Beyond letters: Azerbaijan's digital evolution of postal system - ANALYTICS

Just two decades ago, a post office was associated by most of us with letters in envelopes, long queues, and mandatory paper notifications. Today, even this conservative sphere has found itself at the cutting edge of the technological revolution.

The key driver of change has been life itself. With the growth of e-commerce and the habit of shopping online, a new public demand emerged - fast, reliable, and convenient delivery. And if previously citizens were willing to spend time in queues, now operations must be available literally in one click - on a smartphone.

In many countries, postal networks have taken on the role of intermediary in providing basic financial and banking services to millions of people who, for various reasons, remain outside the traditional banking system.

These global changes have not bypassed Azerbaijan. At first glance, an ordinary postal service, but in reality, it has played an important role for decades in establishing human connections, developing the economy, and even strengthening national independence.

However, today the function of the post is no longer limited to delivering letters; it encompasses financial, logistical, and digital services. The country is confidently taking the traditional postal system to a new level, providing citizens with access to modern services and strengthening its position on the international information map.

Where does the story begin?

The history of the Azerbaijani post dates back to the early 19th century. The first postal office was opened on June 1, 1818, in Ganja, and a few years later, similar institutions appeared in Baku and Nakhchivan. Since then, postal communication has become an important part of the state structure, and during the years of the Azerbaijan Democratic Republic, a separate structure was even created - the Ministry of Post and Telegraph.

The development of the economy and culture in the 20th century only increased the importance of postal services. If in 1920 there were only a few dozen points operating in the country, by 1940 their number had increased ninefold to 524. Moreover, almost 80% of these offices were located in rural areas, which reflected the strategic task to provide communication not only in cities but also in remote areas. During the same years, the length of postal routes increased 2.6 times and amounted to 6,767 kilometers.

A special trial fell upon the years of the Second World War. The flow of letters from frontline soldiers and triangular soldiers' letters made the postal service an invisible but vital bridge between people. It shouldered the responsibility for preserving human connections during the most difficult times, as well as ensuring document flow between government structures. The role of the Baku post office was especially significant - in the context of oil industry development, it became an instrument for coordination and management of a strategic sector.

During the Soviet period, the system received powerful development. The post office ceased to be just a channel for correspondence: it provided money transfers, offered social and educational services. In essence, it was one of the first multifunctional networks, anticipating modern postal-logistics and financial services.

After gaining independence, Azerbaijan's postal system embarked on a path of transformation. In 1997, the Azerpost structure was created in the format of a production association, then as a state enterprise, and since 2004 as a limited liability company. This institutional reform became the starting point for digitalization and integration into international standards. Gradually, Azerpost went beyond traditional delivery, offering services in e-commerce, mobile applications, and financial services.

From infrastructure to digital ecosystem

Over the past two decades, Azerpost has traveled a path that can be compared to a full-scale modernization of the entire industry. From 2003 to 2023, 887 new postal buildings were constructed in the country, 126 offices were completely renovated, and 11 more modern complexes were built. A special place is held by the restoration of the postal network in the liberated territories of Karabakh and Eastern Zangazur. Post offices first appeared in 2020 in Hadrut and Jojug Marjanly, in 2022 in the village of Aghali in Zangilan district, then a branch opened in Khankandi (2024), and postal services were organized in Shusha and Kalbajar. In 2025, Azerpost plans to put into operation a total of more than 40 modern postal centers with digital services in Karabakh and Eastern Zangazur. For people who are returning to the region or just relocating there, these services become an important part of everyday life - from receiving parcels to financial operations.

Today, over 1,500 postal offices ensure the company's presence in virtually every region. For residents of rural areas, where access to government and financial services is limited, this has become a real window to the modern world.

In fact, the company has transformed into an infrastructure hub, combining logistics, fintech, and government services.

In 2024, Azerpost's subsidiary company - Postcargo - began international deliveries to the Karabakh economic region. Initially, they covered Khankandi and Fuzuli, and later expanded to other cities. This step is especially important for the region's residents: it expands access to online commerce, strengthens international connections, and stimulates economic activity.

Thus, the postal network contributes to revitalizing the regional economy and strengthening the country's unity.

Digital Breakthrough

In 2021, Azerpost moved to a stage of deep modernization, focusing on developing digital solutions. By 2024, the organization had successfully implemented three key projects: the AzPostMobile mobile application for individuals, internet banking for business clients, and the Mobil POS service for small and medium businesses. These products not only facilitated access to services but also became part of a large-scale transition of the postal system to the digital environment.

The e-commerce market holds a special place. The volume of e-commerce parcels processed by Azerpost increased by almost 40% in 2024. This can be seen as a signal that Azerbaijan could transform into a regional center for electronic logistics. The successful implementation of the HUB project, operating since 2016, has already allowed the country to become a transit point for delivering goods from China to 17 countries. Additional confirmation comes from the redirection of EMS parcels from the US and Germany to Russia through Baku.

