With domestic business continuing to be under tremendous pressure from rapidly declining traditional mail volumes, Singapore Post (SingPost) has turned its focus to e-commerce.
SingPost and Chinese tech giants Alibaba Group have entered into an investment agreement under which Alibaba Investment will invest S$312.5 million and have a 10.35% stake in SingPost upon completion of the deal. Over the next few months, SingPost Group and Alibaba Group will also continue discussions on the formalisation of a joint venture with respect to the business of international e-commerce logistics.
Currently e-commerce accounts for 26% of total revenue for the postal service.
The e-commerce market in the Asia Pacific region is poised to become the largest in the world, with sales expected to hit more than US$1 trillion by 2020, according to eMarketer.
This strategic alliance was created to tap into this growing segment and provide SingPost with greater access to international logistics capabilities, infrastructure and delivery networks. The partnership also aims to provide end-to-end solutions to Alibaba Group customers and merchants.
Wolfgang Baier, group chief executive officer of SingPost said: “E-commerce logistics is the key enabler to capture the growth in e-commerce in Asia. This strategic investment will help boost our transformation in regional e-commerce logistics and realise our next growth frontier.”
Baier added that the funds from this investment provide SingPost with financial flexibility and enable it to significantly scale up its e-commerce logistics business as SingPost’s core domestic business continues to be under pressure. He added that SingPost will benefit from Alibaba’s expertise in e-commerce, technology and business volumes.
However, despite traditional mailing volumes declining, the postal service is still going to invest S$100 million to improve customer service and productivity including the replacement of its mail sorting machines and delivery fleet as well as offering more 24/7 services such as POPStation and ezy2ship.
“We will speed up investments into our regional capabilities especially technology and infrastructure. Still, as Singapore’s Public Postal Licensee (PPL), our foremost priority is to provide high quality domestic mail services to meet our service obligations in Singapore,” he said.
Daniel Zhang, chief operating officer of Alibaba Group added that for Alibaba, through this collaboration, the company hope to create concrete benefits for overseas buyers and sellers.