News / Shipping and Logistics

Online Retail is Pushing Postal Prices

Australia Post Delivery Van

The growing online retail industry is causing losses at Australia Post of around $70 million this year, which is forcing the postal company’s hand to raise domestic parcel prices.

Packages weighing less than two kilograms that originate from foreign markets like the US, UK, New Zealand and China cost Australia Post more than it gets back under international rules that cover handling costs.

“It’s a huge problem,” Australia Post Chief Executive Ahmed Fahour told a Senate inquiry. “The only way we can minimise our losses is if the domestic price goes up.”

Fahour said that Australia Post was among the postal services in developed countries that are disadvantaged by the system where costs are set by the Swiss-based Universal Postal Union (UPU). These costs were established in an era when letters still made up a large portion of the regular postal freight. Now, with the rise of digital technologies and e-commerce, letters are rare and small parcels are numerous.

The UPU determines costs based on an outmoded system, which takes weight, country of origin, exchange rates and other costs into account – but this doesn’t add up in today’s society.

“There are some very obvious characteristics about Australia to do with geography that make it a difficult market, and we also place an emphasis – quite rightly – on border security,” Richard Umbers, Executive General Manager for parcels and express services at Australia Post, told The Australian Financial Review.

Umbers also said that losses from the international sub-2kg parcel category would reach $70 million this year. Meanwhile, Fahour points out that Australia Post has been able to offset any losses so far by increasing domestic shipping costs.

“Rest assured, the more Australian retailers go online the happier we are, because we actually make a buck on that,” Fahour said.

 

2 Comments

  • This article frustrates me so much although it does answer an issue of mine. In the last 6 months we have doubled our parcel turnover yet I got a letter last week informing me that our base e-parcel rate has risen by $0.35. Now its not a big increase but over a large amount of parcels it adds up. I am told that in 6 months time if we continue at the rate we are increasing we will go up a tier and will be able to negotiate our pricing over again.
    I won’t be passing on the hike as it will be reversed in a short time but it does frustrate me that it is a result of needing to subsidise international mail. I have also wondered how it is possible for something from China purchased from ebay can arrive in Australia via e-parcel with a total cost including the item for less than my base e-parcel rate. I purchased a memory card reader for $6.95 recently including delivery is the example I am thinking of.

    Reply
      • Brett
      • 25th May

      only $0.35! if you were enjoying domestic AAE PO Box delivery as part of the service, it now costs an additional $7.76 as of 30th June (I think) for PO Box delivery.. SO, $7.50 + gst for 1Kg is more than doubled. HOW is it more expensive to deliver to PO BOX than residence!!!

      Reply

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