The next wave: NZ Post plugs in for e-commerce

By RICHARD BRADDELL

"There's a natural belief that everything will go electronic. But it's going to be a long time before we will be able to shove matter along wires," says New Zealand Post's general manager of electronic business, David Skinner.

NZ Post is taking its role as the nexus between the physical and electronic worlds very seriously, to the extent that it regards itself as a New Zealand leader, with about 200 people employed directly and indirectly in its electronic commerce activities.

As the rapid growth of e-mail increasingly bites into the letter market, it is unsurprising that the state-owned enterprise is seeking other revenue streams and activities that reinforce its relevance to customers.

Exploiting its position as one of New Zealand's two largest courier firms is one opportunity.

NZ Post expects growth in express freight to reflect global growth of 15 per cent annually, or twice the rate in telecommunications.

But NZ Post is also developing its own e-commerce streams which owe less to the physical completion of electronic transactions and more to being the electronic vehicle itself.

Its eBill facility, an online service for bill payments such as credit cards, electricity, gas and telecommunications, is a natural electronic expansion of the existing arrangements in which post shops act as an agency for financial service organisations and firms wanting a physical contact point with customers.

The advantage of eBill is that it is secure and operated by a neutral third party, although how that will square up if NZ Post enters banking remains to be seen.

While consumers can access eBill directly on NZ Post's website, some of the large billers - who pay for the service - have put their own "skins" over the eBill engine, thus making it look like their own site.

E-business now accounts for around 5 per cent of NZ Post's $1 billion turnover, and while a slow start to the year makes it unlikely a 50 per cent growth target will be met this year, NZ Post expects to exceed easily last year's 32 per cent growth.

Popular wisdom associates e-commerce with consumers and the internet, but Mr Skinner says that both the internet and consumer business represent only about 5 per cent of activity. The internet side of e-commerce has been overhyped.

"Ultimately, that will happen, but I personally regard that as more of a 20-year generational thing, not a three-year transition.

"What e-businesses are really about is connecting the processes between companies, and sometimes between large parts of companies, so the information flows across and between companies automatically or much more efficiently than now."

He says the whole area of e-business has been painted by the industry as unnecessarily complex. "It isn't really different from most conventional business models, except that you tend to use different underlying technologies."

But the huge savings possible to commerce have to be captured if New Zealand is to remain competitive.

Electronic purchasing by a company can do away with time-consuming tender and vendor selection processes, invoices, delivery documents and, for the vendor, the 2 1/2 month wait for payment.

"In that instance, it's all about taking out inefficiency rather than creating new markets or black art ways of doing things," says Mr Skinner. "Our business model is very much to remain in the business of generating, consolidating and making bills presentable. We are quite happy for organisations like the banks or Telecom to reflect that capability under their own brand."

NZ Post does not regard itself as a dot.com, nor does it see its e-business operations as speculative, since every venture has to meet commercial payback criteria. But it does form partnerships with promising new ventures. It recently earmarked $20 million for what it terms development capital, with about $3 million already invested in companies that show promise as business partners and sources of expertise.

One of those is half-owned Electronic Commerce Network, which has a contract with Customs to handle import declarations.

But the jewel is a long-standing stake in Datacom, a leading privately held New Zealand information technology firm that is expanding fast into Australia and Asia.

NZ Post first took a stake in 1991-92 to cement an outsourcing arrangement with Datacom and that has grown to 28 per cent.

The relationship was vital in NZ Post's delivery of a retail system it sold to the South African Post Office.

"Our ability to deliver that project would not have been possible simply because we had to go from our standard 15 people involved in that technology to over 60 in a matter of weeks and sustain it for six months," Mr Skinner says.

NZ Post's international consulting business is not only highly profitable, it also brings export earnings. It has a target of $50 million in exports in two to three years.

With NZ Post's skills heavily oriented towards business analysis, it is highly dependent on outside contractors on the technology side. Inside the company, a constraint on its e-business growth is staff.

"There aren't that many people in New Zealand with the techno-marketing skillset. The salaries recommended for that skillset overseas are massive, and we regard ourselves as a competitive payer."

One answer is to take the best people from courier and freight areas who understand the opportunities.

The Juice

eBusiness (a division of New Zealand Post)

Turnover: $50 million approx

Staff: 200

* Strategy: To build on a reputation for being a neutral player and trusted delivery agent.

* Services: Bill payments and facilitating e-commerce strategies. Exporting systems and services.

* Partnerships: Include 50 per cent Electronic Network electronic services, 30 per cent Silent One software developer, 40 per cent Communication Arts. Also long-standing association with Datacom, now 28 per cent owned.

* Growth Expectations: Up to 50 per cent this year after 32 per cent last.