You are here
SingPost 'well-positioned' to capitalise on region's booming e-commerce market: CEO
SINGAPORE Post (SingPost) is eyeing a 50 to 60 per cent slice of the domestic e-commerce delivery pie, after seeing its share improve from 20 to about 46 per cent in the last two years.
Paul Coutts, chief executive officer of the mainboard-listed postal service provider, did not specify a time-frame to reach the target. But he sounded confident of hitting the bull's eye, buoyed by the success of SingPost's strategy to win the home market first.
Its closest rival in that space is said to be logistics provider Ninja Van.
Mr Coutts said the e-commerce delivery market has "no shortage of volume". The company's revenue bore this out: it rose 2 per cent to S$324.4 million for the recent quarter, led by higher international post and parcel revenue generated from cross-border e-commerce deliveries.
Also, he cited a report by Bain & Company, Google and Temasek, to reinforce the point that the regional e-commerce market is exploding. According to the report, South-east Asia's Internet economy is estimated to be worth US$100 billion at end-2019, with e-commerce taking the lion's share at US$38 billion.
SingPost is "well-positioned" to capitalise on the region's booming e-commerce market, said the head honcho who assumed the position in 2017.
First, putting its failed e-commerce ventures in the United States behind it, SingPost has renewed its focus on its businesses in the Asia-Pacific. The loss-making subsidiaries Jagged Peak and TradeGlobal recently sold substantially all of their assets; the failed ventures cost the Singapore company S$280 million in total impairment.
Second, it can leverage a network of postal service counterparts in Asean, with which SingPost has forged close relationships over its history of 160 years.
Third, it has been able to access the explosive Chinese e-commerce market through its link with substantial shareholder Alibaba. SingPost is an associate of the listed Chinese e-commerce behemoth, which owns over 14.4 per cent stake in SingPost. But SingPost doesn't get preferential treatment and has to earn it on a level-playing field, Mr Coutts was quick to point out.
While China has been the key market in global e-commerce driving west-bound traffic, SingPost has observed that east-bound flow for Asia from markets such as the United Kingdom and Europe is picking up.
Mr Coutts reckons that Singapore is a perfect gateway for east-bound traffic, and this presents a "considerable opportunity" for SingPost. "We think that's going to be a key driver of our growth in a very short space and time."
Indeed, SingPost isn't just a postal service provider, but it also offers a full suite of e-commerce solutions including front-end Web management, warehousing and fulfilment, last-mile delivery and international freight forwarding.
Mr Coutts is also keen to develop strategies to expand its B2B (business to business) to B2B2C (business to business to customers), upon the urging of its B2C customers.
In B2B2C, Business A engages Business B to provide a service that A currently does not offer. Therefore, it is able to offer a wider variety of offerings to customers while B is able to generate additional business and customer contacts in this relationship.
While it seems that SingPost has garnered a decent share of the domestic e-commerce delivery market, would the volume be enough to offset the "accelerated decline" in its domestic letter delivery business, which currently offers the highest margin?
"But it's not about the growth in itself, you know, there's lots of growth that you could get. The trick for me actually is getting profitable growth," Mr Coutts pointed out.
He said the product has to be constructed in a way that is attractive for the consumer. It also has to be engineered in a way that enables SingPost to use its infrastructure profitably.
He conceded that some of SingPost's products had become loss-making over time. "You know, we were delivering door-to-door which comes with a large multiple in terms of unit costs, when in actual fact, the customer was paying for a letter-box delivery. And so we had to find a way of overcoming some of those tension points."
This, coupled with a sharp reduction in business letter volumes and advertising mail, took a toll on SingPost's domestic post-and-parcel business in the recent quarter. Mr Coutts declined to furnish the magnitude of the decline in volume.
The company has since rationalised some of its products and services, including introducing new rates and direct delivery to letterboxes. This spares the recipient the hassle of waiting for their packages at home, and will therefore reduce missed deliveries.
Mr Coutts didn't want to venture numbers when asked how much this move would lift SingPost's top and bottom lines. He said he was not sure how the customers will respond to the new products.
He noted, however, that the exercise wasn't intended to squeeze more profit, but rather to simplify the product range for customers.
Generally, analysts have welcomed the streamlining move. A UOB Kay Hian report noted that the rationalisation aids operational efficiencies and utilises SingPost's advantage over its rivals, such as Ninja Van, which do not have the licence to access letterboxes.
"Insignificant revenue impact but potential for cost savings," said DBS Equity Research. "This will allow the postman to be more efficient, without having to deliver to the doorstep and deal with missed deliveries."