Wednesday, August 28, 2013

Toll takes on Australian Post for a piece of the Australian ecommerce market

Toll’s recently released FY2012-13 revenues indicate a company that is struggling with the global economy. According to Ti’s brief, Toll relies heavily on Australian business”, August 23, 2013, Toll’s FY2012-13 total revenue was generally flat. Its contract logistics, global forwarding and global express divisions noted slight revenue increases but profits declined in the three groups.

Although the company’s Express business in Australia noted a margin squeeze from consumers trading down to lower cost services, its management were excited by the growth of its B2C business, Toll Consumer Delivery.

Indeed, ecommerce is driving much of the company’s B2C business. Market research company, eMarketer, forecasts Australian B2C ecommerce sales to increase at a 6.07% CAGR between 2011 and 2017 reaching $32.56bn by the end of the forecasted period.

According to various estimates, the Australian Post currently has much of the market share of B2C parcels but Toll Group wants to take a piece of the market. Recently, Toll announced the building of a A$170m freight sorting hub that will have the capabilities to increase Toll’s Sydney parcel sorting capacity more than three-fold to 35,000 parcels an hour.

The Toll Group is also testing a locker system to increase the delivery options it can offer to the growing number of online shoppers. Based on the success of the trial, Toll Consumer Delivery may add the secure locker system to its Nparcel collection network, which was established last September to facilitate parcel deliveries through a national newsagency. Toll aims to build a network of more than 3000 online shopping pick-up points across the country.

Toll has a daunting task ahead of itself as it tries to stake a claim to Australia Post’s 80% plus market share of the B2C parcel delivery market. Australia Post has invested heavily in this segment by acquiring a payments gateway, improving sorting facilities and extending hours. It also plans to expand its parcel locker system to 80% of the population by 2014.  In 2012, it bought out partner Qantas from the Start Track express parcels business which according to the managing director and CEO of Australia Post will add “significant additional capacity to Australia Post's services, particularly in the area of express and tracked parcel services."

While its international business may be struggling, the company has high hopes for its Toll Consumer Delivery group. It believes it has a big advantage over Australia Post in that it can make use of its various divisions to deliver parcels from overseas to Australia. Whether they will be financially successful, is unknown but the competition between Australia Post and Toll Group should help drive rates down for consumers and shippers alike.