AUSPOST LOSING $1M A DAY ON LETTERS, INDUSTRY SAYS IT'S NOT LISTENING

By Wayne Robinson | 10 February 2023

Mail monopoly Australia Post lost $1m a day, every day, on its letters business in the first half of the year, and says it is experiencing significant ongoing headwinds.

Letters: Losing $1m every day at Australia Post

Letters losses reached $189.7m in the six months to December, an increase of 171.5 per cent from the prior corresponding period. Letters revenue, at $882m, now represents just 18.8 per cent of AusPost revenue.

Group revenue was $4.69bn, down 2.4 per cent from 1H22, largely driven by an ongoing decline in letter volumes. AusPost claims that by 2030 households will only receive an average on one letter a week.

AusPost’s letters strategy has baffled the print and mail industry for a number of years, with the industry saying the 'raise prices and cut services' policy would inevitably lead to serious decline, which is proving to be the case.

Luke Pearsall, general manager of Active Mail, was among those in the print and mail industry frustrated by AusPost's outlook. He said, “The notion that letters are doomed is nonsense, bulk mail in particular has a strong future if current trends are anything to go by, we have never been busier."

Media reports, and Australia Post itself, seem to ignore the bulk mail industry. Mailing houses complain there is at best little in the way of consultation between themselves and AusPost. Direct mail is enjoying a resurgence in many countries, the US in particular is seeing volumes surge.

Kellie Northwood, CEO at PVCA, called for a nothing-off-the-table discussion with AusPost, government and the unions, she said, “As a country, with an increasing digital divide, a vast geographical footprint, low accessibility rates and poor OECD affordability ranking across internet affordability, we need to work in a united approach with Australia Post, government, trade unions and industry to build a longer-term strategy to secure our postal services across the country.

"Industry cannot operate on a fluctuating twelve monthly pricing review cycle, Australia Post needs to have some of its encumbrances from government reviewed, the trade unions are seeking employment stability, and together we need to build longer-term, commercially viable, and socially beneficial solutions to secure a strong and sustainable postal service. If that review process delivers reduced regulatory obligations, pricing and employment stability from flexible delivery schedules, improved operational efficiencies, streamlined mail products and more, the industry is open to all discussions."

AusPost has, for a number of years, been flagging what it says are significant structural headwinds. During Covid-19, the Parcels business experienced a temporary surge, which masked the underlying challenges the business has been facing.

With lockdowns ending and eCommerce volumes moderating, the challenges of the business are now more visible.

Australian mailing houses, though, tell a different story, for while person-to-person letters have collapsed, the country’s mail houses have been enjoying bumper months. Australia Post’s decision on its letters business will have a major impact on the mailing sector.

Group profit before tax of $23.6m at Australia Post was down by 88 per cent from $200m in the prior corresponding period, largely the result of the record first-half letters loss of $189.7m, compared to $69.9m in 1H22. Parcels and Services revenue was $3.8bn, down 1.6 per cent on first half last year. The razor thin profit came despite the traditionally ultra-busy Christmas period. AusPost management has flagged that the full year result will be in the red.

Letters plumetting: Australia Post — *Not listening to industry: Australia Post*

Group CEO and managing director Paul Graham said that growing headwinds were impacting the performance of the business. He said, “Every year it’s costing Australia Post more to deliver fewer letters. We know letters are in an unstoppable decline, thanks largely to digital communications, yet letter costs are rising due to the increasing number of delivery points we service every day. This all contributes to increased losses and is a global issue facing all postal services. We expect annual volumes will decline further, with Australian households receiving less than one letter per week by the end of the decade.”

Changes at Australia Post will not be easy, with the powerful unions in place. They have managed to wind back most of the Covid adjustments – letters are back to daily delievery, for instance. Unions are already saying the $23m profit could be more than doubled if a scalpel was taken to the $28m in management bonuses that were paid last year. Eight senior executives recieved $556,000 each, and the 362 lower ranking staff who earned more than $235,000pa shared the remaining $24m between them.

Northwood said, "As an industry we work closely with Australia Post and we review mail volumes consistently. There are complexities greater than volumes which need to be examined to understand the data, and future strategy, more accurately. Some channels are reflecting volume stability, and some are recording improved performance to volumes from prior year. That said, some of the larger Business Mail sectors, such as PreSort, are in decline which is impacting overall volumes.

“Industry is seeking greater collaboration across which mail products are delivering strong performances as the grouping of mail into one can reflect poorly on a marketing communications channel that is the most trusted, safest and carrying the highest response rate performance than any other mass/customised blended channel.

“We know consumers are more concerned than ever across their privacy and data security, we know the mail channel carries the lowest identity theft statistics than any other personalised sector and we know younger cohorts view mail as more important than any other. All of this reflects the channel relevance is strong,” furthered Northwood.