Australia Post’s mail business to lose $200 million this year

Australia Post’s traditional mail business will lose $200 million this year as one of this country’s most recognised brands adjusts to the online world.

Speaking at the Digital Productivity Conference in Brisbane on Thursday morning, Catriona Larritt, GM, Post Digital at Australia Post, said the company’s mail business will “lose about $200 million this year” and these losses will get “bigger and bigger as people move from physical to digital communications.”

While spruiking the organisation’s relatively new Digital Mailbox service and other e-commerce initiatives, Larritt ran through some of the harsh realities of the growth in online services. Australia Post is three years into a complex five year business transformation program to address this huge shift.

Larritt said Australia Post’s mail volume has been declining at about 4 to 5 per cent per year since 2008 and this year, for the first time in the company’s 204 year history, parcels will generate more revenue for the company than letters.

“Undeniably, our biggest challenge is in our traditional letters business and as you can imagine mail volume is now in decline across the world because of the growth of email and social media,” Larritt said.

2008 was an “inflection point” for the growth of the digital economy as it was the year that the first Apple iPhone was release and now 6 out of 10 adults own this device, said Larritt. Social media also became mainstream during that year and the number of Facebook accounts globally has since grown from 90 million to more than one billion.

“Australia Post used to have 100 per cent of the communications market – we were the Gmail, the Facebook, the Twitter of the 19th and 20th centuries. But this year we will deliver one billion less letters than we did in 2008,” said Larritt.

“A mail volume decline of 4 or 5 per cent per year doesn’t sound like very much but it has a huge economic impact on our business,” she said.

“Every 1 per cent of volume decline has a $20 million profit impact. So every year we need to find $100 million worth of cost savings or revenue growth just to get back to the start.”

But it’s not all bad news for Australia Post with 70 per cent of parcel transactions being generated online and this business is “booming”, said Larritt.

“Our domestic business generates about $1 billion in revenue and it’s growing at 10 per cent per year. Even though the Australian e-commerce market was slow to grow initially, most forecasts have it growing at double digit rates until 2020.”

Australia Post was also attracting some “great digital talent” with the addition of two staff members who had previously worked at Skype and Wikimedia.