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Saturday, 13 October 2012 15:32

Australia Post’s brave new $2 billion world Featured


Along with postal utilities around the world, Australia Post is trying to find ways to replace revenues from the declining usage of conventional stamps and letters. It will spend $2 billion implementing a number of new strategies, but how effective will they be? What will the Australia Post of 2020 look like?

How often to you write a personal letter to a family member or friend? How often do you pay a bill through the mail? How well do you think the world’s post offices are coping with the digital era?

Things have changed. They have changed a lot and they have changed very quickly. Australia Post is looking at a number of new strategies to ensure it remains viable in a world where postage stamps are becoming museum pieces, along with public phone boxes, cheque books and good manners.

Last week Australia Post released its annual results. They are a revealing snapshot of how the company’s fortunes are changing. Revenues were up marginally, from just under to just over $5 billion But pre-tax profits rose 21%, from $329 million to $398 million, a good increase and a handsome margin.

The important figure is where the money comes from. Revenues from ”regulated mail” fell from $1950 million to $1924 million, and made a loss of $148 million. Regulated mail is standard postage, of which Australia Post has a monopoly. But the monopoly is not sufficient for it to turn a profit, which indicates how sick that business is. Australia Post has community service obligations, and must continue to sell stamps and carry letters.

“Non regulated parcels and retail” is where the money is. Revenues were up 8.5% to $3073 million, returning a profit of $546 million. So Australia Post makes much more money in an area where it competes in the open market than it does where it has a monopoly. Think about it.

Just as traditional letters have been declining (did you send out Christmas cards last year, or did you do a group email?), so parcels have been increasing, drive by the massive boom in online shopping. You might order it on the Net, but someone still has to physically get it to your house. That’s a boom industry, as the success of FedEx, DHL and UPs shows. Australia Post does well there, and wants to do better.

And there’s retail. There are no post offices any more, but Australia Post Shops, often in anonymous shopping centre outlets. The former post office buildings s, often the grandest in town or on the suburban high street, are now information centres and guest houses and restaurants. All in pursuit of a dollar.

And Australia Post is now entering the digital age. It will launch its Digital MailBox service this month, which allows consumers and businesses to communicate with each other and pay bills. That is exactly what existing services such as BPay do, and have course the banks’ own online banking services are quite sophisticated and feature-rich. So how will MailBox differentiate itself?

“MailBox will be free to all Australians. It will enable consumers to receive and pay bills, track and manage their relationships with their providers and store all of their important documents in one place. It's easily accessed with one password, from any Internet enabled device, 24/7, from anywhere in the world.”

Well, yes. It’s more than bill paying, it allows secure communication, but whether people need another intermediary in a world that is quickly disintermediating is another story. Analysts are split on whether MailBox is a good idea or not, and there is a strong competitor from the recently announced private Digital Post Australia service, from Computershare and US provider Zumbox. Australia Post has taken Digital Post Australia to court over its name, which it alleges is too close to its own (like the uses of the words “post” and “Australia”). It lost, but will probably appeal.

Telstra will provide the infrastructure for MailBox. This is an amusing twist, given that both Telstra and Australia Post had their origins in the Post Master General’s Department. The wheel has turned full circle. AMP and Westpac have signed up, and no doubt many more names will be announced at launch time.

There is no doubt Australia Post’s high profile CEO, former banker Ahmed Fahour, is what Michael Caton’s character in The Castle would have referred to as an “ideas man”. Last week he announced a $2 billion “transformation investment program in infrastructure, products and services in support of the digital economy.”

That includes MailBox, though the actual investment in that service is not being disclosed. But Fahour gives much greater emphasis to the fact that “the investment will create a world class parcel delivery network that will improve automation and expand Australia Post's footprint across Australia, deliver convenience and choice in parcel delivery.

“This will significantly expand the capacity of our parcels network. Without this investment, we cannot sustain the enormous demand for parcel services and continue the high level of service and reliability we’ve always delivered to Australians. This investment will provide the infrastructure and delivery options to ensure Australian businesses and consumers can reap the benefits of the digital economy.”

So, despite the tumult and the shouting Digital MailBox will be a bit of a sideshow. It’s hard to see how it will make serious money, or even return its investment. The mundane truth is that the future for Australia Post is in moving shoes and books and exercise bicycles and cosmetics and electronic equipment from southern China to suburban Australia. Hardly a Brave New World, but a profitable one.

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Graeme Philipson

Graeme Philipson is senior associate editor at iTWire. He is one of Australia’s longest serving and most experienced IT journalists. He is author of the only definitive history of the Australian IT industry, ‘A Vision Splendid: The History of Australian Computing.’

He has been in the high tech industry for more than 30 years, most of that time as a market researcher, analyst and journalist. He was founding editor of MIS magazine, and is a former editor of Computerworld Australia. He was a research director for Gartner Asia Pacific and research manager for the Yankee Group Australia. He was a long time weekly IT columnist in The Age and The Sydney Morning Herald, and is a recipient of the Kester Award for lifetime achievement in IT journalism.

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