Reach reported its largest revenue result from its letterbox division last year, with its chief executive describing the channel as “definitely seeing a resurgence post-Covid”.
Struan Abernethy said the impacts of Covid-19, and then the war in Ukraine, which put pressure on the global paper supply, meant businesses dropped their direct mail contracts.
“But the cost of not doing it now probably outweighs the cost of making that decision to be digital only,” he said.
“We are also seeing a number of examples where, particularly through Covid, organisations made the decision to exit the channel only to come back because of the impact to their revenue, or in some cases their market share.
“Over the last four years we’ve been the most active in the market around being the voice of the channel in regard to its effectiveness.”
The company’s financial results seem to reflect this with $27.8 million in revenue from its letterbox division recorded for the year ended June 2023 – up from $18.8m in 2022 and $15.8m in 2021. The figure is higher than the pre-Covid level with $23.6m recorded for 2019.
The bumper year was also boosted by the failure of its top competitor, with Reach picking up new clients.
However, Abernethy is quick to point out it’s not a letterbox vs digital mentality any more, with businesses running multi-channel campaigns and consumers apparently taking better notice of a digital promotion if that same brand’s catalogue is sitting on their kitchen counter.
Abernethy said the opportunity for letterbox advertising had also improved with it being a chance to turn the material from “junk” mail to “joy” mail.
“You think about it historically your letterbox is where you received all your bad news. It was your utility bills and bank statements – you might have got the odd letter from a friend – but all that now is digital.
“So when you think about opening a letterbox these days, that surprise and delight piece is huge, if we can get that right, and one of the things that has come through some customer research is about utilising that channel with flare … you use the term junk mail, we call it joy mail.”
Reach brand strategist Gemma Ede gave the example of a liquor retailer running a cocktail recipe promotion in store.
“And you go and grab your bottle of gin, and you can grab a little flyer with a cocktail on the way out, and so you could bring this to life through the letterbox channel and people can collect and tangibly create these little recipes, and it stays in the home and it goes on the fridge.”
She said creating content that would catch people’s attention had to move past a previous cut-and-paste approach to the mail.
“How do I catch someone, you know, in the driveway, getting the kids and the shopping and everything’s busy. What’s that one cool thing that could improve their life? Or be a freebie for them? Or get them to switch brands? What are they going to put on the fridge because it’s relevant to them and how they like to live their life. And that’s agnostic of company size.”
Abernethy said an obvious challenge, and one that had persisted in this sector, was securing an on-the-ground workforce to make sure the finished product actually landed in a letterbox.
“You never really get 100 percent coverage if you’re talking about a national distribution. So we’re transparent [with customers] around ‘hey, this is where we currently have some challenges, we are not going to distribute in there, let’s reinvest your money somewhere else, or actually save you some money’. So, this has been a challenge and has been a challenge for years.”
Though things appear positive for Reach, revenue reports from the Advertising Standards Authority show the unaddressed-mail sector – while always small – is becoming smaller in the big scheme of things.
In 2014 the channel was recorded as making up 2.3 percent of the total turnover from advertising companies (newspaper, television and interactive media such as billboards were the biggest earners).
In 2022, the ASA’s most recent report, unaddressed mail made up just 1 percent of the sector, with digital now swallowing up nearly 60 percent.
Struggles can also be seen in the liquidators’ reports for former competitors of Reach.
Ovato went into liquidation in 2022 and Reach’s parent company, the IVE Group based in Australia, has since purchased Ovato’s Australian parent company.
Abernethy said when he entered the role in 2019 the business was in a “fierce price war with Ovato that was stripping value out of the industry”.
He said from then until Ovato’s liquidation in 2022, Reach upped its game, to take approximately 80 percent market share.
“We had Ovato customers knocking on the door wanting to come across … as well as the bulk of the newspaper segment engaging with us to shift providers. This resulted in significant market share gains prior to the exit of Ovato and was a compelling reason for their exit.”
Liquidators Rees Logan and Andrew McKay of BDO Auckland explain the pressures Ovato faced in their first report.
“The printing industry has been under pressure as a result of technology changes, changing consumer behaviour and the movement of publications online for an extended period of time.
“More recently, [Ovato] have been significantly affected by Covid resulting in a reduction in revenue and inability to get required levels of paper due to an international paper shortage … without the support of its parent, it was not viable to continue trading.”
Admail, another company offering direct mail services, went into liquidation in 2022.
“The Liquidators have been advised that the reason for the failure of the company which led to the appointment of the Liquidators is due to the loss of a key client due to the client entering into a formal insolvency process in early 2022 coupled with the cash-flow impacts of Covid-19,” the final report from September 2023 said.
