Australia Post to launch a marketplace

It isn’t a fact yet, but my educated guess: Australia Post will launch a marketplace sooner rather than later.

Australian eCommerce landscape changes quickly. Just an year ago we only really had eBay as a major player in general eCommerce marketplace space. Now we have also Catch Of The Day and Amazon opening doors soon. Why do I think that Australia Post will join the brawl?

Short answer because it has proper capabilities, does the steps in that directions and it is the right time now. Finally Auspost will reap enormous benefits if its marketplace works.

Capabilities

Logistic

Amazon is often referred as being ‘logistic business’: from massive warehouses to fleet of own airplanes. Auspost is already there: letters and parcels delivery have always being its core business and while the former part slowly dying, the latter has been massively invested and grown:

• Acquisition of StartTrack in 2003-2012
• Smaller stakes in other logistic businesses like Dubai-based Aramex.

Payments

Secure transaction is a core part of the marketplace. This is the reason why Amazon has Amazon Pay, Google and Apple also own payment platforms and eBay purchased Paypal.

Australia Post already has its own payment platform though purchase of Secure Pay in 2010.

Skills

That is probably a more grey area, but past years Auspost has been actively studying eCommerce marketplaces: it has launched number initiatives with Alibaba and Tmall to help Australian merchants sell on Chinese market. In addition to leaning how to run the marketplaces from these ventures Auspost established better contacts with Australian retailers.

Australia Post has experience to run retail business through near 7,000 outlets all over Australia, where it sells not only post services, but also merchandises like printers, gadgets and stationery.

Auspost actively recruits IT experts, out of 90 open vacancies at the moment, 15 are in Information Technology, it is second only to Manufacturing, Transport and Logistic. If we count full time position, IT takes the 1st place: 15 out of 35.

Finally Auspost invests heavily in building more agile and innovative culture with support of corporate innovation and intrapreneurship, where post team members launch such enterprise-backed startups as Reciva.

Information

As the biggest shipping company serving eCommerce in Australia, Auspost has very good knowledge of who and what does in digital commerce space. If we add there data from SecurePay and other ventures it will be clear that Auspost seats at a huge pile of data about eCommerce in Australia.

It doesn’t end with businesses. Such initiatives as ShopMate and more traditional consumer facing services gives AusPost access to millions of Australian customers. Only in 2015/16 1.9M people registered accounts in MyPost to use Auspost digital services, 190%  increase from previous year.

Shipster

Last move made by Australia Post that makes it even closer to the launch of a marketplace is its newest venture – Shipster. If you haven’t heard about Shipster, it is a subscription-based service for online store shoppers. With $9.95 per month you can get unlimited shipping from over 40 selected retailers.  The list of retailers who signed up include such big names as Myer, Target, Harvey Norman, Kogan, Cotton On.

Shipster is an answer to Amazon Prime that works in a similar way and is considered to be one of the main driver of Amazon growth.

Also Shipster is probably a final test (and a future component) for the Auspost marketplace.

Chicken and Egg problem (almost) solved

One of the biggest challenges setting up any marketplace or two-sided market is Catch-22 or chicken and egg problem: in order to function well marketplace has to have both sides of the market. In a case of eCommerce marketplace the sides are vendors and consumers. With no consumers vendors are not much interested to come on board, with no vendors consumers go elsewhere.

Australia Post has very unfair advantage there, probably second to no other business in Australia: it has access to both consumers and merchants. As I referred above Auspost has relationship with retailers through their core business and new initiatives. It also has access to consumers and possibility to promote new marketplace to them at marginal cost.

It isn’t uncommon for the marketplaces to subsidize one side of the market to balance demand and supply. Australia Post is able to do that: it still makes money through payment and shipping even if marketplace fees will be set lower to compete with Amazon, eBay and Catch on price.

Timing

The time now is also perfect for such move.  Why? The answer is Amazon. Amazon rightfully scares shit of many Aussie retailers. Some of them talk brave talks and others think or pretend that they will be better with Amazon, but most of merchants are not happy of Amazon arrival in Australia. While Amazon itself not only a retailer, but also a marketplace, many retailers at best hesitate of selling through Amazon. The reason is that in spite of rhetoric from Amazon’s executives, merchants afraid of becoming lab mice: you run a store with Amazon, business goes quite well, but some day you see that Amazon started to sell the same or very similar with your products itself, hence becoming your competitor. Maybe such concerns are exaggerated, but ff you think that it it complete fantasy, check what happens with Toys”R”Us in US. Only the good protection from such threat is a very strong product brand, but retailers rarely have it. So merchants who sell other brands or slightly re-branded OEM products are especially vulnerable.

This is why we now witness boost of activity from other marketplaces: Catch marketplace launch, more aggressive marketing from eBay. Many retailers realize that they need allies in order to compete with Amazon and happy to come on board to less risky platforms.

Hence if Auspost comes with its marketplace, it is now easier to get supply side.

Auspost motivation

Why should Australia Post bother to launch a marketplace? With all the factors mentioned above it is still a rather high risk venture. Many things can go wrong. So why take this risk?

The answer is “Almost no growth”. Last 3 years Auspost revenue grew not very well to say it politely and the trend isn’t promising.

It becomes even more gloomy picture if we check where last year modest growth came from.

Appeared that minimal growth came not from “star” parcel services, but from “old dog” postal services and probably only the reason of this growth is increased tariffs. It means that taking into account regulated tariffs future growth has to come from other than postal services sources.

Auspost management has to do something with that, that is why it experiments with different initiatives. Launching own marketplace comes as a next logical and worthwhile move.

• It leverages existing organisation capabilities
• It compliments and gives a boost to many already invested services (parcel delivery, online transaction processing are the most obvious)
• At the longer run it may generate fair income. Ebay estimated to generate $4.7B in Australia now per year and Amazon may get $12B per year within decade(source). It maybe too bold to expect that Auspost can get something in between, but even the results somewhere in the same league will add substantial value to Australian Post business.

BTW, all this pretty much corresponds with Auspost published strategy “the opportunity to build eCommerce partnerships to help our customers buy and sell online, both in Australia and internationally’ (page 6 of 2016 Annual Report).

So it is very likely, especially if Shipster goes well we see a new big marketplace player in Australia, and this player will be Australia Post.

 

 

Disclaimer

This post is my opinion formed analyzing publicly available sources. It hasn’t been financed neither by Australia Post nor by any of its competitors. If you base your business decision based on this article, you do it at you own risk.