Mail & Express review interviews Australia Post Managing Director, Graeme John AO
World Mail & Express Review, May 2009 PLEASE PROVIDE OUR READERS WITH SOME BASIC BACKGROUND INFORMATION ON YOUR ORGANISATION .
Australia Post has three core divisions: letters, retail and agency services, and parcels and logistics. For that reason we are one of the most diversified postal organisations in the world.
In 2007-08 we handled 5.6bn items of mail, a two per cent annual growth rate on the previous year. Direct mail volumes rose by almost ten per cent in the same year. Indeed, our letters group won the Growth Category at the World Mail Awards.
Australia Post has the largest retail network in Australia with almost 4,500 postal outlets. We also deliver to more than ten million delivery points around Australia. We have one of the largest fleets in the country, with some 10,500 vehicles ranging in size from B-double trucks right down to motorbikes and pushbikes, and virtually everything in between.
Our parcels and logistics division is increasingly becoming a key player in the Asia Pacific region. International parcels and express couriers are key growth sectors in this division.
In 2007-08, our most recent reporting period, Australia Post achieved a net profit of $A432.2m, a rise of $A31.5m. Revenues reached almost $5bn, a record result.
MAIL & EXPRESS UNDERSTANDS YOU ARE WHOLLY OWNED BY THE STATE. DOES THIS RESTRICT YOUR ACTIVITIES IN ANY WAY? ARE THERE ANY PLANS FOR PRIVATE EQUITY INVOLVEMENT? CAN YOU RAISE FUNDS ON THE OPEN MARKET?
Australia Post is 100% owned by the Commonwealth Government of Australia and we understand the government has no plans to alter our ownership structure. We are what is called a ‘government business enterprise’, which means that we operate as a self funding business with a commercial charter and receive no taxpayer funding.
Since Australia Post is a highly profitable organisation, we are able to finance our investment and growth plans from our retained earnings. We are also able to borrow at attractive rates given our very strong balance sheet and AAA credit rating. So Australia Post’s ownership structure has not inhibited our growth plans or our ability to raise funds if required.
HOW ARE YOU REGULATED? WHAT DEGREE OF MONOPOLY PROTECTION DO YOU HAVE?
As a wholly owned government business enterprise Australia Post is governed by the requirements of the Australian Postal Corporation Act and the Commonwealth Authorities and Companies Act. The government/shareholder responsibilities are exercised jointly by the Minister for Communications and the Minister for Finance in the Commonwealth Government.
Under the Australian Postal Corporation Act 1989, letters under 250gms are reserved to be delivered exclusively by Australia Post in Australia unless they are carried for a price more than four times the basic postal rate. All other goods and services that Australia Post offers are sold in fully competitive markets.
Australia Post now earns the vast bulk of its revenue in the non-reserved portion of its activities. All of our profit comes from areas of our business open to full competition.
TELL US ABOUT SOME OF THE MAIN COMMERCIAL DEVELOPMENTS.
We are growing strongly internationally as well as delivering new products into the Australian marketplace.
For example, we are expanding our parcels and logistics operations into both New Zealand and China (via a joint venture company with China Post called Sai Cheng); and our international parcel and courier volumes and profits are rising strongly.
Australia Post is able to compete effectively with our major private sector courier and logistics rivals because we are better utilising our existing end to end logistics infrastructure, as well as investing in the latest track and trace technology to offer better value for money to our customers.
At a retail level we are introducing new identity verification services and new financial services products. More than one million people a day enter our retail outlets around Australia. We are becoming more sophisticated in the type and variety of products we now offer our customers.
WHAT HAS BEEN YOUR STRATEGY TO MINIMISE THE POTENTIAL DECLINE IN PHYSICAL LETTER VOLUMES? FOR INSTANCE, HOW FAR HAVE YOU DEVELOPED SERVICES EMBRACING NEW COMMUNICATIONS TECHNOLOGIES?
Australia Post knew it had to embrace the digital age. That is why we now offer a range of sophisticated services that embrace new technology, whilst still offering customers solutions that allow them to enjoy the benefits of direct mail communications. For example, our eLetter Solutions site allows customers to send mail direct from their desktop computers to their customers’ mailboxes.
Australia Post has been able to position direct mail as a cost effective and vital part of contemporary communications. For that reason promotional mail volumes are still growing steadily.
Our investment in new technology through companies such our subsidiary PrintSoft is now generating significant dividends. PrintSoft provides customers with software for document and letter production so that customers can individually tailor correspondence or offer a hybrid mail solution. PrintSoft now has offices and customers all around the world.
WE UNDERSTAND THAT THE PARCELS MARKET IN AUSTRALIA HAS BEEN OPEN TO FULL COMPETITION FOR MANY YEARS. HOW SUCCESSFUL HAVE YOU BEEN IN HOLDING ON TO YOUR POSITION IN THE B2B MARKET? DO YOU SHARE THE GENERAL VIEW THAT THE RISE OF E COMMERCE GIVES THE POSTS A POWERFUL GROWTH OPPORTUNITY IN B2C?
Australia Post in fact has been very successful in growing volumes in the parcels market because we offer a cost effective alternative to the private sector operators.
Australia Post has also embraced the growth in online retail and offers partners like eBay the most effective way of delivering their online sales orders. Today, Australia Post stands as Australia’s largest distributor of online goods in the country, which shows how we are benefiting from the growth in e-commerce.
