Amid fierce competition in the parcel delivery business, surrounded by financially strong foreign operators, state enterprise Thailand Post has realised it needs to revamp its business.
The company is pursuing a major transformation called "360-degree turnaround milestone" to prepare for competition and achieve a sustainable revenue stream.
Thailand Post posted a record net loss of 1.6 billion baht in 2021, including more than 500 million baht allocated for its early retirement programme, a hard fall from its recorded net profit of 300 million baht in 2020.
Chief executive Dhanant Subhadrabandhu said Thailand Post is pivoting towards reviving its strong foundation and exploring new revenue opportunities this year under its "beyond logistics" plan.
"We must deal with the unprecedented change in the business landscape. This is a do-or-die strategy," said the 49-year-old executive who took office in May last year.
He told the Bangkok Post the company is facing its toughest challenge and needs to adjust operations to ensure growth and a strong profit margin in the future.
BELOW-COST PRICING
Mr Dhanant said the express delivery segment has seen tough competition, especially this year, as several foreign operators pursue a below-cost pricing strategy, racking up huge losses in order to increase their market share.
This has distorted the market and could be detrimental to the country's logistics ecosystem in the long run, he said.
The fierce competition resulted in the company's first net loss last year, said Mr Dhanant.
In recent years, the company has seen its revenue decline 10% on average per year.
Average revenue per parcel delivery transaction is now 15% lower than the level recorded last year, he said. Rising fuel prices have also pushed up fuel costs by 30%.
Parcel delivery service contributes 40% of Thailand Post's total revenue, followed by mail at 30%, international courier services 20% and retail and counter services 10%.
Thailand Post still retains the biggest market share for overall mail and parcel delivery business at 45%, down from more than 50% two years ago, said Mr Dhanant.
Kerry Express has the biggest market share for logistics services, particularly express delivery services.
"Thailand Post has been aware of these threats for years. That is why we have to pursue the roadmap for a business turnaround," he said.
Between 2022 and 2024, the country's express delivery market is forecast for average annual growth of 11.2%.
This year competition in express delivery service has been escalating as companies rely more on e-commerce and delivery services for business, said Mr Dhanant.
For parcel delivery business, Thailand Post has a 40% market share in terms of revenue and a 57% market share based on the number of delivered parcels.
He said attractive service fees are not enough to increase business in the long run. The more important issues are service quality and whether customers feel it is worth spending on the services.
According to Mr Dhanant, promotions, after-sales services and payment channel support can propel e-commerce growth, which could in turn drive revenue growth for Thailand Post in the long run.
Thailand Post is offering a broad range of support measures for e-commerce, including packaging, storage, delivery and after-sales services.
The company's EMS Every Day campaign upgrades express delivery services with 24-hour service.
He said the firm is now catering to demand using various transport formats, such as pick-up services and the delivery of bulky items, or those with an unusual shape.
The company also has the thailandpostmart.com website, where community products can be posted and sold.
Thailand Post also supports the delivery of medical supplies and trees or seedlings, provides delivery solutions such as warehousing and fulfilment, and offers temperature-controlled delivery under the Fuze Post brand through a joint venture.
In addition, the company supports a point-of-sales system for locals who want to sell their products via thailandpostmart.com, said Mr Dhanant.
Local communities can also be supported with inventory management, sales reports, logistics, e-payment and the e-wallet system of Thailand Post.
TURNAROUND DRIVERS
"All we have done is fix the business foundation. In 2023 we are looking to forge a turnaround," he said.
To drive the turnaround, first the company is scaling up efforts to optimise delivery service efficiency in what is called a "parcel-defined logistics strategy", he said.
The strategy is meant to ensure the most effective logistics process, ranging from packaging and space management to route optimisation and last-mile delivery.
Its logistics business is expected to be fine-tuned to cater for more specific demand from merchants to evade competition, said Mr Dhanant.
He said the strategy is bearing fruit as the amount of work investigating damaged and delayed parcels decreased 46% in the first quarter this year from the previous quarter, despite the number of delivered parcels surging 15%.
Thailand Post is also in talks with Transport Co and the State Railway of Thailand for cooperation to complement the company's logistics ecosystem.
