NZ Post plans for Christmas parcel boom, while letter volumes drop 11 per cent

Monday, 11 September 2017

As letter volumes plunge and parcel volumes surge, NZ Post has made major changes to its business, including the introduction of Paxster delivery vehicles in some areas.

New Zealand Post is preparing for a massive surge in Christmas parcels, as the decline in letter volumes accelerates.

The state-owned postal company reported a rise in profits from continuing operations to $27 million for the year to June 30, up from $10m in 2016.

But the performance of the core postal business is one of increasing contrast.

Letter volumes, which have been sliding for years, dropped by 11 per cent, an increase from an 8 per cent drop in 2016.

David Walsh, who became chief executive of NZ Post in May, admitted the company did not know whether the fall in letter volumes would increase in speed, or stabilise if bulk senders which make up the majority of volume continued at current levels.

Parcels meanwhile continue to break records.

NZ Post said overall parcel volumes jumped 8.5 per cent in 70 million for the year, with volumes surging into the Christmas period, without falling off into the New Year.

'Uniquely this year, the usual slowdown post-Christmas didn't happen as more and more people shopped online,' Walsh said.

'The positive effects of lower costs across the organisation and revenue growth in parcels has more than offset the impact of letter mail decline.'

Christmas 2017 is expected to be even bigger, with NZ Post expecting 25-30 per cent growth on last year.

'We're asking some of our customers what they're expecting, we're looking at some of the global trends. These are the sorts of volumes we're planning for.'

While Walsh said the company was confident it could cope with the increase, the price of failure would be high.

A team was established in February to identify where the business could be vulnerable to breakdown, from operational capacity, to IT stability and call centre capacity.

The move to online shopping meant volumes were likely to continue to increase in future years, Walsh said.

'It's a systemic change that we have to plan for now.'

NZ Post's international parcel volumes now generate revenue of around $160m, more than 17 per cent of the group.

The number of customers signed up to Youshop, its parcel forwarding business which allows customers to buy from websites which refuse to ship direct to New Zealand, is now 245,000, an increase of more than 50,000 in a year.

NZ Post maintained profitability largely due to cost cutting, with group expenditure falling 9 per cent or $88m to $887m.

Walsh said some of the cost-cutting projects which it has underway are not yet completed, meaning costs would continue to fall in the current financial year, but probably not to the same extent.