Snail mail business experiences speedy demise

Letter delivery services could be extinct in five years after Australia Post losses entered freefall.

The assessment follows the government-owned enterprise’s announcement this week of its first full-year loss since 2015, with chief executive Paul Graham proclaiming letters are in an “unstoppable decline”.

Australia Post reported a 171.5 per cent increase in letter losses to $189.7 million for the half year.

Recent advances in technology have sped along the transition from physical to electronic media, hastening the demise of ‘snail mail’, Curtin University supply chain expert Paul Alexander said.

COVID-19 permanently changed the delivery landscape as people and businesses quickly adopted online alternatives for legal documents and contracts, which were considered a hold-out for the transition, he added.

“It gets to be a tipping point if one bank decides that it can create an online-only version of all the sorts of things you used to have to swap documents for, then the other banks will follow” Dr Alexander told AAP.

“So you just get this kind of avalanche.”

During the early days of COVID, the federal government granted Australia Post a temporary suspension of daily delivery standards, allowing it to deliver every second business day in metropolitan areas.

Dr Alexander doesn’t see the postal service reverting to daily deliveries, and said the end of the current regime of frequent, low-cost mail delivery to individual letterboxes is inevitable.

“At some stage in the future that’s absolutely going to happen,” Mr Graham told AAP.

“This has been happening for well over a decade, it’s no surprise.”

Ninety-eight per cent of mail in Australia is commercial, so demand for letters will naturally dissipate as companies look to convert to digital, he said.

Mr Graham is the latest in a string of Australia Post executives to signal the medium is moribund.

His predecessor, Christine Holgate, told a 2020 Senate committee that letters accounted for 70 per cent of costs.

Letters increasingly cater only to marginal users – older Australians, people without internet access and one-off uses like greeting cards.

Without legislated community obligations to maintain delivery services, it would have been out of the letters business much faster, Dr Alexander said.

One option to increase profitability is to further reduce the frequency and coverage of mail delivery by having customers book in letter postage, similar to parcels.

However, this would be dependent on the government lowering its onerous performance standards.

Currently it’s required to operate independently as a profit-making enterprise while also bound to maintaining the loss-making letter service.

The government has yet to announce which way it will move on the matter, but a spokesperson for Communications Minister Michelle Rowland told AAP the department is working with Australia Post to examine options to improve productivity.

“As an institution that is regularly adapting to changes in technology, changing consumer preferences, and competition – it cannot stand still or be frozen in time,” the spokesperson said.

Over the past few years, Australia Post has increasingly geared towards parcel delivery as changing shopping habits have skyrocketed demand.

Mr Graham remains optimistic about his company’s fundamentals, with parcels and banking forecast to keep growing.

As it redirects resources away from letters and into parcels, Dr Alexander expects Australia Post’s workforce to remain static.

“If you’re working in a mail centre sorting mail, you’ll move to a parcel centre sorting parcels,” he said.

“Those guys and their little three-wheeled things delivering mail will be delivering parcels as they do now. That’s what those vehicles are there to manage.”

The Communications Workers Union, which represents mail workers, said it is working with Australia Post to protect jobs and services as it transitions its business model, but called on the government to broaden the range of services, including banking.

“Governments should be taking advantage of Post’s vast network, retail footprint and trust in the community to deliver the other government services that the public are fed-up with waiting hours in telephone queues to access,” national president Shane Murphy said.

If Australia Post manages to shed its letters obligations and likely regain profitability, it will have to navigate more cyclical demand and more frequent disruption from natural disasters driven by climate change, said Dr Alexander.

“They’re on their way, but they’re going to have a few more bad years as they settle into whatever their new business models look like.”

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