Recently Australia Post released details about some of the likely changes that the letter industry will see in 2015. For further details of this, please visit Australia Posts Website By Clicking Here.
A summary of the change is as we already know they introduced a 2 speed letter service which tiered pricing to help assist them to cover some of the losses in what is widely agreed is a declining letter market.
However this was only the first of the changes that the Post Office proposes to introduce. They were faced with a decision that is common with most businesses and that is if a portion of your business is running at a loss, the two things that you can to is:
- Decrease Costs
- Increase Revenue
So, on this basis the Post office considered a 3 day per week delivery service against the everyday model that it currently operates on. Naturally this possibility would reduce their costs associated with the labour of their “Postie Network”
From the report that they issued last month, it appears that they have chosen to go down the other path and appeal to the ACCC to raise the base price of a letter from $0.70 to $1 later this year. They are promoting that even after this impending price rise, Australia will still have one of the lowest costs of sending mail in the developed world. This potentially is a matter that is open to debate, however one thing that is for certain is that we will be paying more to send out our mail before the end of the year.
Now, what are going to be the likely effects of such a change? Are businesses going to invest even more resources into diverting their promotional and transactional mail into electronic format?
If this is the case, it is almost a self-fulfilling prophecy that we are setting in motion here. Let’s look at it this way, Australia Post is a monopoly that is required by law to provide a standard of service to a geographically diverse population. If, by increasing the price of a standard letter to cover costs in a declining letter market lead to more people and businesses using email then pretty soon in order to provide the same letter of service they are going to have to raise the prices again. As I said this is a possible never ending circle.
Sure the Post Office is able to supplement some of their letter losses through the more premium revenue generated through their parcel business but unless their share of this admittingly growing sector continues to grow then it is difficult to see any other alternative to more letter price rises in the years to come.
What are your thoughts? Is this the catalyst for your business to seriously considering putting more emphasis on converting to electronic mail?
