Many companies have found their traditional businesses disrupted by technology, such as retail, newspapers, taxis, telcos, etc.
SingPost is no exception, as there is less and less mail as more and more companies and people switch to emails, e-statements, online downloads, etc.
Nevertheless, at the same time, technology disruptions to brick-and-mortar retail shops have led to a rise in e-Commerce, with more people shopping online and getting their parcels delivered to their doorsteps.
This has somewhat saved SingPost from being relegated to the sidelines, as SingPost is also in the business of parcel delivery.
Yet, there are many established and start-up logistics companies vying for a piece of the growing parcel delivery business. Can SingPost hold up against the intense competition?
Before we delve deeper into the analysis, it is essential to understand there are important differences between mail delivery and parcel delivery. Knowing the differences help us to understand why SingPost is unable to translate its monopoly in mail delivery to a durable competitive advantage in parcel delivery.
Differences Between Mail and Parcel Deliveries
When it comes to mail delivery, SingPost has a monopoly. By virtue of its public postal licence that allows it to provide postal services in Singapore, it has access to 2 key infrastructure — the letterbox to each household and the roadside post box for posting letters. Mail is collected via the post box and gets delivered to the letterbox of each household and the recipient can choose when he collects the mail. However, when it comes to parcel delivery, the infrastructure that makes mail delivery so efficient breaks down. Here are some of the key differences between mail and parcel deliveries that we have to bear in mind when analysing the parcel delivery business:
- Parcels Come in Different Sizes
- Needless to say, parcels come in different sizes and shapes. Whereas, mail items such as letters, reports, catalogues, etc. are relatively more homogenous. Because of the heterogenous nature of parcels, each of them has to be handled individually. You cannot squeeze all parcels into a letterbox unlike mail items.
- Limited Hours for Successful Delivery of Parcels
- Most mail items can be delivered at any time to the letterbox, unless it is a registered mail that requires the recipient to acknowledge receipt. In contrast, because parcels usually cannot fit into a letterbox, they have to be delivered to the doorsteps. Not only that, the recipients (or their representatives) have to be present to receive them. As most people are working full-time, the hours for successful delivery of parcels are mostly limited to after office hours, unless they have relatives, neighbours or maids to collect the parcels on their behalf.
- High Delivery Failures for Parcels
- Because the recipient has to be present to take delivery, there are occasions when deliveries are unsuccessful. In such cases, re-deliveries are required. If the re-deliveries are also unsuccessful, the parcel is returned to the sender.
- Time-sensitivity for Parcels
- When you buy a product, you hope to receive it as soon as possible. If the product does not arrive after a few days, you might be tempted to cancel the order and ask for a refund, leave a poor review about the seller and/or not do further transactions with the seller. This is especially critical during online shopping holidays such as Singles’ Day (11 November) and Cyber Monday (Monday after Thanksgiving), when transaction volumes on e-Commerce websites would spike to many times the usual transaction volumes. Thus, parcel deliveries are time-sensitive and delays can cause many complications. In contrast, mail deliveries are comparatively less time-sensitive.
- Return Path for Parcels
- When you buy something online, you can only see what it is like. You cannot feel or try the product. Thus, when the product finally arrives in your hands, you might not like the actual product and might request to return it. To handle such cases, it is necessary to have convenient avenues for the recipient to send the parcel back to the sender. In contrast, mail items are seldom returned unless they are sent to the wrong addressees. Thus, the return path is important for parcel delivery but less so for mail delivery.
Thus, it is clear that the current mail infrastructure is inadequate to handle parcel deliveries. To cater for parcel deliveries, SingPost and its competitors have set up new collection, sending and return points. These new and existing touchpoints include:
- Doorstep delivery;
- Letterboxes (SingPost only);
- Locker boxes (e.g. Locker Alliance, SingPost’s POPStation, Blu’s BluPort, Ninja Van’s Ninja Box, etc.);
- Neighbourhood retail shops (e.g. Ninja Van’s Ninja Point, PostCo’s locations, etc.);
- Neighbours (e.g. Park N Parcel); and
- Post Offices (SingPost only).
How well does SingPost compete against established and start-up logistics companies in the parcel delivery business?
In particular, start-ups have been quick in adopting technologies and are very innovative in their solutions. You might be familiar with some of these names and might have even used their services, such as Ninja Van, RoadBull, LalaMove, etc.
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Let us consider several factors.
Comparison of Competitive Advantages
Infrastructure is what makes SingPost a monopoly in mail delivery. It is my opinion that ultimately, infrastructure is also the key factor in deciding who wins the parcel delivery competition. Currently, most of the logistics companies deliver to the doorstep, but compare the hassle of delivering to each doorstep in a HDB flat/ condominium with the convenience of delivering to the letterboxes in the common area. Clearly, delivery to the letterboxes wins hands-down. Unfortunately, the current letterboxes are too small to receive all parcels, resulting in a fairly level playing field for everyone and few barriers of entry in the parcel delivery business.
