The competition among the globe's largest logistics vendors is about to heat up, with Japan Post Holdings' announcement it plans to make additional large acquisitions following its $5 billion purchase last year of Australian logistics provider Toll Holdings, as the Wall Street Journal reports:
“Stamps won’t generate profits and delivery services are getting even more competitive so mergers and acquisitions or alliances with others seems to be the only way to boost revenue,” said Masatsugu Nagato, who was appointed last month to succeed 80-year-old Taizo Nishimuro.
Mr. Nagato, who served as president of Japan Post Bank Co. before taking on his current role, said in an interview that he would consider both domestic and international deals in logistics and parcel delivery.
The purchase of logistics company Toll Holdings was the first major acquisition for the government-owned behemoth, which runs 24,000 post offices across Japan, as well as the country’s largest bank by deposits and one of its biggest insurance companies. The deal vaulted Japan Post to No. 5 globally in logistics revenue at the time.
Analysis: Japan Post's Plans Come As Logistics Market Braces for Change
Fast-rising e-commerce revenue, particularly in the Asia-Pacific region, is one obvious reason Japan Post wants to expand its footprint in the market. There are simply going to be many more packages that need to be delivered each year moving forward. Moreover, rising consumer expectations over what types of items can be delivered and how quickly is placing pressure on the overall logistics market. The companies that can stitch together the best networks, assets and alliances will win.
Still, now that Japan Post has so clearly signaled its intentions, larger global competitors such as FedEx, DHL and UPS could conceivably look to make acquisitions of their own, or compete with Japan Post for prime targets.
"Scale is how you protect your margins," and Japan Post's plans are another example of that, says says Constellation Research VP and principal analyst Guy-Frederic Courtin. "They're saying hey, we can't just rest on our laurels and service our domestic market."
Beyond simply growing top-line revenue, as part of its expansion plans Japan Post could start providing customers, particularly bulk ones, with new options.
For example, today container ships arrive at West Coast U.S. ports, with containers then typically shipped by truck or train to a warehouse. Once at that destination, the contents are broken down.
But let's say a customer wants the goods to arrive at their final destination more quickly. "Can you do something where you distribute straight from the ship, break bulk right there because I paid a premium?" Courtin says. "I'm not saying the UPS or FedEx model is wrong, but what if it makes more sense to ship something directly to you from the port of entry as opposed to a distribution center in Lexington, Kentucky?"
"The need for fulfillment hasn't slowed down, it's only accelerated," he adds. "It's flexible fulfillment that's now needed."
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