Today, the segment of parcels and express deliveries forms the basis of income for most postal operators. In 2024, revenues from express mail and courier services in Azerbaijan amounted to 26.43 million manats ($15.547 million), which is 43% more than a year earlier. Over the past five years, this segment has increased 4.5 times, and revenues from courier delivery have tripled. The total market volume of postal and courier services in 2023 exceeded 111.94 million manats ($65.847 million), which is 13.7% higher than in 2022.

Azerpost itself is also strengthening its financial position. The organization's annual income in 2024 was 73.5 million manats ($43.235 million) - 2% more than in the previous year. Net profit reached 4.5 million manats ($2.647 million), with an EBITDA of 9.9 million manats ($5.823 million). For the third consecutive year, the company has completed its financial cycle with a profit, confirming the sustainability of its business model and the effectiveness of the ongoing transformation.

As can be seen, the postal system is increasingly reorienting towards digital services and high-value-added services. Money transfers, once one of the pillars of the postal system, are now giving way to digital solutions. In July 2024, Azerpost announced a 60-70% reduction in tariffs for domestic transfers. This step reflects two key trends: the growing popularity of mobile banking and the acceleration of digitalization, which gained momentum during the COVID-19 pandemic.

Modern digital technologies, such as online shipment tracking, mobile payments, and electronic document exchange, make citizens' lives more convenient and government services accessible literally in one click. At the same time, Azerbaijan's integration into international postal networks is strengthening, opening new opportunities for the economy and business.

Thus, digitalization is gradually covering all levels of postal services. In the near future, we can expect the implementation of automatic sorting based on artificial intelligence, 24/7 customer support through chatbots, secure document flow using electronic identification, as well as further expansion of the e-commerce segment.

Azerbaijan is ahead in growth rates

The global postal services market shows steady but slowed growth, within 1-2% per year. Its development is primarily driven by parcels and express delivery, while traditional correspondence continues to decline.

Against this background, Azerbaijan demonstrates a more dynamic picture. While global average annual growth rates fluctuate within 1-1.7%, certain segments of the Azerbaijani market are growing by tens of percent annually: in 2024, revenues from express mail and courier services increased by 43%. This is explained by the rapid growth of e-commerce, the expansion of the regional postal network, and the introduction of digital services.

Thus, while the global postal market is moving at a moderate pace, Azerbaijan is forming a more sustainable growth trajectory and gradually establishing itself as a potential regional center for postal and logistics services.

According to Consegic Business Intelligence, in 2023, the global postal services market was valued at $267.65 billion. By 2031, it may increase to $306.74 billion - this corresponds to an average annual growth rate of 1.7%. The forecast is based on the development of several segments: traditional mail, parcel delivery, express services, and integrated logistics. Similar estimates were presented by Precedence Research: in 2024, the market was recorded at $249.37 billion, and by 2034, it is expected to grow to $287.41 billion. Here, the key drivers are accelerated e-commerce development, digitalization of logistics processes, and increased volumes of cross-border trade. A more optimistic view is offered by Emergen Research analysts: according to their forecasts, the market in 2024 will amount to $246.9 billion, and by 2033 will reach $297.7 billion. The average annual growth in this scenario is higher than the industry average - 2.1%. On the opposite side are the conservative forecasts of Global Industry Analysts. Their scenario assumes market growth from $241.8 billion in 2024 to $256.4 billion in 2030, which corresponds to only 1% annual increase. At the same time, analysts believe that standard postal services will show slightly more confident growth, while the express segment will slow down.

On the other hand, which is an important factor in many countries, national postal services are opening up to the private sector and entering a competitive environment, while Azerpost, remaining under state control, successfully combines its social mission with commercial objectives. So, while in many countries the number of mail carriers is decreasing, giving way to couriers and logistics operators, in Azerbaijan, this process is accompanied not only by automation but also by improving staff qualifications. Thus, the transformation of the postal industry becomes a factor of employment and professional development. In other words, Azerbaijan's postal sector today stands at a crossroads: on one hand, it reflects global trends, and on the other, it demonstrates its specificity and potential. Against the background of everything noted here, express services and e-commerce are already becoming drivers of development, while digitalization and innovation give it new life. Azerbaijan has traveled a significant part of this path, transforming Azerpost into a modern platform that provides convenience for citizens, supports business, and strengthens the country's position as a reliable partner in international logistics and financial services. In the future, this transformation will deepen: the implementation of green technologies, the development of artificial intelligence-based delivery systems, and the expansion of digital financial services are expected. Azerbaijan, moving in step with global trends, has every chance to secure its status as one of the key postal and logistics centers in the region.

The article is submitted to the competition "Transformation of Traditional Mail in the Modern World and Azerbaijan," conducted by Azerpost LLC together with the Press Council.