E-commerce in New Zealand: where to next?

Thanks to Covid-19, Kiwis are shopping online more frequently than ever. The number of parcels moving through New Zealand Post’s network is up 25 percent YoY. Peter Jones discusses the trends and where this rapid growth is taking us.

Just before Christmas last year, New Zealand Post reported it was delivering nine parcels a second in its final push before Christmas. When analysing data from New Zealand Post, this is not surprising – as shoppers in New Zealand spent $25 million online every day in October 2021.

In the lead up to Christmas, New Zealand Post ramped up its operations to deliver more than two million parcels a week by recruiting hundreds of extra people, extending operating hours and shifting to a 24/7 operation. The business also re-designed its Auckland network to speed up deliveries.

An already expansive network, New Zealand Post is one of the largest operating businesses in New Zealand and boasts an impressive network with supporting infrastructure throughout the country.

In delivering the Christmas peak period, New Zealand Post communicated well with the nation around cut-off dates and delivery expectations – which was a huge win for the business and led to 71 percent of Kiwis stating they were satisfied with their delivery experiences over the past year[1].  While 71 percent leaves plenty of head room for improvement, in the heavily disrupted Q4 environment of 2021, there are many companies that would have been very pleased with this result.

While New Zealand coped with 2021’s peak, scaling any business 25 percent in less than a year is not without its challenges. As the shift to online shopping looks like it’s only set to continue, and with lockdowns up and down the country there has been a distinct shift in consumer behaviour. As a result, parcel networks throughout the world now have a small window of opportunity to reflect, reimagine and reset before activities ramp up again.

Shifting away from crisis mode

New Zealand Post did an impressive job of maximising their infrastructure, processes and people to absorb the rapid rise in volume throughout 2021. However, they are not alone in the challenges. Australia Post also dealt with an increase of 17 percent above 2020, which was already exceeding their 2023 forecasts. Similarly, DHL opened a new facility in Israel in 2021, and CEO Yair Bitton stated just after opening the new facility: “When we planned this facility five years ago, we thought this facility would be good for the next 20 years. Unfortunately, or fortunately, when finishing it we see that it’s good maybe for the next five.”

It’s looking like it’s going to take two or three years for this consumer trend to settle down into any kind of new normal and that will be a normal with double digit growth for quite some time. Consumer behaviour has changed and whilst it will settle into new patterns, it will be a few years until we all fully appreciate what those patterns will be.

Business leaders setting strategy with such uncertainty is both complex and carries risk. Will it be business as usual, and operations only expand when dealing with peak periods like Christmas, Easter and online shopping days? Or do networks need to be expanded to deal with continuous double digit compounding growth.?

The data, local and global, points towards continued growth in e-commerce. As a result, businesses like New Zealand Post, Australia Post, DHL and all the other e-delivery companies around the globe will need to transform their operations to profitably manage consistent growth at this scale.  In parallel, work on how they get ahead of the growth curve over the next five years or so, or they run the risk of staying in this scrambling, catch up and reactive cycle for a long time. 

Parcel networks around the world (as well as e-businesses who are doing the selling) have a window available to analyse their operations, better plan for volumes above network capability, while at the same time develop the required infrastructure to serve this new marketplace.  Critically reviewing networks, how they operate under the various pressures of the annual cycles and start to ask: “What does 2024 look like and how do we get there, while at the same time, asking what does 2030 look like and what do we need to be putting in place to meet that demand?”

Reviewing networks, infrastructure, assessing the geography of their facilities, access to people all while ensuring flexible and agile processes to carry out future tasks will be crucial.

An opportunity to be seized

The shift to e-commerce presents a major opportunity for large-scale parcel providers like New Zealand Post to grow and scale their business. But without a full operational review, 25 percent year-on-year growth will not necessarily equate to profit growth, and could, as with Australia Post last Christmas, lead to erosion of margin due to the higher operating costs of the short term and ad-hoc processes required to meet exponential demand growth on short notice.

As Brendon Main, COO at New Zealand Post said: “New Zealanders have taken to online shopping in a way that has changed the retail landscape forever and it’s now up to New Zealand Post to make sure that they seize this opportunity to change and develop just as the consumers has.”

Brendon’s comments are not for New Zealand Post only, but for all businesses in the e-commence industry.

Peter Jones (pictured below) is Managing Director and Founder at Prological Consulting.

Visit: https://www.prologicalconsulting.com/.