidze believes that the company will not be truly successful until Georgia implements a culture of postal communication that is similar to Europe. The European Union statistics are indeed impressive: according to Eurostat, the postal sector accounts for a 1% share within the EU economy, which translates into 91 billion Euros. Letters alone account for EUR 44 billion – 0.34% of GDP. With regards to e-commerce, it accounts for a growing volume of postal services (more than 6 billion packages, according to the latest data). Universal postal service companies alone employ millions of people.
The Director General attributes the aforementioned numbers to the postal service culture that exists in the EU. Therefore, it is necessary to establish a similar culture in Georgia. To this end, the Georgian Post was chosen to host the 2018 PostEurop Plenary Assembly session and business forum in Tbilisi. The event will mark the 25th anniversary of PostEurop, and will be attended by up to 200 delegates from across Europe. The member countries of this organization boast impressive statistics of their own: 175, 000 post offices, 2.1 million employees and services that connect 800 million people to each other every day.
Chikvaidze believes that if Georgian society can accept and relate to European values, then the postal culture will easily gain a foothold here over time. To this end, the Georgian Post has installed mail collection boxes across the country, although by far the largest share of the mail placed into these boxes still belongs to foreign tourists, i.e. those who are familiar with the tradition of using postal services as a communication method. According to Chikvaidze, the establishment of a similar culture in Georgia will be aided by creating a proper registry of postal addresses and installing individual post boxes at all of these addresses, as is the case in Europe.
Chikvaidze firmly believes that undertaking the appropriate steps will enable the Georgian market to post vastly improved figures. Only then, according to the Director General, will his decision to follow his personal interest in reviving the postal sector (rather than any pragmatic calculations) and take charge of the Georgian Post, finally be justified:
“We wished to bring the spring season into this sector. Choosing the Georgian swallow as our company logo supported this idea.”