Australia Post price hikes throw e-tailers off-side

New price hikes of up to 30% on Australia Post’s prepaid packages are a smack in the face for domestic online retailers and a win for independent delivery services, an e-tail expert has told B&T.

Australia’s postal service today boosted the prices of its prepaid packages, by almost a third according to most reports, to further cash in on the online shopping revolution.

When contacted by B&T an Australia Post spokesperson suggested the 30% figure quoted by the ABC, Sydney Morning Herald and The Age was an exaggeration, claiming she believed the rises to be more around the 7% mark.

The majority of Australia Post's revenue currently comes from parcels instead of letters and more than two thirds of its delivered parcels stem from online transactions.

Bernie Johnson, director at Adrenalin Media – the digital agency responsible for the online retail presences of Guthy-Renker and Appliances Online – today told B&T that while the move might deliver higher profit margins, it would encourage the online retail community to seek out alternative distribution partners.

“Australia Post has plenty of domestic competition in the parcel delivery business through the likes of companies such as Temando, so it might be the catalyst for online retailers to re-assess their supplier options,” Johnson said.

Other budding delivery services include Mail Call, a start-up used by leading online retailer The Iconic and leveraged by Want It Now – a company dedicated to providing fast delivery from online retailers Australia-wide will no doubt be clapping their hands too.

But the move is a blow to the local e-tail market which increasingly has to compete with competitive propositions from overseas and global online retailers, like ASOS and Amazon.

“The downside is obviously for online domestic retailers, who are already struggling to compete against low-cost overseas rivals amidst pretty stagnant trading conditions. Tight margins just got a whole lot tighter,” said Johnson.

But the changes are not likely to send flourishing e-tail ventures out of business.

“I would surprised if it was the single factor in sending any online retailers bust. If your margins are that tight it’s probably time to re-evaluate the business model,” said the Adrenalin director.

According the NAB's Online Retail Sales Index, Australia's annual online retail spending hit $13bn in the year to January 2013 which represents a $2.5bn increase in online retail spending over the previous year.

Australia Post posted a 16.6% annual profit increase to $281m in October last year driven by increases in parcel delivery.

Regulated mail business losses widened to $148m on the back of mail volume and revenue declines while strong performance in parcels and retail produced profit of $546m.

Late last year CEO Ahmed Fahour pledged $2bn to transforming the national logistics network to create a “world class parcel delivery network”.

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