Denmark's PostNord's decision to completely cease letter deliveries by 2025 is today's critical warning for Australian Licensed Post Office (LPO) operators. They also face a worldwide trend of declining letter volumes. What is left of the post there will be done by private companies. If the Danes follow the pattern that Australian media companies did with newsagents, I would not expect much help to their agents when the system privatises.

It's a preview of what lies ahead for our postal system.

Current Australian Postal Trends

Australia Post's letters business has been experiencing an unstoppable decline for many years. I know personally as many of my customers are LPOs.

In the 2023-24 financial year, letter volumes in Australia fell to levels not seen since the 1950s. In 1950 we had only a third of the population!

The statistics are getting worse:

- Domestic addressed letter volume has decreased by 72% from 2006/07 to 2023/24
- Typically households now receive approximately two letters per week, this is estimated to drop in five years to less than one letter per week 
- Letter volume decline has reached 72% from 2006/07,
- Letter volumes are expected to fall by about 10% a year.
- Letter costs are up as there are more delivery points.

"Ask yourself this: When did you last get a personal letter? I cannot remember. I know it was a long time ago."

For LPO operators, these declining letter volumes translate to reduced revenue streams.

Australia Post's Modernisation Response

Since April 15, 2024, Australia Post delivers non-urgent letters every other day rather than daily. These operational changes directly impact LPO operators through altered delivery schedules.

The organisation has now fully implemented its New Delivery Model:
- Posties deliver priority mail, express letters, and parcels every day
- Standard letters and unaddressed mail are delivered every second day
- Australia Post is increasing its postage charges.

Finding Opportunity in Disruption

Despite these challenges, LPO operators have a significant opportunity as there is a growing parcel delivery business driven by e-commerce. When ever I go to my local LPO, I can see a lot of traffic.

Strategic Adaptation for LPO Survival

To thrive in this changing landscape, Australian LPO operators must consider the following strategies: Like newsagents, they must offer other goods and services. What works well in LPOs are complementary business lines that sell more to existing customers, such as greeting cards, packing supplies, office supplies, and printing services.

Looking at the business for sale figures, you can see that many LPOs are doing well. 

Looking Ahead

The future of postal services in Australia will look very different. LPO operators must embrace change.

About the Author

As founding Director of POS Solutions, I've spent over four decades providing point-of-sale software solutions to retail businesses across Australia, including numerous Licensed Post Offices. My company has been a major supplier of POS systems to newsagencies, pharmacies, and specialty retailers, giving me firsthand insight into the operational and financial challenges these businesses face.

Throughout my career, I've witnessed the digital transformation of retail and postal services and helped hundreds of business owners adapt their operations to changing market conditions. My experience working directly with LPO operators has provided me with unique insights into their revenue streams, operational challenges, and adaptation strategies.

Much of the statistics cited in this article come directly from Australia Post's Annual Reports (2023-24) and industry briefings I've attended as a service provider to the postal retail sector. 

Retail surcharging on public holidays sparks much debate. It's not for every business, but let's explore this complex issue.

What is a Public holiday surcharge?

A public holiday surcharge (retail surcharging) is an extra fee added to a customer's purchase to cover increased costs on the public holiday. It's gained more attention lately, especially on public holidays, with the astronomical growth of salaries.

Although it is commonly seen as an issue in hospitality and service industries, it does come into other sectors. For example, I recall a heated debate when newspaper companies introduced Sunday papers. Many newsagents argued that newspapers should have a consistent price daily, viewing them as products, and doubted customers would pay more because it was Sunday. Despite this pushback, the newspaper companies implemented a higher Sunday price. This higher cost is part of the reason Sunday newspapers sell less.

The Rationale Behind Public Holiday Surcharges

Cost of Labour

Businesses face significantly higher labour costs on public holidays. Today, the average hourly rate for a shop assistant in Australia is $30.38. You could look at 250% of the base rate for full-time and part-time employees at public holiday rates. Using this average hourly rate of $30.38, you can estimate that $30.38 x 250% = $75.95 an hour on public holidays.

It's a lot of money that can quickly eat into your profitability. This is why many shops close on public holidays. Many of my clients work themselves on those days; otherwise, it's not worth it to open.

