Its innovation is prompted by evolving market dynamics, changing consumer preferences and to align with industry trends
by NURUL SUHAIDI
Pos Malaysia Bhd is adeptly navigating the nuanced landscape of parcel and mail delivery, actively seeking innovative business opportunities amid the challenges prevalent in the industry.
To mitigate reliance on traditional mail and parcel services and stay competitive in a swiftly transforming market, Pos Malaysia is strategically diversifying its business portfolio.
Recognising challenges in the parcel and mail delivery sector, the company is proactively embracing diversification to uncover fresh business prospects, optimise its extensive asset network and establish a robust and sustainable business model.
This strategic shift is prompted by a keen response to evolving market dynamics, changing consumer preferences and the imperative to align with industry trends.
Pos Malaysia’s diversification strategy is marked by a purposeful expansion of its revenue streams, leveraging its existing asset network to implement four key initiatives that enhance value creation.
These initiatives include an expanded retail footprint, the introduction of Pos Shop convenience stores for diversified retail offerings, foraying into fulfillment services through Pos Fulfill and making a notable presence in the international shipping market with Red Express.
This multifaceted approach underscores the company’s commitment to adapting and thriving in the face of industry evolution.
In an exclusive interview with The Malaysia Reserve (TMR), Pos Malaysia group CEO Charles Brewer shed light on the company’s transformative plan — the Pos Malaysia 2.0.
A pivotal aspect of this initiative involves a strategic expansion of the retail footprint. Brewer emphasised innovative strategies such as leasing and subletting assets to generate income and enhance the outlets’ network.
With about 3.64 million sq ft of retail spaces and 628 strategically positioned post offices nationwide, Pos Malaysia envisions a paradigm shift in the role of these spaces.
The transformative vision positions retail outlets as dynamic hubs, catering to diverse customer needs.
“We’re leveraging our retail presence to offer more than just postal services,” Brewer said.
By strategically expanding its footprint, Pos Malaysia aims to transform each retail outlet into a multifunctional space, providing unparalleled convenience and a comprehensive suite of services under one roof.
Pos Malaysia’s goal is to be the quintessential one-stop destination for customers, delivering unmatched convenience through a broad spectrum of services.
This commitment reflects Pos Malaysia’s proactive stance in adapting to evolving market dynamics.
The company has initiated collaborative ventures, such as partnering with the homegrown coffee brand Bask Bear, resulting in the first drive-through coffee and toasties outlet in Malacca.
This venture enhances the retail experience and exemplifies Pos Malaysia’s commitment to forging innovative partnerships for mutual growth.
Pos Shop: Transforming Post Offices into Versatile Hubs
Pos Malaysia’s diversification journey includes Pos Shop, a groundbreaking initiative aimed at reshaping the role of post offices into versatile hubs.
The goal is to elevate the retail experience, turning post offices into comprehensive service centres beyond conventional mail and parcel services.
The introduction of Pos Shop convenience stores involves a careful curation of offerings, expanding beyond the traditional scope of postal operations.
Pos Malaysia envisions its post offices becoming the go-to destination where customers can conveniently access a multitude of offerings.
“Pos Shop is our way of responding to the evolving needs of our customers. We want our post offices to become versatile spaces where individuals can not only send parcels or letters but also explore a range of products that enhance their daily lives,” explained Brewer.
Efficient cost management is a focus, achieved by maximising existing assets.
Brewer highlighted the success of this model, emphasising its profitability compared to traditional convenience stores.
Pos Malaysia plans to expand the Pos Shop concept, with six more outlets expected by the year-end and a long-term target of 50 outlets.
This expansion aligns with the broader industry trend of postal operators leveraging their retail footprint to enhance customer experience and drive additional revenue streams.
Innovation in the Fulfillment Services Sector
Pos Malaysia’s third pillar of diversification is Pos Fulfill, a foray into the growing trend of fulfillment services.
Brewer explained that the Pos Fulfill concept is about repurposing existing post office spaces to provide storage solutions for direct-to-consumer brands.
This innovative model optimises underutilised space and creates a new revenue stream.
“We’re harnessing the potential of our existing post-Malaysia space, introducing racking and shelving, and extending these facilities to direct-to-consumer brands.
This model, although relatively new, approximately six months old, has proven to be highly successful, attracting around 14 customers already,” Brewer highlighted.
