Australia Post to increase postage rates, but is online shopping to blame?

Small businesses are fearing another hit to their bottom line with Australia Post announcing a 1% fuel surcharge for all domestic and international parcels as well as international letters due to increasing demand.

But the increase has caused some in the business community to wonder whether the surcharge is due to the increased amount of mail being processed from overseas due to the shift to online retailing.

Peter Strong, chief executive of the Council of Small Business of Australia, says it’s worth asking whether domestic shipping is being made more expensive in order to account for international parcels, which are processed at different rates.

“Petrol has been going up, but it’s always been going up and down, so why all of a sudden is this an issue? That’s one question, but another is whether something else is going on.”

“We’re buying a lot more from overseas, and many people now order products from overseas stores. Is it getting hard for AusPost to maintain their profits due to this shipments being covered by international shipping rates?”

Strong questions whether domestic businesses are being charged higher rates because of this imbalance – he has previously agreed with the notion that online sales need to be charged GST.

Strong’s question was put to Australia Post this morning. A spokesperson said the surchage was introduced “due to the rising cost of fuel in recent years”.

“Domestic online retail sales are predicted to grow from around $27 billion last year to almost $37 billion by 2013, with every item purchased online representing an opportunity to us”.

In a statement, executive general manager of postal services Jim Marshall said: “We think it’s a modest price increase that is fair and reasonable given the current pressures facing us”.

“Every year we are increasing our delivery points by 200,000 new addresses and predict that in 10 years it will be the equivalent of another Queensland being added to our delivery network. At the same time, costs keep increasing and letter volumes continue to decline, with our letters business losing over $170 million last financial year.”

The Australian Competition and Consumer Commission also said last week it would not oppose a move from Australia Post to increase postage stamp prices for companies mailing in bulk.

The proposal will see Australia Post increase business mail services, including PreSort services, which provide discounts to wholesale customers who sort and barcode their mail before sending.

“At the same time, to encourage more efficient and flexible use of the postal network, Australia Post proposes to change its Off Peak PreSort letter services to make them more attractive to its bulk mail customers.”

But overall, Australia Post says postage services will rise for domestic businesses, although normal postage rates will remain the same.

“Beyond this price notification, the current approach to assessing prices, including the allocation of costs, needs to be re-examined given the environment of declining demand for traditional letter services,” ACCC chairman Graeme Samuel said in a statement last week.

This move comes after one postage industry veteran claimed domestic shipping prices would begin increasing as Australia Post struggles under the influx of international shipping rates.

“There is going to be a very fine line between jeopardising the domestic market and promoting the international market for parcels,” Parcel Express chief executive Jason Picknell told SmartCompany last week.

Picknell also stated that more Australian companies are beginning to house their merchandise offshore in order to capitalise on cheaper shipping rates for internationally-based packages, instead of paying more expensive domestic rates.

It also follows complaints by Australia Post licensed stores on the margins they receive for processing parcels, which are an increasing part of the company’s business.