Cut out letters and we may be profitable – NZ Post

The Chairman of NZ Post has said to parliamentary select committee that if mail volumes shrink to nothing, NZ Post would be a very profitable parcel delivery company.

Mail volumes in New Zealand have been falling by about 10% annually for the last decade and the fall shows no signs of abating with ever more businesses and private customers seeking to cut out physical mail from their daily business.

Sir Michael Cullen told New Zealand MP’s that in regards the decline, “The remarkable thing is how steady it’s been year on year for about 10 years.” It is now conceivable that mail delivery could die out altogether on the Southern Hemisphere island nation.

NZ Post has lost around NZD $30 million annually due to the costs of delivering mail under its universal service obligation to everyone in the country. The postal operator has been rationalising its sorting offices and operations to tackle the collapse in mail volumes and move to digital communications. One of the recent moves has been to reduce deliveries of mail to three times a week in major urban areas, and a major review is to be held into head office costs.

It isn’t all gloom and doom for the postal operator though. With parcel volumes increasing at between 4-5% annually and international parcel volumes growing at 8%, this is a business that will eventually help NZ Post thrive. Cullen said of this phenomenon, “If letters disappeared entirely they would leave a parcel business, and parcel businesses can be highly successful.”

Mail volumes being in decline is a global issue and where some operators are floundering, others in diversifying and consolidating their parcel businesses are maintaining and even increasing their profitability year on year. New Zealand may just follow this in microcosm by comparison to larger western countries.