We also service more financial transactions in our retail network than any other organisation in Australia. We are now offering identity checks through our Post Offices, a process that ultimately solves one of the biggest missing links surrounding the growth of e commerce.
DO YOU OFFER A WIDER RANGE OF LOGISTICS SERVICES?
Australia Post offers complete end to end logistics solutions to customers from warehousing to land, shipping or air freight supply chain synergies. We aim to offer value added logistics services from factory gate to retail outlet. That is especially true in our growing international supply chain business.
Our Sai Cheng joint venture company in China can manage a customer’s entire supply chain, picking up the goods at the factory in China, assembling and packaging orders, storing in secure bonded warehousing, and utilising shipping or air freight, through customs clearance, time critical delivery and credit management. That is an offer no one else can match out of China in such a cost effective way.
RETAIL ACTIVITIES FOR POSTS IN MOST DEVELOPESD COUNTRIES ARE A MAJOR CHALLENGE. PRESUMABLY THE HUGE LAND MASS AND SCATTERED POPULATION OUTSIDE THE MAJOR CITIES ADDS TO THE DIFFICULTIES. WHAT ARE YOUR STRATEGIES TO BOLSTER VIABILITY?
Australia Post has the largest retail interface of any business in Australia and we look upon that as a major asset. The key is to expand the number of services we offer in the areas of financial transactions and other services within that retail network.
In 2007-08 Australia Post conducted more than two million identity checks on behalf of government agencies or businesses and we also processed more than 1.3m passport applications. Even in the current economic downturn our retail outlets are still showing solid sales growth.
Only a small proportion of our retail network is franchised. A significant proportion is run under licensed agreements with small business operators, and the rest are owned and operated by Australia Post.
We take seriously our community service obligation to service the more than ten million delivery points across Australia. Australia is a large and diversified country and we have the infrastructure in place to service such a broad network. That puts us in a better position compared with our private sector competitors because we can offer trusted service and convenience. There is almost always a post box just around the corner or a post office just down the street. Our competitors cannot match that.
That is the secret to our future success: offering greater customer service in a convenient way.
PLEASE TELL US MORE ABOUT SOME OF THE COMMERCIAL ALLIANCES, PARTNERSHIPS OR JOINT VENTURES YOU HAVE IN PLACE.
Commercial alliances have proven to be very successful for Australia Post.
Two of our most successful joint ventures are with Australia’s national carrier, Qantas. These joint ventures are in a company called Star Track Express (specialising in time critical B2B transport), and Australian Air Express (time critical air delivery services).
Australia Post also has the previously mentioned joint venture with China Post, Sai Cheng International, which we plan to expand into other countries. Sai Cheng has been able to deliver twenty per cent savings to some customers on their logistics costs between China and Australia.
HOW HAVE YOU MANAGED TO TAKE YOUR EMPLOYEES AND CUSTOMERS WITH YOU DURING WHAT MUST HAVE BEEN A PERIOD OF SIGNIFICANT CHANGE?
Australia Post is very proud of working with our employees as we have restructured the business. We consistently achieve year on year productivity growth and we have managed over the past decade to change the profile of our workforce from predominantly full time employees to a mix of 25,000 full time employees and 10,000 part time staff. That has meant that while our head count has remained the same we now have a far more flexible workforce to meet the current economic challenges.
We also regularly measure customer satisfaction and attitudes to our service. Australia Post remains one of the most trusted brands for customer service in Australia.
YOU ARE CELEBRATING YOUR 200TH ANNIVERSARY THIS YEAR. WHAT ARE YOU DOING TO MARK THE EVENT?
Our bicentenary is a very important milestone because it means that Australia Post is officially the longest continuously running commercial operation in Australia.
We will be marking the achievement with a number of high profile events but mostly we will be having a series of thank you events for our staff around the country to mark the occasion. Our employees have consistently raised the productivity of the organisation and embraced the restructuring we have undertaken over the past fifteen years. It is an appropriate time to thank them.
We are also getting the Australian public involved by letting them choose Australia’s favourite stamp; and have joined forces with the Australian Film Institute to run a short film competition called ‘200 seconds’, where the only requirement is to include a parcel in the film. We are also capturing the history of Australia through the medium of letters in one of the largest social history projects ever undertaken, ‘Letters of a Nation’, in partnership with the National Archives of Australia.
Further details of Australia Post 200th Anniversary activities can be found at www.auspost.com.au/200years
FINALLY, WHAT WOULD BE YOUR ADVICE TO FELLOW CEOS IN REGARD TO BOTH THE WAY IN WHICH TO DEVELOP AND IMPLEMENT SUCCESSFUL BUSINESS STRATEGIES IN THE LONG TERM, AND TO COUNTER THE CURRENT GLOBAL RECESSION?
The current economic downturn is difficult for everyone, but postal organisations around the world have to use it to their advantage to emphasise what a wonderful cost effective alternative post and parcels are to higher priced courier services. For example, our Express Courier International product is up to forty per cent cheaper to send a parcel overseas than using an overnight courier. It might take a day or two longer, but for the vast bulk of small to medium sized businesses in Australia that represents a good deal.
While private sector operators will be reducing costs and cutting back services, this is the time for postal organisation to try and fill that void. There is also the opportunity to bring new and innovative products into the retail network. Overall, it is a time to outline a strong vision for the future for employees and customers.
Graeme John, thank you. Here’s to the next two hundred years of success for Australia Post!
