Building a competitive retail network in Poland

Rafał Brzoska

President of the Management Board

Amsterdam, 24th March 2009

Agenda

Polish postal marketIntroduction to the Integer.pl GroupKey success factors for the future growth

of InPostDevelopment of the partnership franchise

modelImproving service delivery and ensuring a

customer-centric approachCreating a unique position in the market:

building brand awareness

Polish postal market - 2008165 – number of registered players on the Polish Postal market (including CEP)

2,5% - market share of alternative postal operators in addressed mail

54% - market share of alternative operators in parcels segment

74% - market share of alternative postal operators in unaddressed mail

Source: InPost calculations based on Office of Electronic Communications (UKE Polish postal regulator) report on Polish postal market in 2007, May 2008

Postal retail outlets

8692 – number of retail outlets run by Polish Post (30% run by agents)

1543 – number of retail outlets run by other postal operators (72% runby agents)

Integer.pl Group - introduction

Distribution of unaddressed mail

market leader in distribution for supermarket chains

Postal services

largest independent postal operator

Financial services

Basic financial and insurance services offered

in 95 Point of Sales

Logistics services

logistics support to Group’s subsidiaries

Distribution of unaddressed mail in Ukraine

Operations start in January 2009 in 5 biggest cities (20 by end of

the year)

Automated parcel terminals

250 machines by end of 2009

InPost - postal services2008 - market share of 2,2% with 3 million letters per month onaverage

2009 - market share of 4,5% in December with 8 million lettersper month by end of the year

Standard, express and registered express letters, parcels as wellas manufacturing and installation of commercial mailboxes

Main focus on business customers (95% of income).

Infrastructure

1 sorting central hub in Piotrków Trybunalski automised andregional branches. 2 additional hubs to be opened in Northand South of Poland in 2009.

109 branches

800 Customer Service Points

Presence in 198 cities

2500 postmen

Retail network

Growth from 0,3 million letterper month in Q4 2006 to 4,4million letters in Q1 2009

Retail network doubled –increase from 430 points in Q42006 to 800 in Q1 2009

* - Forecast

Key succes factors for the Growth (1/2)

Utilisation of logistics infrastructure,management and experience in running thebusiness of 7000 people of Integer.pl(unaddressed mail)Flexible approach to our customersLower prices compared to the nationaloperator by 20-30%Ambition to have national coverage – currentlyalmost 200 cities in PolandFully owned logistics infrastructureInnovative ideas

Additional security of mail pieces –„special seal” attached to thecorrespondenceInPost’s envelopes weighing 50 grams

Key succes factors for the Growth (2/2)

Introduction of new products and services in linewith the strategy to introduce 5 new products peryearInnovative solutions based on technologyimprovements

On-line track and tracing since December 2007GPS monitoring of postmenReporting systemm.InPost – mobile version of the websiteAutomation of central sorting hub

Automated Parcel TerminalsHybrid MailE-services

Partnership franchise model (1/4)

InPost

CustomerService PointsBranches

Partnership franchise model (2/4) - Branches

100% branches run by third-party agents in Nov 2006

Financial restrictions for agents to make investments

InPost taking ownership in largest cities (currently 16)

Remaining are monitored by InPost (e.g. training, uniformstandards)

Forecast of mail volume allows sufficient training andrecruitment

No franchise fee. Agents are paid by:Number of delivered correspondenceNumber of outcoming mail from their region – incentivefor sales activities and key account management

Partnership franchise model (3/4) – Customer Service Points

100% Customer Service Points run by agents in Nov 2006

Agents running their own businesses and treated InPost’sservices as a second revenue stream

2008 – decision to open own Customer Service Points in mostattractive destinations

Uniform outlook and full range of servicesInPost is paying the rent, furnish it and organise necessaryequipmentAgent is organising clerk and earns money from theprovision of sales servicesIf agents fails, InPost is not loosing the localisation butreplace the agent – more stable financially and better forthe image

Partnership franchise model (4/4) – Customer Service Points

Two cooperation models for agents:Own premise or is renting the outlet marked by InPost –need to invest source for furnishment. Benefit of highercommissionOwn premise or is renting the outlet marked by InPostbut is not covering the cost of uniforming it to InPoststandards. Contract signed for 2 years

Each agent receives licensed software, training materials,visual materials, assist in leaflets distribution

Offered services include selling stamps, sending and receivingletters and parcels as well as offering financial services (billpayment, cash loans, mobile top-up, money transfers)

Improving service delivery and ensuring a customer-centric approach (1/3) - GPS

95% of volumes generated by business customersStrategy focused not only on lower costs but also onquality aspectCustomers get used to price and pay more attention toquality

Every postmen equipped in GPSContant monitoring of work and delivery routeAbility to check if postmen reach „test addresses”Complaint procedures for standard lettersFirst big advantage over national incumbentSimple but very effective

Improving service delivery and ensuring a customer-centric approach (2/3) – IT-Agent

Fast growth urged the need to havea complex solution to control thequalityIT-Agent – system to control theentire process within theorganisationIntroduction of barcodes and data-matrix codes

Cooperation with customers inarea of barcoding e.g.implementation to our systems,generating reports

Multiple scanning of thecorrespondencePostmen's bonuses are dependanton effectiveness and quality ratherthan on number of working hours

Improving service delivery and ensuring a customer-centric approach (3/3) – Automatisation of sorting hub

Next step was to automate the sorting processManual sorting generated up to 5% mistakes and 1-daydelayInstallation of two Pitney Bowes machines (VariSort andOlympus II) allowing to deliver up to 10 million lettersper month with marginal error range

Next big projects:Hybrid mailAutomated parcel terminals

Goals of undertaken actions are to increase quality of service and gain more competitive advantages

Building brand awareness (1/4)The launch of InPost on the market - strategy

Strategy of thelaunch

The market research

(TNS OBOP)

Informationmaterials

Anti-crisismaterials

Media trainingand internal

communicationMeeting with

opinion leadersWebsite

Teaser and educationalcampaign

Official launchof InPost brand(15 Nov 2006)

Regional pressconferences

Building brand awareness (2/4)

Public Relations activities – publications and articlesIntensive communication with clients and employeesPro-ecological activity EKOInPostEuro-mailboxes educational campaignCharitable activities – InPost actively cooperates withAnna Dymna’s “Mimo wszystko” Foundation and EwaBłaszczyk’s “Akogo?” FoundationContest for customersInvestments in the staffWebsite, gimmickriesMany awards

Building brand awareness (3/4)

1695 publications aboutInPost in 2008

Major coverage in Internetand Press

InPost’s name in the titlementioned 514 times in 2008

43 headlines per month onaverage

Rafał Brzoska broke the monopol The private post – the investment of the year

InPost insures

InPost’s postman as a cash machine

InPost – laureate of „Teraz Polska”

InPost introduces a new service

InPost introduced a new IT system

Building brand awareness (4/4)

Retail outlets

Contact details

Rafał BrzoskaPresident of the Management Board