Toll competes for Australia Post’s domestic market share in e-commerce

Toll Group’s FY2012-13 revenues indicate a company that is struggling with the global economy. According to Ti’s brief, Toll relies heavily on Australian business (August 23, 2013), Toll’s total revenue was generally flat over the last year. Its contract logistics, global forwarding and global express divisions noted slight revenue increases, but profits declined in all three segments.

Although the company’s Express business in Australia noted a margin squeeze, the result of consumers trading down to lower cost services, its management were excited by the growth of its B2C (business-to-consumer) business, Toll Consumer Delivery.

Indeed, e-commerce is driving much of the company’s B2C business. Market research company, eMarketer, forecast Australian B2C e-commerce sales to increase at a 6.07% compound annual growth rate (CAGR) between 2011 and 2017, reaching US$32.56bn by the end of the stated period.

According to various estimates, Australian Post has much of the market share of B2C parcels, but Toll Group plans to take a piece of the market.

In July 2013, Toll announced the building of a A$170m freight sorting hub that will have the capabilities to increase Toll’s parcel sorting capacity in Sydney more than three-fold to 35,000 parcels an hour.

Toll Group is also testing a locker system to increase the delivery options it can offer to the growing number of online shoppers. Based on the success of its trial, Toll Consumer Delivery may add the locker system to its Nparcel collection network, which was established last September to facilitate parcel deliveries through a national news agency. The company aims to build a network of more than 3,000 online shopping pick-up points across the country.

Toll has a daunting task ahead of itself as it tries to stake a claim to Australia Post’s 80%-plus market share of the B2C parcel delivery market, as Australia Post too has invested heavily in this segment.

Australia Post has acquired a payments gateway as well as investing to improve its sorting facilities and extend its hours. It also plans to expand its own parcel locker system to 80% of the population by 2014. Furthermore, in 2012, it bought out partner Qantas from the Start Track express parcels business which, according to the managing director and CEO of Australia Post, will add “significant additional capacity to Australia Post’s services, particularly in the area of express and tracked parcel services.”

While Toll’s international business may be struggling, the company has high hopes for its Toll Consumer Delivery group. It believes it has a big advantage over Australia Post in that it can make use of its various divisions to deliver parcels from overseas to Australia. Whether it will be financially successful is unknown, but the competition between Australia Post and Toll Group should help drive rates down for consumers and shippers alike.

This content originally appeared in Ti’s Logistics Briefing Asia newsletter. Click here to add this free newsletter to your subscription.