I was surprised to read reports this week that Australia Post Licenced Post Office agreements run for 20 years with little opportunity to exit the agreement. The ABC had this story yesterday.
Given the considerable challenges being faced by Australia Post and that small business LPOs shoulder costs of many of those challenges, the length of the agreement is an issue to consider.
I’d be interested to hear what LPO operators have to say about this.
There are some days I look at the traffic of Post Offices and think it would be good to have it. But then I consider why people are there and think I am better off attracting shoppers who are looking for higher margin items and others prepared to spend up on impulse lines. I suspect the conversion rates of postal and bill payment services shoppers to other items is low. It’s what newsagents found with Bill Express.
For me, it comes back to being a retailer or an agent. While I choose to be a retailer, if you own and LPO or have one within your newsagency business and decide to focus on being a retailer, the length of the agreement could be a challenge.
I’ve had a call from a knowledgable LPO operator this morning and he clarified that the LPO agreement is a lifetime agreement. It’s an agreement that was put in place 20 years ago.
We owned an LPO when these agreements came into being. These agreements offered agents a surety they had never had before in that if Aus Post terminated an agreement they would pay the agent 3 times their gross profit. This is why the conversion rate for LPO went from 1.5 to the 4 – 5 it is now. The only reasons Aus Post could terminate an agreement were if you grew to a size that made them want to make it an official Post Office or for poor management of the business, most notably fraudulent behavior. I do not recall that the agreement stopped you from closing your business but it is what made them an attractive business at the time. Not sure how good they are these days as we sold our last one about 15 years ago.
Correct Mark on your comment.
The issue is that the agreement and the remuneration in it was devised 20 years ago and hasn’t been updated to include items that weren’t thought of then or considered to now be so large a part of the business. Parcels are one part of this. until very recently there was no payment for an LPO to hold and deliver a parcel to a customer if the first delivery by the contractor/Aus Post was unsuccessful. Over that period payments to LPOs are about 80% behind CPI increases.
The senate enquiry has also turned up a couple of “inconsistencies” in the dealing between AP, POAAL and LPOs which may well lead to further action being taken upon senate recommendation. Everyone is waiting with baited breath to see what comes out of the enquiry on the 26th but some elements may be rather rather earth shattering if some of what has come to light is to be believed and proves true. Possible that some will be linked to the recent court cases against AP via Post Office franchisees (not LPOs) that have resulted in undisclosed payouts to the complainents (the franchisees) and serious questions about the ethical conduct of AP in dealing with its franchisees.
As someone who currently owns a Newsagency/Post Office I have to agree with the previous responses that the LPO agreement is somewhat out of date, especially with regard to letters and parcels. As Paul stated above not too long ago we were paid nothing for parcels that would sit in our offices for two or more weeks before being collected by customers. We now receive a small commission for these parcels but it still does not cover the true cost of handling these parcels.
Not everyone may agree with me on this but some of the popular agency services such as Post BillPay and Bank@Post do pay reasonably good commissions and the AustPost Point of Sale system handles these services very easily.