Flexibility is needed as Australia Post reorganises its business

Post offices around the world are feeling the pressure from declining revenues and letter volumes as well as increasing competition and privatisation for some post offices. Australia Post is no exception. However, unlike many post offices, Australia Post actually made a profit last year. But its mail business lost AU$187.4m with expectations of continued losses this year for the business. Volume-wise, Australia Post has recorded a 30% decline in letters over the past five years and expects that volumes will continue to decline 8%-12% a year.

To stem further losses, the Australia Post announced plans to restructure its business, basically splitting it into two businesses: The Australia Post brand will be used for the letter and retail business for consumers and small businesses. Its StarTrack brand, which originally was a partnership with Qantas and then acquired fully from them in 2012, will include parcel and express, e-commerce logistics and supply chain services.

Even prior to the reorganisation, Australia Post has been establishing partnerships, investing in technology and expanding its facilities to handle the increase in parcels.

For example, a recent partnership with Alibaba was formed to connect Australian consumers with Chinese manufacturers and boost Chinese consumption of Australian products. Australia Post has launched its own store within Alibaba’s Tmall.com platform. According to Alibaba, “The recent collaboration with Australia Post will allow Australian businesses to use their Australian business licenses and ship their products directly from Australia.” Plus, Alibaba’s Alipay purchase cards will be distributed throughout Australia Post stores, allowing Australian consumers to purchase Chinese product direct.

In another partnership, The Post Office has formed a partnership with Westpac Banking Corporation. The agreement will allow financial statements and communications to be sent to customers via the digital mail service. Australia Post will also make use of Westpac’s card payment services in post offices.

Australia Post is also expanding its locker network across Australia and currently has 172 lockers in place.

According to Australia Post, it needs flexibility to respond to accelerating falls in mail demand. As such, as part of its reorganisation, some 900-1000 employees will be let go. The savings from these job cuts, estimated at AU$90m, will help fund the extended Saturday trading hours and weekend parcel delivery announced earlier this year.

As noted in Ti’s latest report, Global Express and Small Parcel Market 2014, post offices are undergoing a massive change and are not only partnering with small parcel delivery firms but also competing against them thanks to the rise of e-commerce. In the Australian business-to-consumer small parcel market, Australia Post commands a big share with some estimates exceeding 60%. Toll Holdings has less than 10% but it is working to catch up as it focuses on this potentially lucrative market. Other providers such as FedEx, UPS and DHL are also participating in the Australian market as well as domestic niche players – all of which adds up to increasing competition and pressure for Australia Post.