The Balancing Act

Implementing a surcharge is about more than covering costs. It's about finding a delicate balance between:

• Staying open to serve customers

• Covering increased operational expenses

• Maintaining profitability

• Not upsetting customers

The Nuts and Bolts of Surcharging

Surcharge Rates: Finding the Sweet Spot

In my experience, most businesses charging surcharges use 10% to 15%. If you levy 10%, you might as well go to 12.5%. If you will make it 15%, I suggest considering 17.5%.

Although I have seen it, I think 20% to 25% is too high for most customers.

Retail surcharge laws

I am unaware of any legal limit on surcharge percentages in Australia. However, businesses must display the surcharge, e.g., at the point of sale, as they must disclose prices, including surcharges.

Besides, it's critical to maintaining customer trust.

Industry Variations: Who's Surcharging and Who's Not

Where You'll See Surcharges

Surcharges are most common in the hospitality sector. Restaurants and cafes often lead the charge due to high labour costs and the expectation of being open on holidays.

Where You Won't See it.

You're unlikely to see surcharges in many other sectors, including:

• Essential services

• Public transportation

• Online services

• Banks

• Government services

The Customer Perspective: What's the Verdict?

In my interactions with my clients, they have reported to the public a range of reactions to surcharges:

• Some flatly refuse to pay it.

• Many accept the necessity, especially if the surcharge is reasonable.

The Role of Technology: How POS Systems Can Help

As someone now in the POS software business, I can't stress enough how important the right technology is in managing surcharges effectively. Our POS System has a function that allows you to charge the surcharge.

In the cash register

You can make the surcharge here as a percentage or amount; it is your call.

As it automatically calculates, it reduces the chance of human error, so you can change any figure you like, e.g., 12.5%, which is hard to do manually. More about 12.5% later.

• Display surcharges on receipts and customer-facing screens

• Provide reports on surcharge revenue to help with decision-making

• Offer flexible options for implementing different surcharge strategies so you can do what we call an A/B strategy, say, charge 10% this public holiday and 15% on the next and then compare the results.

Note:

-If you have a customer who objects too much to the surcharge, you can choose not to charge them for this transaction.

Clear Customer Display

Our POS systems with customer-facing displays will clearly show enhanced transparency.

Detailed Reporting

Our advanced reporting features can help businesses analyse the impact of surcharges on sales and customer behaviour.

Conclusion: Finding Your Balance

As retailers, we need to balance our operational costs with customer satisfaction. My advice? Whatever approach you choose:

1. Be transparent

2. Be fair

3. Always prioritise your customers' experience

FAQ

Q: Can businesses charge a public holiday surcharge?

A: In Australia, you can legally charge a public holiday surcharge.

Q: What is the average public holiday surcharge in Australia?

A: The most common range for public holiday surcharges is 10% to 15%

Q: What is the public holiday rate in retail Australia?

A: Public holiday penalty rates for retail employees are typically 225% to 250% of their base hourly rate.

Q: Can you charge a weekend surcharge?

A: Yes, you charge weekend surcharges.

Q: Why do businesses implement surcharges?

A: Generally, businesses implement surcharges to offset increased costs, notably higher labour costs due to penalty rates on public holidays and weekends.

Q: Consumer rights regarding surcharges?

A: Consumers have the right to be informed about surcharges before purchasing, so businesses must display surcharge information.

Q: Alternatives to surcharging for businesses:

A: Not many.

• Absorbing the additional costs

• Raising regular prices to account for occasional higher costs

• Closing the shop

Note: I am not a lawyer, so you may consider getting proper legal advice before proceeding.

Usually, on Australia Day, I would share a cheerful greeting about what a wonderful country Australia is and how proud I am that we're an Australian company serving great Australian customers. 

But celebrating Australia Day has become controversial especially after Woolworths surprised us when it announced it would stop selling Australia Day merchandise.  While they claimed it was just a commercial decision due to declining sales, I'm sceptical. Even if dropping the merchandise was a business move, publicising it seems political to me and many others. After all, other retailers, e.g. ALDI, who pulled Australia Day items, did so quietly without making announcements. 

A holiday meant to unite us in celebrating our beautiful, diverse country has become politicized. And I think there are lessons here for retailers.

Woolworths said its decision to end its Australia Day celebratory products was due to lagging sales. Perhaps so. Few would have cared if the merchandise was available at Woolworth's; when I looked at the shops in my shopping centre, many stocked such items. Now, many do care. It will cost them both financially and in goodwill.

This illustrates what I've said for years - business and politics don't mix. It isn't a company's role to get involved in politics. 

What do you think about businesses getting involved in politics? I welcome your perspective.