As mentioned in earlier sections, the return path is as equally important as the delivery path for parcels. Let us consider the infrastructure for the delivery and return paths separately.
a. Delivery Path
Letterboxes for Small Parcels
Here, SingPost has a competitive advantage over all its competitors by virtue of its ability to access the letterboxes which can accept small parcels that can fit into a letterbox. However, this advantage disappears for large parcels.
Parcel Locker Boxes for Larger Parcels
The equivalent of letterboxes for larger parcels would be the parcel locker boxes located in places with high traffic flows such as shopping centres, MRT stations and community centres. Here, SingPost leads the competition with POPStations in around 160 locations. The nearest competitor is Blu, which has BluPorts in approximately 120 locations including Cheers convenience stores and petrol stations. Other competitors with locker boxes include Ninja Van which has Ninja Boxes in around 18 shopping centres.
Besides its own POPStations, SingPost also has access to Parcel Santa’s network of 300 locker boxes located in condominiums. However, these locker boxes are also open to other logistics companies that partner with Parcel Santa, such as DHL, FedEx, UPS, SF Express, etc.
Neighbourhood Stores and Neighbours for Larger Parcels
What some of the start-up logistics companies lack in parcel locker boxes, they more than make up for them through collaborations with neighbourhood retail shops to serve as collection (and sending/return) points. Ninja Van has collaborations with 1,000 retail shops including Guardian shops and minimarts. Park N Parcel even goes a step further and collaborates with residents to serve as collection points. Park N Parcel works with over 1,600 residents and neighbourhood retail shops.
One thing to note is that unlike parcel locker boxes which are accessible round-the-clock, neighbourhood stores and residents are only open/ available at certain hours of the day. Nevertheless, these hours are usually sufficient for people to collect/ send/ return their parcels after office hours. Neighbourhood stores also do not work exclusively with 1 logistics companies; some serve as collection points for more than 1 logistics companies.
Another concern is the security of the parcels left with neighbourhood stores and residents. PostCo vets and trains the neighbourhood stores on how to handle the parcels safely while Park N Parcel carries out verification of the residents before they can work as collection points.
Overall Network of Collection Points
Figure 1 below compares the locations of SingPost’s POPStations, Ninja Van’s Ninja Points and Park N Parcel’s Parkers in Jurong East as an example. Clearly, Ninja Van and Park N Parcel have a lot more touch points for parcel collection than SingPost.
Figure 1: Comparison of SingPost’s, Ninja Van’s and Park N Parcel’s Touch Points in Jurong East
There is a saying, “If you cannot beat them, join them!” That is what SingPost did. It now collaborates with Park N Parcel via its Last Mile Platform to make use of Park N Parcel’s Parkers to hold the parcels for recipients to pick up at their convenient time.
Thus, for the delivery path, SingPost holds an advantage for small parcels because of its access to the letterboxes. For larger parcels, SingPost also has the advantage in secure parcel locker boxes that are available round-the-clock. However, competitors like Ninja Van and Park N Parcel have more touch points through their collaborations with neighbourhood retail shops and residents.
b. Return Path
For the return path, Ninja Van has the clear advantage over SingPost because of its network of neighbourhood retail shops which is more extensive than SingPost’s network of post offices and POPStations. Most other competitors can only receive returned parcels at the doorstep.
2. Partnerships with e-Commerce Websites
Besides having the infrastructure to deliver and accept returned parcels, it is also important to have extensive partnerships with e-Commerce websites to feed parcels into the infrastructure. A glance at some of the popular e-Commerce websites such as Qoo10, Lazada/Redmart, Shopee, Zalora, Asos, etc. shows that the more common logistics partners are SingPost, Ninja Van and SF Express. Other logistics partners include Qxpress, J&T Express, CJ Logistics, RoadBull, etc.
It is perhaps worth mentioning that Alibaba, the Chinese e-Commerce giant, owns Lazada, which in turn owns Redmart, and has a 14.6% stake in SingPost. That stake in SingPost is probably to ensure that parcel deliveries from Alibaba-related e-Commerce websites (Taobao.com, AliExpress, Lazada, etc.) get priority in deliveries from SingPost.
In addition, Alibaba has a director sitting on SingPost’s board. The director could provide valuable advice to SingPost on how to transform to better meet the needs of e-Commerce.
Thus, in the area of partnerships with e-Commerce websites, SingPost, Ninja Van and SF Express stand out as some of the logistics companies with bigger networks.
3. Upstream Integration with Fulfilment Centres
Besides waiting passively for parcels to be fed into its infrastructure via the e-Commerce websites, it is also possible to actively get parcels by playing the role of a fulfilment centre.
What are fulfilment centres? Imagine you are a start-up entrepreneur selling, say, 10 different products. Client 1 orders Product A, C, E while Client 2 orders Product B, C, F. To fulfil their orders, you need to:
- Have all the products available in your storage area;
- Pick and pack Product A, C, E for Client 1;
- Label the package and mailing address correctly;
- Weigh and attach the correct postage/ courier fee;
- Send it to Client 1; and
- Repeat the same process for other clients.
