According to Estonian Post Ltd. boss Aavo Kärmas, parcels business flies like an eagle, carried by wings of e-commerce. With the big growth yet ahead.
Estonian Post strikes gold with parcels business – interview with Chairman of the Board
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Lately, the talk is that Estonian Post’s Post24 automats are bursting with parcels, with people struggling to deliver their stuff. Is the parcels business really that hot?
Yes, exactly. E-commerce and the parcels moved via that is like an engine for our business. The parcels volumes are on the increase the world over, not just in Estonia and the Baltics. The growth comes in double digits. In Europe, 20 per cent a year, even higher in Asia and USA. Our parcel volumes increased by 17 per cent, last year.
As the global data reveals, people love to purchase stuff over the Internet. True: we have room for growth here – even though an e-State, with lots of e-services and heavy Internet use, still only 20 per cent of Estonian computer users do their shopping in the Internet. In Western-Europe, the percentage is twice as high. So we have room for growth.
Obviously, buying bravado is impacted by costs of delivery, perceived security of online purchases, and options to return the goods. Judging by e-commerce developments, however, recession is nowhere to be seen.
Parcel volumes passing through our business have grown at surprising speeds. When planning for our Post24 automats, last year, we foresaw the need for expansion, aware of the demand. By now, we have accomplished that: this month, we set up bigger automats at here and there, also adding extra locations. Still, in near future, further expansion is needed. In Lasnamäe, for instance, we have one of Europe’s largest outdoor parcel automats – covering an entire wall, with 270 parcels’ capacity. And still it is often full. We are no longer talking about setting up parcel automats in regional hubs, but in smaller settlements as well. We do not have a single parcel automat not eagerly used by people.
How big a piece of the Estonian parcel market have you grabbed?
No one has specifically measured that. According to our own estimates, however, it could be half of the market.
Last week, you officially opened a parcel automats network in Latvia. Tell us more of the Latvian business – how is the parcel market over there?
We have 29 automats in Latvia, and officially we are now launching the network. Actually we have been on the Latvian market since end of last year, with volumes growing all the time – every week better than the one before. In this business it is like this: once customers embrace you, they get very active. And that has happened: Latvians have embraced us, busily sending parcels via the pakomats (pakomat being the automats’ nickname in Latvian – edit); about a hundred Latvian Internet stores already joined with us.
Of the 29, 19 automats are located in Riga, the rest in 12 largest cities. However, the Latvian network still lags far behind the Estonian one, the local volumes often exceeding our capacity to handle.
You are entering cooperation with the German DHL. What will that mean?
In international e-commerce, Estonian Post is unable, by itself, to reach the large Internet stores. Therefore, we have agreed with DHL, to cooperate in this field: they partnering with us by getting the international parcels here; we, in turn, will forward them to the persons who ordered them.
What does Estonian Post look like, in global postal business?
Small is beautiful! We differ with our electronic services like e-invoices, electronic registered mail – for the latter, we were recognised internationally, last year. The volumes of the said services are not large, currently, but they are increasing fast. For the parcel automat solutions, we have also received an international award. The determining factor being that from our automats, parcels may be sent to other automats, into homes by couriers, or to post offices. There being similar parcel automats networks in the world, but not with such options.
Years ago, Estonian Post’s management was all enthusiasm about expansion into Kazakhstan, supposedly quite an Eldorado. What has come of that?
Last fall, we sold our stake in the project and wound up the business over there. The country is not only distant physically – also distant in many other aspects. Such business would demand constant attention and development; we, however, consider it prudent to focus on the Baltic States, this being our domestic market. We exited the Kazakh business without losses.
Why should Estonian Post, owned by Estonian state, be involved in all Baltic States? Would Estonia not be enough?
There are three reasons.First: our largest clients – those providing the bulk of our turnover – view Baltic States as a unified market. They desire parcels to be delivered in a uniform manner, in all three countries.
Secondly: we want to be closer to the receivers. The third reason being the fact that while, at the moment, 40 per cent of our turnover comes from mail services – decreasing by 10 per cent, yearly – then we obviously don’t want the business as a whole to shrink. Thus, other options need to be sought, how and where to develop.
For sure, we have no ambitions whatsoever to carry letters in Latvia and Lithuania – only to compete in logistics.
What about the company’s latest economic results?
In first quarter we grew according to plans i.e. turnover increasing 9 per cent year-on-year, with zero profits. Turnover having increased by these very parcels.
In the spring, people grumbled as Estonian Post altered the Maxi Letter size and that sending of parcels, overall, became much more expensive. What was the customer feedback then? Has the price rise been «swallowed» by now?
The plan was not to conceal the price rise. We are an open enterprise – if we raise prices, we dare talk about it. The change was in preparation for 1.5 years and, partly, it was caused by the fact that Maxi Letter service was being used to send things far from being a letter. A letter is something that is put to a post box – fitting in there.
The problem also being that the movement of Maxi Letters was impossible for clients to monitor, over the Internet. Now we can see how, as people purchase things over the Internet, they will immediately start to monitor if the parcel has been forwarded, and what is its current location.
From the parcel automats, the items are removed within a day, on average – the people eagerly waiting for their parcels to arrive. The delivery of Maxi Letters, on the other hand, was very clumsy – when too big for the post boxes, postmen brought the people slips of paper, to be presented to post office staff, going to get it in person. Thus, it took many days more for the parcel to arrive – than now.
I cannot help but ask: how many Estonian Post’s post offices are planned to be closed down, yet?
The last major closing was four years ago, and still the subject is up! By now, the post office network is such as not to require major closings. We have 340 post offices; maybe a few will have to be closed down or relocated. Actually, we are just now busy reviewing the post office locations – aiming to bring them to places people really visit. For instance, 70 post offices are now located at shopping centres.