Australia Post will not be a victim of the digital world, thanks to its booming e-commerce business, according to CEO Ahmed Fahour.
Speaking at a Committee for Economic Development of Australia (CEDA) lunch in Sydney today, Fahour did not hide the fact that the government-owned company's 200-year-old letter business was in serious decline, peaking in 2008 and declining in the past three years by 14 per cent. This was expected to decline a further 40 per cent by 2020. Fahour said that in the space of 10 years, the company's monopoly on written communication had dwindled in the face of email and text messaging.
"In the space of one generation, the letter's share of the written communications market has reduced from almost 100 per cent, to a tiny fraction of 1 per cent of the total market," he said.
But while the company lost $90 million in its letter business, it earned a profit of over $300 million in its other commercial activities, and Fahour said that e-commerce is the new core of Australia Post's business.
"While the internet is the worst enemy of Australia Post's letter business, the growth of online shopping means the internet has become our best friend for the parcel business."
A total of 70 per cent of Australia Post's parcel business is generated online, he said, and this accounts for around $1 billion in revenue for the company. Most of this was generated for companies in Australia, Fahour added.
"The reality is that the majority of e-commerce in Australia, despite the popular press view, emanates from domestic Australian retailers. Not necessarily the big retail names, but it's all the SMEs that are starting up online and providing terrific services.
"They're the new big retailers. Names that are not familiar to us. They are making huge inroads."
To meet this demand for parcel delivery, Fahour said that Australia Post was extending opening hours in 300 outlets around the country, and had over 700 outlets open before 9am and after 5pm to catch people who otherwise would not be able to pick up packages. Australia Post now has 2400 outlets open on a Saturday. The company had also begun trialling Smart Lockers and was establishing business hubs to work with small and medium businesses engaged in e-commerce. The first hub was opened in Mount Waverley and Fahour said that 20 more will open around Australia by the end of next year.
The company is also establishing "superstores" around the country that come completely decked out with smart parcel lockers, ATMs, vending machines, iPads and interactive screens.
While all these operational changes were important, Fahour said it was important to have people in the organisation prepared to change the company and quickly.
"The reality is that I never want the term 'snail mail' ever used in Australia Post, let alone 'snail executives'," he said.
"The reality is that you need talented people and a really positive cultural mindset in order to successfully implement a multifaceted change program like this."
He said he believed that the company had hired a strong team both recruited externally and promoted from within. He added that the government under shareholder ministers Stephen Conroy and Penny Wong had been very supportive of Australia Post throughout its change.
"We could not get a more supportive owner than what we have right now ... Rather than to be victims of the digital economy, we decided to actually do something about it and turn it into a source for growth," he said.
"I think many of you know [Conroy] is an out-and-out champion of the digital economy and what digitisation means. Our owner is delighted we're embracing the digital world, they approve our annual plan, they approve our budgets, they approve our moves."