Pos Fulfill seamlessly complements PosLaju’s last-mile services, positioning itself as a comprehensive one-stop solution provider for both business-to-business and business-to-customer industries.
At present, Pos Fulfill operates over 200,000 sq ft of warehouse space in Shah Alam, Klang, Kuala Lumpur and Kota Kinabalu.
This initiative represents Pos Malaysia’s forward-thinking approach to meet the evolving demands of the industry.
Red Express — Pioneering the Global, Asset-Light Frontier
In its fourth diversification move, Pos Malaysia introduced Red Express, an international shipping product operating on an asset-light, digital paradigm. Brewer explained that Red Express connects points A and B using technology, eliminating the need for owning planes or delivery vehicles.
“It’s a very efficient and cost-effective model,” Brewer stated.
The unique aspect of Red Express lies in its minimal reliance on physical assets, providing a streamlined and flexible international shipping solution.
Red Express positions Pos Malaysia in the global logistics market, offering scalability and the potential for expansion beyond its current Malaysia-centric operations.
This approach aligns with the company’s broader strategy of leveraging technology to enhance global reach.
Navigating Market Challenges
While Pos Malaysia propels itself into new avenues, a recent report by Kenanga Research provides insights into the current challenges faced by the company.
For the first nine months ended on Sept 30, 2023, Pos Malaysia’s results disappointed with a wider-than-expected net loss of RM76.7 million.
The underperformance is attributed to poor cost containment and challenges in the postal and logistics segments.
Revenue fell 6%, driven by a decline in postal and logistics services, offset by a recovery in aviation.
The inability to contain operating expenses (opex) led to a 34% increase in core net loss. Quarterly results, however, showed a marginal decrease in revenue with recovery in postal and aviation services but weakened logistics and other services.
Kenanga Research predicted a continued net loss, prompting a 3% reduction in the target price to 38 sen.
The research house maintains an ‘Underperform’ call on Pos Malaysia, expressing caution due to challenges in the conventional mail and courier businesses, as well as doubts about the effectiveness of cost-cutting measures.
It noted that the recent venture into Pos Shop convenience stores, but concerns exist about the gestation period for achieving operational efficiency.
Pos Malaysia acknowledges these challenges and is doubling down on its diversification strategies, seeking to reduce reliance on traditional mail and parcel services.
Harnessing the Power of Technology
In an era defined by digital transformation, Pos Malaysia under the leadership of Brewer has strategically positioned itself at the forefront of innovation by embracing technology for operational efficiency.
This commitment to technological advancement is not merely a buzzword but a fundamental pillar of Pos Malaysia’s diversification strategy.
Throughout the insightful interview, Brewer underscored the paramount importance of leveraging technology to propel operational efficiency within the organisation.
A key facet of this strategy involves the seamless incorporation of automation into Pos Malaysia’s facilities.
This deliberate move towards automation aligns with the broader objective of streamlining processes, reducing operational complexities and enhancing overall efficiency.
An intriguing aspect highlighted by Brewer is the company’s distinctive focus on making technological investments from an opex perspective rather than a capital expense (capex).
This strategic choice reflects a forward-thinking approach to financial management, wherein Pos Malaysia actively seeks operational expenditure opportunities over capital expenditure.
Brewer elucidates on this approach, stating, “We look for opex opportunities versus capex opportunities. We found creative solutions, opex solutions, to a capex problem.”
This financial strategy is not confined to technology alone but extends seamlessly into sustainability initiatives.
Pos Malaysia has strategically forged partnerships that facilitate the implementation of eco-friendly solutions, such as the integration of solar panels on buildings and the adoption of electric vehicles (EVs) in the fleet.
What makes this approach noteworthy is its ability to align sustainability goals with financial prudence, ensuring the company embraces environmentally friendly practices without creating an undue strain on capital resources.
Brewer articulates the significance of this dual-focus approach, emphasising, “It’s about finding that delicate balance between technological innovation, operational efficiency and financial prudence.
“We want to invest in technologies that enhance our capabilities without burdening the organisation with excessive capital expenses,” he added.
In essence, Pos Malaysia’s commitment to leveraging technology for operational excellence extends beyond mere rhetoric.
It is manifested in a deliberate and pragmatic approach to adopting automation, exploring innovative solutions and striking a balance between technological innovation and financial prudence.
- This article first appeared in The Malaysian Reserve weekly print edition