Australia Post cannibalising mail and print for its own benefit

On August the 28th Australia Post (AustPost) applied to the Australian Competition Consumer Commission (ACCC) to increase not only the price of a stamp from seventy cents to one dollar but business mail pricing of up to 48% from January the 4th. This is on top of price hikes of 5-9% for Print Post, which is used to post publications such as newspapers, magazines and catalogues, let alone bulk mail price rises of 2.8-5% this month as a CPI increase. There was wide spread industry concern that AustPost would use the 42% stamp price increase as an excuse for business mail rises next year, it seems they had good reason to be concerned.

AustPost wants small pre-sort mail, being the category most used for bulk mail and is 38% of mail volume, to rise 37.5% for the regular service and 48.5% for the priority service. They also want to raise Print Post again by 15% for the priority service under 125gm and 13% for the rest, with the regular small service up 13% and the rest at 11%. A couple of days later the Print Industry Association of Australia (PIAA) launched a planned and researched national campaign to win political support for AustPost reforms. PIAA CEO Jason Allen, said “The price increase issues are a major concern and they are the tip of an iceberg threatening the future viability of the entire mailing industry and all the associated sectors whose economic livelihoods are under threat by Post’s blindsiding tactics,” and that “Post has consistently failed to consult and to make an economic and social business case substantiating its actions. It has failed to highlight any improvements and benefits that businesses would be expected to provide their clients with accompanying any price increase. We believe it has failed to meet the criteria of the Australian Government’s Cost Benefit Analysis. It has avoided quantifying the impacts of its actions across the community and failed to provide economic and social evaluation in monetary terms of its proposed actions.”

Mr Allen believes that it is the duty of the Parliament to hold AustPost to account and that his campaign is geared to do this “From the end of this week politicians around the country will be receiving our report on the Economic Contribution of the Australian Mailing Industry and our plea to pull this monopolistic, national service provider into line and into compliance. Members of Parliament need to understand the consequences of Posts actions on the employment of as many as 150,000 people who contribute $14.1 billion in Gross Value Added to the Australian economy not just the 30,000 people Australia Post employs,” he said.

Subsequent meetings over the first couple of weeks of September were held with printers and mail-houses in Sydney and Melbourne, and they have thrown their support behind the campaign. Mr Allen also said they would be making a substantial industry submission to the ACCC for the Thursday 15th October 2015 deadline. On the 17th September the AustPost newsroom announced that they would establish a new industry working group to support the implementation of letters regulatory reform and consider other strategic issues facing the postal sector. The group, is to be chaired by former Victorian Senator Helen Kroger, and will include representatives from the printing industry, mail houses, licensed post office (LPO) network and employee unions. This was actually a recommendation from a Senate inquiry from a year ago into the LPO network, wanting the establishment of a strategy group of industry stakeholders. The inquiry also recommended restoring the ACCC oversight of business mail price changes and an independent review of AustPost’s community service obligations.

Interestingly Ms Kroger is the former wife of Michael Kroger who is currently the Liberal Party state President of Victoria. In 2012 Ms Kroger was bumped from first place on the Senate ticket by Mitch Fifield, who was recently made Minister for communications taking over from the current Prime Minister, Malcolm Turnbull. In January this year when Mr Turnbull was communications MP, he made it clear that AustPost was not establishing the government’s digital shopfront. He conceded his e-government plans “undermines the economics of my other responsibility – Australia Post” but that this was inevitable because “the letters business doesn’t have a great future”.

AustPost obviously wants to position its self as digital innovators with the AustPost Digital Mailbox cloud storage launched in October 2012, and to focus on parcel deliveries with its acquisition of Star Track Express couriers in December 2012. Many found it curious when they decided to move away from the famous red and white logo for blue and white when they rebranded its parcel division and the Star Track fleet last year. AustPost also launched an iphone app in 2012 called Australia Post Postcards, allowing you to send images from your phone as postcards anywhere in the world. “Australia Post is continually looking for ways to make our products and services a helpful part of our customers’ lives both physically and digitally,” said Catriona Larritt, the former Australia Post’s General Manager Post Digital, at the time. It has come out this year though that the app has many problems such as long delays for the cards to arrive or them not arriving at all.

In 2013 Ms Larritt said that if the Digital Mailbox was successful, it would accelerate the decline of its letters business and that it was a question she was often asked. “The answer is yes, it’s clear that if we’re successful, over the next couple of years we’ll accelerate the decline of letters.” And “That obviously will have a material economic impact on Australia Post, but we made a decision as a business that this was happening anyway and we may as well cannibalise our own business rather than have someone else do it to us. That was a hard decision organisationally.” But Ms Larritt also said that there were billions of letters still sent, so for the next three to five years it would be about ramping up the migration to the Digital Mailbox and “providing a multi-channel communications offer”.

In April this year AustPost launched its new Apple watch app that enables customers to view delivery information and track their parcels on an Apple Watch. “The new Apple Watch app is the latest in a series of digital innovations Australia Post has been working on to provide easy to use experiences for customers who want greater flexibility in management delivery services,” Andrew Walduck, executive general manager, information & digital technology at Australia Post, said in a statement. Also in April it was revealed that AustPost’s state of the art sorting machines had misdirected an estimated 40,000 parcels each day. And in May this year it had a meltdown in its computer system leaving millions of online bill payments frozen meaning companies were unable to receive customer payments for a week.

A week ago they came out with a campaign to help small businesses reach international as well as local audiences through e-commerce. And as of yesterday, Mr Walduck will now head the new ‘trusted e-commerce solutions’ division. AusPost CEO Ahmed Fahour, said of the move “We are increasingly clear that trusted services opportunities within e-commerce, which we have been deliberately and carefully investing in over the past four years, are core to our future business”

Physical business mail such as direct mail still has its role in marketing and advertising, variable data printing is a great example of this. This technique is favoured for elections, charities and business. It is clear Mr Fahour has heavily invested in digital and parcels and wants to take AustPost in that direction now, he is not interested in letters or bulk mail. Wanting something and their being successful are two completely different things as we have seen with the numerous digital glitches quoted above. AustPost admitted in 2013 that they cannibalised their own business which has brought about an even faster decline in letters. Let’s also not forget the fact that these price hikes affect 150,000 people who contribute $14.1b in gross value added to the economy not just the 30,000 that Mr Fahour employs. In business it’s generally best to nail down what you are good at before you branch into other areas, and they are struggling with logistics which should be their core market. In my own personal experience their parcel division leaves a lot to be desired and is a common joke between my customers and other suppliers. I’m also not sure about their return on investment (ROI) with their Apple app either. A very small segment will own them and will they care enough to download it to track parcels considering their web version of this also leaves a lot to be desired?

Digital marketing embraces traditional such as print and billboards and uses these channels to direct you to online offerings. Magazines, as well as catalogues are also still popular and viable, which I think is at least partly due to only being able to read so much with artificial light. This is also why I think books will survive.

Until we live in the offline world Tron style, the digital world and the physical offline world should be complimentary.

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