E-commerce has changed the way we buy, sell, package and send goods, and two recent developments highlight just how it is transforming the billion-dollar logistics industry.
The first development was Singapore Post (SingPost) acquiring parcel delivery company Couriers Please in Australia for $95 million in December 2014. The second occurred last month when Japan Post made a $6.5 billion takeover bid for Toll Holdings.
Arguably, the disruptive force of e-commerce has played an important role in these transactions eventuating and they make an interesting case study of how global companies are continually being shaken-up by the digital sphere.
Like many postal organisations across the world who have declining revenues and profits, SingPost and Japan Post are contending with shrinking mail volumes in an increasingly digital world. Certainly, Australia Post’s recent forecast of its first company-wide financial loss since 1982 is another proof point locally.
Addressing this requires a transformation of a business model that has existed for generations. For SingPost and Japan Post, that includes an international strategy with a bigger footprint to take advantage of the e-commerce wave. It’s a strategy that leverages off postal operators’ expertise of owning the consumer relationship — a big advantage in the e-commerce world of B2C deliveries.
In contrast, the major parcel carriers are dealing with the legacy of operations built for servicing B2B deliveries. They are also subject to a disruption that is affecting every business — the shift in control away from providers to customers. Customers, of course, have always been important to parcel carriers. But it’s a capital intensive business model and to efficiently deliver many millions of parcels a year requires an operation based on calibration and control. By necessity, carriers set requirements and limitations for customers to live within.
But that’s starting to change as logistics companies recognise the power shift. Collectively e-commerce customers now have what matters most to capital intensive operations — significant parcel volume. And they are using this power to influence “disruptive logistics” — the push for more convenience, more service, more choice, and faster delivery, to give their online business a competitive edge. This includes e-commerce giants such as Amazon, Alibaba, eBay and Grays Online. Some are becoming more directly involved in logistics, such as Alibaba who became a 10 per cent shareholder of Singapore Post in 2014 with a representative on the SingPost board, and Amazon who is building its own capacity to do more of what parcel carriers do.
This is the age of the e-commerce customer. They know more and expect more. But who exactly is an e-commerce customer? In today’s multi-channel world the definition captures just about every business and most consumers. E-commerce is a mainstream activity and according to the market research company eMarketer, there is still massive growth potential in Australia. If you’re in logistics, this is not the time to be wedded to a business model that has worked well in the past. Customer expectations have shifted and only those that adapt to the change will prosper.
Whilst e-commerce is enabling the change, it is the customers who are the force behind the change and indirectly shaping business strategy and investment focus for the likes of Japan Post and SingPost. For Australian customers, the combined capabilities in operations and technology of international postal and local logistics companies will result in more innovative solutions. Postal organisations are B2C parcel delivery specialists.
Whilst Toll and Couriers Please have already made innovations in this area, they will no doubt learn a lot from their parent companies expertise in B2C. Customers will benefit with more choice and flexibility and we can expect to see significantly more choice in the ‘last mile delivery’ options. The acquisitions by Japan Post and SingPost will ultimately be a big win for Australian e-commerce customers.
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