SingPost to grow e-commerce with US, European services

The Singapore Post branch at Raffles Place MRT on Sept 2, 2014.
The Singapore Post branch at Raffles Place MRT on Sept 2, 2014.PHOTO: ST FILE

Singapore Post, which counts Alibaba Group as its second-biggest shareholder, plans to expand freight services and warehouses in the United States and Europe as Asia's emerging middle class drives online purchases from overseas.

SingPost expects online transactions to jump in coming years, as the typical household in South-east Asia currently receives just two to three parcels a year on average, compared with about 30 in developed markets, chief executive officer Wolfgang Baier said in an interview on Oct 8.

"We need to double down" on the push into e-commerce, Dr Baier said. "E-commerce is going to grow, and we want to make sure we're there."

The move comes as other postal companies in Asia also are looking to reinvent themselves. Japan Post Group, a US$2.5 trillion (S$3.5 trillion) behemoth, is preparing an initial public offering and looking to expand globally after buying Australian logistics company Toll Holdings earlier this year.

MAIL MONOPOLY

SingPost holds a monopoly on mail delivery in its home base, which accounts for about 80 per cent of its operating profit, but is looking for new areas of growth as more people use mobile phones and access the Internet.

Worldwide business-to-consumer sales could grow 34 per cent to US$675 billion in 2016 from 2014 as the global middle class grows, SingPost said, citing data from researcher eMarketer.

The company is building its e-commerce business by managing online stores for about 15 clients such as adidas and Canon, providing warehousing, handling Customs and making deliveries, Dr Baier said.

SingPost, whose biggest shareholder is Singtel, provides these services in Hong Kong, Australia and a number of economies in the Asia-Pacific region, in addition to its home market.

GOING BEYOND MAIL AND DELIVERY

We're not just a delivery company, we're not just a mail company. This e-commerce ecosystem will explode once there's a critical mass in terms of deliveries.

SINGPOST CHIEF EXECUTIVE OFFICER WOLFGANG BAIER, saying "we need to double down" on the e-commerce push

SingPost said on Friday it was buying 71 per cent of Jagged Peak, a Florida-based e-commerce company, for US$15.8 million. The agreement marked its first purchase in the US, adding to $181 million of acquisitions in the past year, according to data provided by the Singapore company.

ONLINE SALES

Online purchases account for about 0.2 per cent of total retail sales in South-east Asia, compared with 10 per cent to 15 per cent in developed markets, Dr Baier said.

Alibaba, China's biggest e-commerce company, agreed in July to boost its stake in SingPost to 14.51 per cent from 10.23 per cent. It also bought 34 per cent of a SingPost e-commerce logistics subsidiary that provides warehousing across the Asia-Pacific region.

SingPost's volumes have increased "significantly" since it partnered Alibaba, Dr Baier said, without providing figures. The partnership with Alibaba could help increase volumes for SingPost, bringing down costs for customers, he added.

OTHER INVESTMENTS

SingPost is alert for potential acquisitions beyond Singapore, Dr Baier said. The company had cash and equivalents of $566 million at the end of June.

SingPost is investing in facilities as well. The company will spend $182 million to build a three-floor warehouse to handle e-commerce businesses in South-east Asia and serve as the connecting point to the rest of Asia, it said last year. The warehouse should be fully operational in the second half of next year.

SingPost is also exploring the feasibility of delivering packages by drone, echoing attempts by Amazon.com. The Singapore company said on Oct 8 that it has conducted a test flight.

"We're not just a delivery company, we're not just a mail company," Dr Baier said. "This e-commerce ecosystem will explode once there's a critical mass in terms of deliveries."

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on October 13, 2015, with the headline 'SingPost to grow e-commerce with US, European services'. Print Edition | Subscribe