Online shoppers are in for a shock as Australia Post pushes through price increases of up to 30% for parcel delivery. It is bad news also for Australian online businesses, as the price hike makes online domestic less competitive with online overseas stores who already bypass the 10% GST and also regularly offer cheaper postage rates. About the only thing spared was the humble letter which can still be posted for a 60 cent stamp.
News of the price hike will be music to the ears of Australia Post's competitors, with customers already shopping around for alternative delivery options. The growth in online shopping has increased customer demand for flexible and speedy delivery of purchases, with parcel volumes growing at 12% per annum, freight firms are keen to grab market share.
Two such firms looking to grab market share include the Mark Bouris-backed TZ Ltd (ASX: TZL,) which specialises in 'intelligent devices and smart device systems', who in partnership with freight operator Toll Holdings (ASX: TOL) have just announced an agreement to trial TZ's Parcel Locker System. This locker system allows a customer to conveniently collect a parcel at any time of the day or night. It effectively extends Toll's specialised parcel delivery service, Toll Consumer Delivery, which also has a venture with a network of News Agencies to act as collection depots for parcels, into a 24/7 delivery service.
Fellow logistics players, including Perth-based CTI Logistics (ASX: CLX) and Qantas Airways (ASX: QAN), also stand to benefit from the outcry over Australia Post's pricing. Last year Qantas sold its half stake in courier Star Track Express to Australia Post and in return Qantas got control of Australia Air Express. The Air Express service may now be more competitive with overnight trucking rates, giving the Qantas division a boost.
Foolish takeaway
The freight sector has the potential to perform well on two fronts. Firstly, the structural change to online shopping means the sector is growing strongly and secondly, given the high fixed cost base of freight companies they have leverage to any rebound in the domestic economy.
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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Tim McArthur owns stock in Toll Holdings.
