NZ Post's David Walsh on life in the fast, and slow lanes

Thursday, 7 March 2019

E-commerce's share of retail is set to double in double-quick time, according to David Walsh, chief executive of New Zealand Post.

The mass of parcels containing valuable goods flowing from online retailers to Kiwi consumers is posing a challenge in our ever-denser cities.

Parcels on doorsteps are easy targets for criminals, and deliveries to high-rises are a logistical headache, so some of us are having our e-shopping loot sent to the supermarket to pick up when we get our groceries.

Every month around 100,000 parcels get sent to non-home pick-up, including to Countdowns around the country, says New Zealand Post chief executive David Walsh.

Walsh heads a two-speed business, with letters in sharp decline, and e-commerce going gangbusters.

* NZ Post hikes letter price as volumes plunge 60 million in a year

* Kiwibank shareholders at war over IT dramas**

'Online shopping value in New Zealand today is about 7.5 to 8 per cent of total retail value,' he says. 'In the UK it's 15 per cent today.

'November, December, we moved 14.5 million parcels in that time, and that was about a 10 to 12 per cent growth on the previous year.'

Walsh expects those growth rates to continue, which means NZ Post is going to invest to handle the increasing e-commerce volumes to fulfil its aim of being the number one partner for e-commerce retailers.

'We will need to put more capacity in, but it has to be done on a clear commercial basis.'

But alongside the growth business, NZ Post has the declining, loss-making letters business, which is a drag on NZ Post's ability to invest.

'In the last half [year] we delivered 200 million letter items. It's still a significant number, but it's declining, declining significantly.'

When did you last post a letter? The answer for many is 'not this year'.

About 15 years ago, NZ Post carried 1.2 billion letters. This year, it will be around 400 million.

The post remains critical to banks, insurers, and other companies, as well as government agencies like the Police, the courts, the Inland Revenue and the Electoral Commission.

'Will there be no letters [one day]? I just can't imagine it,' Walsh says.

Freeing up capital to invest has been a big focus for Walsh, and in four years he said the company had freed up over $700 million of cash.

'We sold Couriers Please. We sold Converga. We sold some properties. We sold down Kiwibank. We retired some debt, and paid a special dividend to the Crown, which has given us some capacity to decide how we invest going forward.'

NZ Post electric courier van being piloted in a bid to start the journey to carbon neutrality.

Stabilising costs has involved lifting letter prices, and closing Post Shops, but tie-ups with supermarkets, pharmacies and other shops means it's actually expanding its geographic footprint.

One option to raise capital to invest would be the sale of more of NZ Post's stake in Kiwibank, following the partial sale to ACC and the NZ Super Fund in 2016.

Walsh says the NZ Post board would have the power to do it.

The partial sale in 2016 was driven by the bank's need for capital, but Walsh won't be drawn on whether a further sell-down of NZ Post's current 53 per cent stake in Kiwibank is an option being discussed.

The rise in e-commerce offers an opportunity for NZ Post to lift its stock with the public. The brand has been around for 179 years, but it had a net promoter score in 2018 of zero, meaning from every 100 people asked, 50 would recommend using NZ Post to others, and 50 wouldn't.

The target this year is 5 per cent, rising to 15 per cent in 2021.

NZ Post has signed up 68 big e-commerce brands to the system allowing delivery to pick up points like Countdown. In each case, people ordering online get NZ Post's brand front and centre when choosing their delivery option. That's lifting net promoter scores.

It hopes to win friends on the climate front too, and has set a target of being zero carbon by 2030.

It's currently piloting an electric van to see whether they can be phased in to the courier parcel business. Already, it's got the biggest electric vehicle fleet in the country in its nippy little letter delivery vehicles posties buzz along the footpaths on.

NZ Post could go carbon neutral now, but that would cost $1.5m a year in buying carbon offsets by paying for trees to be planted to sequester the carbon it's responsible for.

But globally, there isn't enough land to plant trees to offset all of humanity's carbon emissions.

'That's why we didn't go to offsets immediately,' Walsh says. 'That's why we re-purposed an offset fund to invest in tangible and realistic solutions.'