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Postal services play a complementary role on Amazon as e-commerce is booming during the pandemic, according to the head of the Irish Postal Service.
David McRedmond, managing director of An Post, told CNBC that the accelerated demand for supplies from online sales has made room for a number of different players.
Amazon expanded its e-commerce presence in Ireland, and the tech giant rented its first delivery warehouse in Dublin in April. The 70,000 square foot delivery station will work with local delivery companies to meet demand.
While Amazon's data center business has a strong presence in Ireland, it is the first time that Amazon has been hired to process online orders directly in the country.
"Amazon is one of our biggest customers, so we ship a lot for Amazon. Setting up your own delivery through Amazon is competitive to some extent, but actually complementary," said McRedmond.
"There is actually so much volume coming through that it is entirely possible to work in a complementary manner."
McRedmond said An Post is very familiar with delivering to areas Amazon may not be able to reach as the postal services serve all areas of the country.
"We are fantastically efficient when it comes to handling large volumes. Someone like Amazon or one of the e-tailers initially says that they are developing the capacity, you have to have the capacity and, to be honest, the capacity would not be without the postal services" , he added.
In the past, according to McRedmond, postal services were tied to old methods, such as the delivery of fixed mail for letters, which has evolved into a dynamic routing to meet the growing demand for parcels.
Last year, An Post opened a new “parcel hub” in Dublin for 15 million euros (18 million US dollars) with a high investment in the automatic sorting of deliveries.
The e-commerce trend was in the game before Covid-19, but the pandemic outbreak has accelerated the trend.
"Letter volume is decreasing and parcel volume is increasing through e-commerce. What happened with the pandemic is that we are almost two years ahead. We are now seeing volume growth in parcel that we didn't expect for another two Years, "said McRedmond.
Technology investments like automation now account for 25-30% of An Post's investments, compared to 10% two years ago, while they made significant investments in sustainability by replacing fleets of delivery trucks with electric vehicles.
While McRedmond is optimistic about postal services, An Post has tried to diversify its business in recent years by moving into financial services and renewing its cellular network.
The An Post Money brand was launched in early 2019 to bring all financial services together under one roof. This includes checking accounts, loans, credit cards, and prepaid currency cards. In 2015, Cell Phone Service, a division that has had problems in the past, was renamed An Post Mobile and targeted a younger customer base with affordable phone and data plans.
A post reported a pre-tax profit of 66.3 million euros in 2019, which was supported in particular by the sale of its gift card business to Blackhawk Network. It was the third year in a row that the company was profitable.
An Post announced the results in April and expected a "substantial decline in sales" as a result of the coronavirus. However, he insisted on being able to withstand the crisis and stick to his digitally focused investment strategy.
McRedmond told CNBC that Ireland has overcome the initial challenges of Covid-19 but that the pandemic recovery will take longer than initially thought.
"We're now at a point where it actually looks like it's going to be a longer game. The pandemic is going to be here longer and we have to work our way through," he said.