Buses and trains have a large amount of space that can be used to add value, said Mr Dhanant.
The company is also exploring new revenue streams from digital services and businesses linked with electric vehicles (EVs).
Thailand Post had discussions with National Telecom about the EV business as both firms use a large number of vehicles in their daily operations.
Thailand Post has been using EVs for some years, with its electric vans projected to reach 250 by the end of this year and 500 next year.
Some 30 postal workers already use electric motorcycles on their delivery routes.
"Thailand Post has strong demand for EV usage, both vans and motorcycles," he said.
The company's EV drivers have crucial information on how EVs can be designed to meet market needs, said Mr Dhanant.
"We are considering how we can monetise our assets in the EV business," he said, which may include a joint design of vehicles, providing maintenance services as well as battery support.
DIGITAL SERVICES
The firm's Post Next unit handles digital services, including transforming physical letters into digital mail. It is used by state agencies and corporations.
Based on the Postal Act, Thailand Post serves as the only authorised agency that can officially certify digital mail and documents.
Last month the company launched the e-timestamping service, which can certify a document's existence or execution at a point in time, as well as add levels of assurance and proof to a digital signature.
More digital services are planned, including e-seal, e-archive as well as digital mail box, which can help users track physical letters in real time via an application.
Mr Dhanant said another projected service is Digital Post ID, which allows users to have an individual address code that directs postal staff where to send parcels for delivery without the need for an address on the box. The service is scheduled to launch in October.
Thailand Post also wants to capitalise on its database as a data-driven organisation, he said.
For the retail business, Thailand Post helps local suppliers sell their products at 11,000 post offices, while 20,000 postal workers can serve as delivery staff to send products at home.
These workers have a close connection with locals through years of local postal services, said Mr Dhanant. Based on that extensive experience with locals, they can be useful in data collection, business surveys, product introduction and receiving orders.
The company is also pursuing IT investment for its postal business with an aim to become a smart logistics operator, he said. Some 2 billion baht has been invested for that development so far this year.
Thailand Post is gearing up for green logistics and sustainability as a core target of its operations under the turnaround push. Digital services and EV the business also serve the firm's green logistics roadmap, said Mr Dhanant.
PROPER REGULATIONS NEEDED
He said Thailand Post is the only operator in the country that provides business-to-customer delivery nationwide together with traditional mail services as a basic logistics infrastructure.
It also provides basic support for the public, such as delivering medical supplies nationwide during the pandemic and distributing fruits and products from local farmers to consumers in line with the government's policies.
Mr Dhanant said proper regulations should be rolled out to govern the delivery industry as several platforms pursue a below-cost pricing strategy regardless of huge losses, which is heaping pressure on Thailand Post. Other delivery companies don't serve the public interest, he said.
If the government allows price-cutting operators to dominate the market with very low delivery fees, it will take a toll on the country's logistics ecosystem, said Mr Dhanant.
"It is hard to speculate how long the company's coffers could be used to compete with foreign cost-cutting operators that have strong financial backing from giant companies," he said.
The implementation of proper regulations should also help ensure operators pay attention to service quality, rather than pricing strategy, said Mr Dhanant.
In response to the regulation requests, Digital Economy and Society Minister Chaiwut Thanakamanusorn said it is hard to act because the industry competition is seen as beneficial to the public.
"This is a complicated issue and needs to be cautiously handled," he said.
However, Mr Chaiwut said he is concerned about the quality of delivery services amid the price wars.
Issues in the delivery industry should be discussed by the Thai Chamber of Commerce, with solutions forwarded to regulate the sector, the minister said.
Pisut Ngamvijitvong, senior equity research analyst at Kasikorn Securities, said Thailand Post has various strengths, including staff familiar with local residents and routes, post offices nationwide and existing resources.
A push to capitalise on employees, such as collecting necessary data for businesses and dealing with retail, is one strategy that can boost its revenue stream in the long term, he said.
Thailand Post's affiliated firms should list on the Stock Exchange of Thailand (SET) or the Market for Alternative Investment, said Mr Pisut.
Mr Dhanant said Thailand Post's logistics solution arm Thailandpost Distribution is projected to list on the SET within two years.
