Australia Post price hikes set to prompt logistics partnerships

Partnering with a large logistics company could shield online retailers from parcel price increases, an expert says, after Australia Post revealed it is being forced to hike up its prices.

It’s been reported Australia Post is generating losses of about $70 million a year as a result of Australian consumers’ increasing appetite for online shopping from overseas retailers.

A recent NAB survey found online shopping hit $10.5 billion in 2011, or 4.9% of total retailing, and is growing by 29% a year. In contrast, traditional retailing grew 2.5% last year.

Australia Post chief executive Ahmed Fahour told a Senate inquiry the only way Australia Post can minimise its losses is if the domestic parcel postage price goes up.

Tim Morris, of online retailer The Pantless Postman, says he hasn’t seen an increase in parcel prices lately, but that could be because his business is part of a “very large” corporate account.

“For us, our primary thing was to operate out of a good warehouse. When an order comes in, it goes through our system, which figures out when the packages are due to be sent,” Morris says.

“Each time a new order is ready to go out, the order is pinged to AND (Australasian Distribution Network) and they pick pack on our behalf.”

Morris says finding the right logistics company was a major priority for his business.

“First and foremost, we were looking for a partner that could do that side of things. We chose ADN because they have a large corporate account with Australia Post,” he says.

“They get the order and then pass the bill onto us. I’ve hardly noticed a significant increase in parcel prices. We might be sheltered under that big corporate account.”

Morris describes the partnership with ADN as “one of the best things we ever did”, and would “absolutely” recommend other online retailers partner with a logistics company.

“We did speak to about four or five. Basically, we partnered with ADN because they took us on board,” he says.

“A couple of the others we contacted initially – they didn’t have much interest in partnering with a start-up business.”

“[ADN has] been really good for us. It’s brought a whole level of professionalism to that side of the business, which could have been one of the downfalls.”

“The other big plus is that Australia Post just comes and picks up the deliveries from the warehouse, so we’re not running down to the post office.”

While Morris recommends such a partnership, he says it’s worth doing it on your own first.

“Get out there and test your business model – do it for yourself first. As soon as you realise you’ve got some traction, absolutely go and find a logistics partner.”

But unlike The Pantless Postman, shipping business Ship 2 Anywhere says it gets better savings from carriers such as DHL.

A spokesperson for Ship 2 Anywhere says in addition to being cheaper, customers of the business don’t need to “wait on the phone forever to book shipping, make enquiries or track packages”.