Currently, less than 45 per cent of Post’s revenue and 15 per cent of our profit comes from protected services.

We operate in five major, competitive markets, only one of which (small letters) is partially protected. These markets are as follows.

Letters: providing the collection, processing and distribution of letters to the whole Australian community and between Australia and overseas;

Parcels: providing an Australia-wide parcel service currently focused on the non-urgent intrastate market;

Logistics: providing secure warehousing and distribution services – “pick pack and deliver” services – for traditional and online customers;

Financial Services: providing access to a wide range of financial services through Australia’s most comprehensive and accessible retail and electronic networks; and

Retail: offering a range of products that are complementary to postal services through the post office network.



Post’s 2.1 per cent decline in domestic letters volume in 2000–2001, against last year’s record growth, was exacerbated by the general economic downturn and the dislocating effect of the Olympic Games on business activity (including marketing mailings) during the Games and in the following months. Last year’s unexpected record volumes were fuelled by one-off factors, such as increased mailings related to the introduction of the GST. In 1998–99, we had recorded the lowest growth rate in nine years.

Globally, letters’ share of the total messaging market declined from 50 per cent in 1960 to 19 per cent in 1999–2000, a trend expected to continue as electronic communications further penetrate consumer and business markets.

This comes on top of Post’s price freeze on the standard domestic letter, now entering its tenth year, our absorption of the GST payable on standard letters from July 1, 2000, and increased customer migration to lower priced services such as barcoding.

We are in a new round of enterprise bargaining (EBA 5), which will further engage staff in the direction of the organisation. We have unveiled the next stage of FuturePost, including sorting to rounds and sequencing within rounds. This includes our Flat Letter Program, which will implement automated address readers, Flat Machine Optical Character Readers (FMOCRs), for sorting large letters. This will enhance delivery of this category of mail.

Major competitive forces include the ability for third parties to aggregate and lower the volume threshold for bulk mail. Our strategy is to extend the lifetime of the core product by improving productivity, driving down the cost of the service and enhancing the value of letters to customers.

We will continue to expand our services to our major transactional and promotional mail customers, help them in the transition from traditional to electronic-based solutions, and encourage the development of direct mail.



Our domestic parcels volumes declined by 3.5 per cent due to the general economic downturn, particularly in the small-business sector, and the dislocating effect on business activity from last year’s Olympic Games. Our strategy is to maintain a strong nationwide focus and to remain the lowest cost and most reliable deliverer of parcels throughout Australia. Globalisation has allowed mature competitors to enter our markets. We have also made progress in delivery flexibility, by introducing after-hours delivery in mainland capitals for contract customers who require a signature on delivery, and have increased provision of total solutions to customer needs, as our growing services to Australia’s wine industry shows. Customers of Post’s electronic mail lodgement service, ELADS, can now track parcel deliveries over the Internet. ELADS is being enhanced and web-enabled ahead of its planned rebranding and launch as eParcel. The year ahead will see the start of Post’s Large Parcels Project, centred on development of new parcel facilities with new parcel sorting equipment.



In this market, many companies are increasing their involvement in contiguous sectors of the value chain in a bid to gain competitive advantage. Our strategy is to build logistics as a core business, with the emphasis on fulfilment, by repositioning Post as an end-to-end solution provider across the whole value chain.

In Post Logistics, Post is undertaking warehousing, inventory management, order picking, assembly and consolidation, kitting, scan packing, return management and delivery. This an example of leveraging traditional skills into a new online business. Since mid-1999, we have delivered a full range of grocery items, including perishables, to Coles Online customers seven days a week.

In 1999, we also established a customer base among online retailers. We have since extended our customer base into the telephony, pharmaceutical, consumer electronics and personal care industries.

Operating the end-to-end Telstra retail fulfilment contract demonstrates Post’s ability to be a strong player in the B2B and B2C logistics markets.



Our retail network, which remains the largest in Australia and achieved its sixth successive year of growth in 2001, is placing a strengthening emphasis on servicing customers in rural and remote areas of Australia. We have broadened our participation in the Federal Government’s Rural Transaction Centre Program and extended netPOS technology to more than 2,900 outlets. netPOS enables a greater range of products and services to be offered, and improves operational efficiencies.

We share with all retailers the challenges that flow from changing customer demands and expectations. Our customer monitoring program shows that we are rated highly for delivering reliable service and value for money at convenient locations.

Retail merchandise revenue improved by 32.8 per cent, but our share of the total market remains modest. Post’s retail merchandise performance in 2000–2001 was largely due to the success of our telephony products and buoyant consumer demand for Philatelic’s Olympics-related products.

Maintenance of our brand standing, continued adaptation of our products and services to the new electronic channels, and lowering the costs inherent in Australia Post’s traditional “bricks and mortar” sales channel remain major retail challenges.



Post further extended its foothold in financial services markets. We effectively operate the nation’s largest personal banking and bill payment network through our giroPost and Billpay services. Our share of the over-the-counter bill payment market rose by four per cent to 48.3 per cent. We leveraged off this with our launch of Post Billpay on the Internet. Our Billpay partners rose to 450.

During the year, our giroPost partners increased to 70. We accelerated our business banking service, with the Commonwealth Bank of Australia (CBA) and the National Australia Bank (the National) joining our giroPost partnership during the year. Our aim is that, by the end of 2001–02, most banks, building societies and credit unions in Australia will be using giroPost, with particular benefits for regional, rural and remote Australians.

We are maintaining a leadership role in selected market segments by managing all channels effectively to provide optimal returns.
Globalisation remains a factor in shaping the competitive postal environment as overseas postal organisations acquire foreign postal companies, form worldwide alliances, and set up operations in foreign markets, including Australia. In addition, major private-sector players are increasing the depth and scope of their global reach. This, alongside increased electronic substitution for mail and the growth of e-commerce, are the major factors influencing global postal and logistics markets.
Competitors are marketing themselves as global logistics companies with integrated mail, express, logistics and financial services. All elements of Australia Post’s business are subject to competition either directly or, particularly in the case of letters and financial services, as a result of technological substitution.

These threats are significant given Post’s legislated social obligations, with the need for its reserved services to cross-subsidise the provision of Community Service Obligations (CSOs).

In respect of the increasingly important logistics business, major overseas players within the logistics industry are developing global reach through strategic acquisitions and alliances. Foreign post offices such as Deutsche Post now operate in Australia, as do foreign parcel companies including FedEx.
Australia Post is close to implementing bulk mail monitoring, having spent more than $1 million reviewing and choosing a suitable methodology in consultation with the Major Mail Users Association (MMUA). The committee established to oversee the project included representatives from the Australian Bureau of Statistics, KPMG, MMUA and Post. The final method was endorsed by the MMUA in November 2000 and the pilot was very successful.

Once operational, from July 1, 2001, KPMG will lodge about 35,000 letters each quarter in 46 different bulk lodgements at Post business centres and mail centres, and at mailing houses. All letters will be customer barcoded.

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