Does Singapore Post still have a viable shot at ecommerce?

This article originally appeared in Chinese on Momentum Works’s WeChat account. Translated into English by the Momentum Works team. 

In May, Singapore Post announced its financials for 2020. The annual profit fell by 47.7%. This is due to the sharp rise in international logistic costs in the pandemic year, and some other factors.

However, its ecommerce business has achievedstrong growth. In 2020, ecommerce-related businesses contributed 65% of revenue, and Singapore Post still achieved a revenue growth rate of 6.9% despite the impact of the epidemic.

Financial report data shows that the growth of e-commerce business makes up for the declining postal parcel business:

 

Singapore Post’s efforts in ecommerce

Singapore Post has been a pioneer in anticipating the ecommerce growth in Singapore and globally. Many of the investments and infrastructure building took place during the reign of its controversial former CEO Wolfgang Baier. 

Baier joined SingPost in 2011 and remained a champion of ecommerce until he was ousted five years later. The company built itself up as one of the more recognized names during the early days of ecommerce development in Southeast Asia. 

Alibaba invested twice in Singapore Post in 2014 and 2016, becoming its second-largest shareholder. In 2015, SingPost and Alibaba began to expand ecommerce logistics cooperation, with three cooperation initiatives:

1. Alibaba invested S$86.2 million (US$65 million) in Quantium Solutions International (QSI), an ecommerce logistics subsidiary of Singapore Post, and reorganized it into a joint venture company between Singapore Post and Alibaba Group. Alibaba would own 34% while Singapore Post keeps 66%. 

2. Further increase investment in Singapore Post, with plans to invest approximately US$140 million.

3. Singapore Post and Alibaba will establish a joint strategic business development framework to further improve the efficiency of e-commerce logistics and integrate e-commerce logistics solutions.

We don’t find the name of Alibaba in the shareholder list of Singapore Post, but there are several nominee shareholders in the list. Alibaba is likely to hold shares in Singapore Post through nominees:

With Alibaba’s collaboration and funding, Singapore Post’s ecommerce business was meant to go onto the fast lane. Its subsidiary ecommerce agency SP eCommerce also began to provide ecommerce solutions for some brands, such as helping Timberland establish an official online store:

In 2015, SingPost acquired U.S. ecommerce service company TradeGlobal and logistics provider Jagged Peak to further develop the global ecommerce logistics market. In that year, Singapore Post’s ecommerce-related revenue and overseas revenue accounted for 29% and 40% of its total revenue. 

But the good times didn’t last long. After completing the acquisitions of TradeGlobal and Jagged Peak, Baier resigned suddenly at the end of 2015 due to discord with the board of directors. 

It is said that Baier had a great reputation among colleagues in the ecommerce business department at the time. Some colleagues were in tears when they heard that he was leaving. In 2016, Baier joined Luxasia as CEO.

Changes in the e-commerce landscape in recent years

In recent years, the rapid rise of the ecommerce industry represented by players such as Shopee and Lazada has also driven the development of ecommerce logistics in Southeast Asia. 

In our forthcoming 2021 Momentum Works Indonesia ecommerce report, the capital invested in online retail in Indonesia has increased by nearly 50 times in the 7 years from 2013 to 2020. 

The logistics field has gradually received capital’s attention from a blank in 2013. It peaked at US$220 million in 2020 – and this is not counting the investments made by Shopee and Lazada themselves.

With the rapid development of e-commerce, a group of ecommerce logistics players appeared in Southeast Asia such as Ninja Van and J&T. 

It is worth mentioning that, relying on the foundation laid in Indonesia, J&T used 极兔速递 as a brand to enter Chinese logistics market in 2020. Chinese logistic giants tried to block it, to no avail.

This is a testament that the Southeast Asian market can also nurture companies that match top players in China.

At present, ecommerce players including Shopee are also beginning to build their own logistics system. In general, the space for third party logistics will be squeezed in Southeast Asia. 

The Post’s cost structure is different from the ecommerce logistics. Singapore Post’s cost structure cannot effectively compete with these emerging players. At the same time, Singapore Post had a tough time to match the service levels demanded by Lazada, an Alibaba subsidiary. Singapore Post was fined twice by the government for complaints about the quality of its express delivery and postal services.

The substantial growth of ecommerce business in 2020 may once again encourage Singapore Post to increase its investment in ecommerce. 

In fact, they are also moving in this direction, but we did not understand some of these initiatives, such as the smart mailbox “PostPal” launched at the end of 2020.

Singapore Post might have missed the 2016-2020 surge of ecommerce across the region. However, it might not be a bad thing – it’s cost structure, culture and crucially investor base are different from those of fast growing ecommerce logistic players. 

If Singapore Post makes good use of its existing network advantages, there is still room to accomplish a lot and plug into some gaps in the ecommerce fulfillment infrastructure, especially in Singapore where costs are generally high. 

Will it be able to?