Advances in technology have been destabilising the Postal Services industry since the early 2000s. Mail volumes have declined each year since their peak in 2008, transforming the industry's operating structure. Addressed letter volumes are continuing to fall at a rapid rate as businesses and consumers are substituting postal communications with electronic communications. Consumers are increasingly using technology to connect to people they would previously have written letters to. Social media platforms, instant messaging apps and mobile phone communications have become almost ubiquitous. However, letter delivery for important occasions, such as Christmas, weddings and birthdays, is still a major source of consumer demand.
Mixed messages
Declines in letter volumes have been particularly pronounced in the business-to-consumer markets. Cost-saving strategies are motivating businesses and governments to move incrementally towards reducing hard copy communications. Many companies have been progressively making electronic communication the default or only option for new accounts, and introducing fees for hard copy statements to drive this shift.
However, the shift from physical to electronic letters has been slower for some business entities due to a few factors:
- The transition to electronic communications has been slower for firms and government departments with more complex communications needs.
- For many companies, a full shift away from mail would require significant updates to in-house communications systems and customer contact information.
- The shift would require customers to change their behaviour in ways that might be difficult for less tech-savvy consumers.
Despite letter volumes falling rapidly, the Postal Services industry is expected to grow at an annualised 4.2% over the five years through 2020-21, to $9.5 billion. Major player Australia Post has focused on servicing the growing demand for parcel delivery, which has been driven by rapid growth in online shopping. The COVID-19 outbreak in early 2020 has had a net positive effect on the industry. Social distancing restrictions in response to the outbreak in early 2020 prompted several Australian retailers to close their in-store operations for a period of time during 2020-21. Consequently, demand for online shopping surged over the course of the pandemic, significantly increasing demand for parcel delivery services. This trend has contributed to anticipated industry revenue growth of 3.0% in the current year.
The growth of online shopping
The COVID-19 pandemic has benefitted the Online Shopping industry. Industry revenue is expected to rise by 35.3% in 2020-21, to $43.9 billion. This significant growth is attributable to a large jump in online penetration in the retail sector in 2019-20, when many bricks-and-mortar firms established online channels during periods of government-imposed lockdowns. The rapid increase in online shopping capacities driven by the COVID-19 pandemic is likely to boost industry revenue strongly in the current year. Online retailers have attracted greater demand as consumers have become more tech savvy and computer literate. Improvements in the security and reliability of online payment systems have changed perceptions of ecommerce, transforming it into a credible shopping medium. Rising consumer confidence in online shopping, the wide variety of items available and increasing internet use across the population have supported sales growth. Although specialist retailers initially dominated online retailing, ecommerce platforms are quickly becoming common for multichannel delivery. Revenue for the Online Shopping industry is expected to rise at an annualised 19.2% over the five years through 2020-21.
IBISWorld reports mentioned in this release:
Online Shopping Industry in Australia