For small transaction volumes, you might find that it is not much of a hassle. But as your business grows bigger with more orders and greater product variety, the efforts to do the above become significant. This is where fulfilment centres can assist. All you need to do is to ship all your products to the fulfilment centre, inform them of the orders to be fulfilled, and they will do the rest. Obviously, if the fulfilment centre is part of a courier business, they will deliver the parcels via their own courier business rather than someone else’s!
In this area, SingPost has a Regional e-Commerce Logistics Hub that was opened in Nov 2016. Quite a few logistics companies have fulfilment centres, but not everyone has the downstream network of collection, sending and return points mentioned earlier. Ninja Van, the start-up that stood out in having an extensive distribution network, does not fulfilment centres. Only Blu has both upstream fulfilment centres and downstream distribution networks.
4. Synergies with Mail Delivery Business?
There are thoughts about synergies between SingPost’s mail delivery and parcel delivery businesses. However, I think the synergies are weak, especially in high-rise areas like HDB flats and condominiums. Even though both are delivered to addresses in the same area, there are extra steps (literally) involved in delivering parcels in addition to mail items. For mail delivery, they can be deposited into the letterboxes. But for parcel delivery, the postman has to walk to the respective doorsteps to deliver the parcels. Much time is wasted in making door-to-door deliveries. Furthermore, SingPost uses scooters with a small storage box at the back to deliver the mail items. While the scooters are adequate for storing mail items for several blocks of flats/ condominiums, they are grossly inadequate for storing large parcels. In contrast, other logistics companies use vans for parcel deliveries.
For low-rise areas such as private housing estates, there are slightly more synergies as mail items have to be delivered door-to-door anyway. Furthermore, the postmen ride their scooters to the next door instead of having to walk within HDB blocks/ condominiums.
Having said the above, SingPost has been making enhancements to increase the synergy between mail and parcel deliveries. With effect from 1 Nov 2019, SingPost will only deliver SmartPac parcels to the letterboxes instead of to the doorsteps. This will reduce the need to do door-to-door deliveries. In addition, it is also progressively replacing its 2-wheel scooters with 3-wheel scooters with larger storage boxes.
5. Legacy Baggages
While SingPost has certain advantages as the public postal licensee, there are also disadvantages. Unlike private companies which can choose the types of businesses that they want, SingPost has to provide postal services to all customers. For example, for individuals wishing to use Ninja Van’s services, they can only use postage-paid poly mailers which only come in 2 sizes. This standardisation streamlines the handling of poly mailers. SingPost, on the other hand, offers 4 different sizes. They also offer 3 sizes of mailing tubes for documents that cannot be folded. For companies wishing to open corporate accounts with Ninja Van to use their services, they must have a volume of at least 100 deliveries per month. This requirement improves the efficiency of their parcel collection trips. In contrast, SingPost cannot reject any customers simply because their volumes are small.
As the public postal licensee, SingPost also has to ensure that its basic postal service is well-run. Incidents such as late deliveries, lost mail, etc. will result in penalties being imposed. It cannot prioritise the parcel delivery business at the expense of the mail delivery business.
Despite being seen as a legacy company whose traditional business is being disrupted, SingPost does have certain advantages in the parcel delivery business. Its advantages include:
- Efficiency in small parcel delivery via monopolistic access to household letterboxes;
- Network of collection, sending and return points, although not as extensive as that of Ninja Van and Park N Parcel;
- Collaborations with popular e-Commerce websites to provide delivery services, which do not lose out to that of its competitors;
- Part of the Alibaba network, which also includes Taobao, AliExpress, Lazada, Redmart, etc.;
- One of the few logistics companies to have both upstream fulfilment centres and downstream distribution networks; and
- Some synergies with its mail delivery business, especially in low-rise private housing estates.
SingPost is also not a company waiting to be disrupted. They saw the declining volume of traditional mail and the increasing volume of e-Commerce parcels. Several enhancements have been made over the years, such as:
- Introducing 3-wheel scooters to progressively replace 2-wheel scooters since 2011;
- Introducing POPStation parcel lockers since 2013;
- Welcoming Alibaba as a strategic shareholder since 2014;
- Trialling the use of drones to make parcel deliveries in 2015;
- Opening the Regional e-Commerce Logistics Hub (fulfillment centre) in 2016; and
- Collaborating with competitors (Park N Parcel) to expand the network of collection, sending and return points.
They have also been investing overseas to increase the breadth of their businesses. They now have businesses in e-Commerce solutioning, warehousing, freight forwarding, self-storage and even an online sample store! In terms of countries, they have investments in US, Australia and Malaysia.
Although not every investment bore fruit, especially the failed investments in US e-Commerce businesses, it is nevertheless a sign that they are aware of the disruptions facing their traditional mail delivery business and fighting to gain a stronger footing in the rising e-Commerce business.
This is unlike many other companies that are struggling to respond to the technology disruptions. As a shareholder, I would rather SingPost fail by trying than fail by not trying!