NZ Post re-doing business case for $170m parcel investment amid e-shopping boom

Wednesday, 16 December 2020

NZ Post had forecast a 20 per cent rise in online shopping this holiday season, but its latest research suggests even that was conservative.

New Zealand Post is reviewing the business case for a $170 million investment in upgrading its parcel processing infrastructure, The Treasury says.

The review is occurring amidst an unprecedented rise in online shopping.

NZ Post announced in June that it would open a “super depot” for parcels in Grenada, Wellington, in 2022 that could create 350 jobs, and a new processing centre in Wiri, Auckland, the following year.

An upgrade to its Southern Operations Centre in Christchurch was also planned in 2022.

* NZ Post makes $6 million profit as post-lockdown parcel volumes surge

While NZ Post’s parcel business may be booming, The Treasury is having to prepare advice on what should happen to its mail business once $130m of Budget funding is exhausted.

* 'Super depot' for NZ Post in Wellington could create 350 jobs

NZ Post said in June that the Wellington depot would include an $18m investment in the latest sorting and scanning technology which would process parcels at a much faster rate than was possible currently.

A Treasury ministerial briefing paper released on Tuesday said ministers had previously been consulted on the business case for the investment.

“However, following the disruption of Covid-19 and new Crown funding in New Zealand Post, the company will seek to re-consult with ministers on a revised business case,” it said.

NZ Post would not comment on whether any of the previously-announced upgrades might not proceed or could be curtailed or delayed, but a larger or faster overall investment appears more likely.

Any reduction in NZ Post’s investment in its parcel business would appear unlikely given dramatically increased parcel volumes in the wake of Covid.

Spokeswoman Greta Parker said its research indicated online shopping was up about 30 per cent on the same time last year.

“We have just had the November sales days of Singles Day, Black Friday and Cyber Monday and it has been the biggest growth period in the history of online shopping,” she said.

The Treasury indicated decisions could be made next year on the longer-term future of NZ Post.

While online shopping has been booming, The Treasury said mail volumes had declined to a point where providing mail services in their current form “was no longer a viable commercial service”.

“However, there is still value in mail as a communication service, at least in the near term, and justification for the Government to procure these services from New Zealand Post,” it said.

The Government provided NZ Post with $130m over three years in the May Budget.

But the Ministry of Business, Innovation and Employment would be working with The Treasury over the next six to 12 months to identify options for mail services to be continued “once this funding is exhausted”, The Treasury said.