SINGAPORE (BLOOMBERG) - Singapore Post, which counts Alibaba Group Holding as its second-biggest shareholder, plans to expand freight services and warehouses in the US 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, he 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 that also function as a bank and insurer, is preparing an initial public offering and looking to expand internationally after buying Australian logistics company Toll Holdings earlier this year.
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, Mr Baier said. SingPost, whose biggest shareholder is Singapore Telecommunications, provides these services in Hong Kong, Australia and a number of economies in the Asia- Pacific region, in addition to its home market.
SingPost said on Friday (Oct 9) that it is buying 71 per cent of US-based e-commerce company Jagged Peak for US$15.8 million. The agreement marked its first purchase in the US, adding to S$181 million of acquisitions in the past year, according to data provided by the Singapore company.
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, he 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, and the two companies have said they will continue seeking other business opportunities together.
SingPost's volumes have increased "significantly" since it partnered with Alibaba, Mr Baier said, without providing figures. The partnership with Alibaba could help increase volumes for SingPost, bringing down costs for customers, he said.
SingPost is alert for potential acquisitions beyond Singapore, he said. The company had cash and equivalents of S$566 million at the end of June.
SingPost is investing in facilities as well. The company will spend S$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 2016.
SingPost also is exploring the feasibility of delivering packages by drone, echoing attempts by Amazon.com. The company conducted a test flight Oct 8.
"We're not just a delivery company, we're not just a mail company," Mr Baier said. "This e-commerce ecosystem will explode once there's a critical mass in terms of deliveries."