Parcels to China a boon for Aust Post
Australia Post is facing a $500 million loss due to the collapse in the number of letters it handles, but the company has received a much-needed shot in the arm from the weaker Aussie dollar.
Chief executive Ahmed Fahour confirmed on Thursday that Australia Post is poised to declare the first loss in its 200-year history due to what he has called a “terminal decline” in the letters’ business, but flagged an increase in the number of small parcels sent overseas as evidence the carrier’s repositioning as an e-commerce company would pay off in the long term.
Mr Fahour said overseas consumers, mostly in China, are taking advantage of the falling cost of Australian goods, with the dollar having tumbled by about 20 US cents to around 73 US cents in the past year.
“Australian businesses selling to offshore markets absolutely took off and the number one overseas market that really took off was exports to China,” Mr Fahour told a business lunch in Sydney.
“I’m very excited by what I see there. The Chinese love some of the things we have.”
Mr Fahour said Australia Post’s year-old partnership with online Chinese retail giant Alibaba, which completed the world’s biggest IPO last September with a listing on the New York Stock Exchange that raked in $US25 billion, had helped generate that traffic.
Australia Post has been trialling a mall on Alibaba’s Tmall platform, arranging translation, payments and logistics for 30 Australian companies to sell directly to Chinese consumers.
“We’ve opened up the Alibaba platform to all these small businesses,” Mr Fahour said.
“There are in the order of 100 million Chinese buyers.”
The decline in the number of letters sent through Australia Post accelerated to a record pace over the last 12 months. It now handles just 60 per cent of the letters it did in 2008.
“That’s nearly half our business gone in the letters business … 97 per cent of letters are sent by corporates and businesses, who are digitising as fast as possible,” Mr Fahour said.
“For every dollar that we get, we are operating at a loss and we are subsidising corporates.”
Australia Post has set aside $190 million in redundancy payments over the next three years but Mr Fahour said his efforts during five years at the helm meant the company is well positioned for sustainability.
“For 200 years, we were by any measure a letter service,” Mr Fahour said.
“Within the space of five years, 72 per cent of our business comes from non letters. We are now an e-commerce company.”