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As Australia Post records huge profits, its delivery system is in freefall. Will frustrated customers see a turn around by Christmas? By Hannah Ryan.

What is going on with Australia Post deliveries?

Consumers have reported growing dissatisfaction with Australia Post services.
Credit: AAP / Joel Carrett

On August 31, when Australia Post announced its latest financial results, things looked pretty rosy. Revenue had soared 10.3 per cent in the past year to a record $8.27 billion, with more than $100 million in profits. The controversy over the dismissal of former chief executive Christine Holgate was finally in the past, after the company agreed to pay her $1 million earlier that month.

But the very next day, Australia Post gave a clue about the perfect storm that was brewing over its business. It told customers it would be halting parcel collections in New South Wales, the ACT and Victoria for three days, to help clear a mounting backlog. The system was overwhelmed.

The very thing that had caused the company’s booming revenue – stunning growth in ecommerce – was combining with lockdowns to bring Australia Post’s parcel delivery service to its knees.

Two months on, the company says it’s back to a Covid-normal state of affairs, at least outside Victoria. But search Australia Post’s handle on Twitter and you’ll find a different post every 10 minutes from a frustrated customer wondering why their packages are taking weeks to be processed. This week, interstate parcels are estimated to take up to 14 business days to arrive in Victoria and 11 days in NSW. Retailers and small businesses are disgruntled, too, after facing the anger of impatient customers.

Why is it that just as Australians have fully turned to online shopping, it has become less reliable? Why did Australia Post survive the lockdowns of 2020, only to be brought undone by the 2021 Delta wave?

By way of excuse, the company points to lockdowns affecting up to 15 million Australians, driving a rise in online shopping that left even the 2020 boom in the dust. At the same time, the workforce was affected by Covid-19 exposures and isolation requirements.

“August and September were just out of the box in terms of volumes,” Australia Post’s executive general manager of business, government and international, Gary Starr, tells The Saturday Paper.

The company had thought last December was huge, and it was – the biggest month to date for parcel deliveries. But, as new chief executive Paul Graham told senate estimates last week, the figures for September 2021 were 40 per cent higher than that peak.

Just under six million households bought something online in September, Starr says, and 9.2 million did so in the past year. Australia Post is now regularly delivering more than 10 million packages a week.

That crescendo has outpaced the company’s planning, even as it has opened pop-up facilities and leaned on contractors to ease the pressure.

“We had a road map for 2022 … [But] we experienced 2023 and 2024 volumes last year in 2020,” Starr says. “Capacity planning and capital investments – just given how long you need to build [a facility] – just couldn’t keep up with the growth that we saw.”

Just as Australia Post staff were confronted by mountains of parcels bigger than they’d ever seen, they were less able to clear them. At any given time, up to 800 workers were isolating after being exposed to the coronavirus. This has been a particular issue in Victoria.

“If you lose a couple of hundred people, or have just one case in one facility, that can be up to 350,000 parcels that we can’t process,” Starr said. “And when you’re operating 24/7, it’s very hard to catch up.”

A reduction in air freight and the social distancing requirements that predated the 2021 lockdowns have also interfered with delivery.

In another desperate attempt to clear the parcels piling up in its storage facilities, Australia Post paused pick-ups from Melbourne ecommerce businesses for the first six days of October.

One of those businesses, pillow and bedding store Go Kindly, has now turned to other, pricier couriers.

Founder Laura Conti says it’s “too difficult” to go through Australia Post.

Not only has parcel pick-up and delivery been slow, deliveries have gone missing and been damaged, she says.

“When you’re a small online retailer like us you’re still building trust with the consumer. When things go missing like this,
it reflects badly on you,” she says. “For a small business, [it’s] crippling.”

Conti’s online sales have soared during Melbourne’s two extended lockdowns, but most of her new customers are older and have less experience with online shopping. That means they have high service expectations and tend to blame the retailer for problems.

At one point, Australia Post had collected four weeks of parcels but hadn’t scanned them into their system. Conti fielded “mountains and mountains” of queries from customers who thought the problem was at her end.

The delays put pressure on her team. She’s had to issue refunds and cop negative feedback. “You feel like you’re just not able
to meet basic customer satisfaction,” she says.

While Conti has started using other shipping companies, she can’t walk away from Australia Post completely. As a government-owned business, it’s the only one that has to ship to regional and remote areas that are less profitable to reach.

In Sydney, printing company owner Holly Masters has also been dealing with unhappy customers – in her case, other businesses. Last week, Masters was abused by a cranky client, also based in Sydney, after an order she sent took two weeks to reach them.

The Australia Post hold-ups have also slowed the work supplies she orders from interstate.

“Every person in that chain has that same problem. It definitely compounds,” she says. “People shopping online expect delays; but when you’re talking business to business, that’s part of the economy. Having a service that supports businesses doing business is quite fundamental.”

Starr insists the confluence of events – the length and breadth of the lockdowns and the impact on staffing – was unpredictable.

“We have a lot of experience responding to emergencies,” he says. “But the last few months, I would confidently say … were very difficult to foresee what would play out.”

Both the NSW and Victorian divisions of the union that represents communications workers, not normally shy to call out Australia Post management for perceived stuff-ups, are sympathetic.

There was “absolutely no indication” that volumes would skyrocket the way they have in such a short period of time, says the union’s secretary, Shane Murphy.

His Victorian counterpart, Leroy Lazaro, agrees. “The volumes were way beyond what the expectation was. It’s just the sheer volume that’s created this mess.”

Dr Paul Alexander, a supply chain expert at Curtin University, agrees that Australia Post’s explanations for their weeks-long delays are credible.

“The pandemic’s the most complicated thing that’s hit this planet since possibly the ’70s when the oil shock hit,” Alexander says. “One way to completely bring a logistics business to its knees is to be unpredictable. If you’re expecting 10,000 this week and somehow 40,000 rolls in, then you’re in panic mode and that causes a backlog.”

To deal with the crisis, Australia Post has announced a $400 million package to build new parcel facilities and other investments. It has also advertised for 1600 permanent and fixed-term jobs to work at contact and processing centres and in delivery around
the country.

In Alexander’s book, Australia Post has “made a lot of mistakes”, including possible complacency before Delta reached our shores. “But I don’t think they’ve made any horrendous mistakes,” he says.

And while he says companies can plan for an unlikely worst-case scenario, those costs would be passed on to the consumer.

Australia Post’s most recent annual report, tabled in parliament last month, revealed that Australia Post’s seven top executives – including Starr – shared in bonus payments totalling $4.85 million last financial year, in some cases nearly doubling their salaries. For people whose dominant experience of the company in the past few months has been frustration, those bonuses may rub them the wrong way.

Alexander believes the big test – the one that will decide whether this episode has lasting effects on Australia Post’s reputation – is Christmas.

The company has recently released cutoff dates by which parcels will need to be sent. Some 4000 Christmas casuals will help deal with the demand, with weekend deliveries continuing until the end of the year.

There are signs things will slow. Parcel volumes are moderating as people in NSW and Melbourne emerge from lockdown and return to brick-and-mortar shops. But most commentators agree the pandemic has brought on a permanent shift in consumer behaviour, and Australia Post is still predicting Christmas will be bigger than last year.

“Australians have shown they love online shopping,” Starr says. “We expect a busy period but we’re ready for it. I think we’ve done a great job, all things considered. We could always do better but I’m really confident now that we’re on top of things as we head into the peak period.”

This article was first published in the print edition of The Saturday Paper on Nov 6, 2021 as "Postal mortem".

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Hannah Ryan is a journalist for AAP, writing here as an independent contributor.