Transcript
Simon Dell: Welcome to the Cemoh Marketing Podcast. We have on the show today Mark McGinley, who is the CEO of CouriersPlease. It is fantastic to have you on the show, so thank you very much for joining me in the car today. I know you're a busy guy. We really appreciate you being on the show. Mark McGinley: I'm not driving, Simon. Just thought we should make that clear. Simon Dell: Right, thank God for that. God, that could have been awkward. And for those who may have guessed very quickly, you're obviously in Australia as the CEO, but you've come a long way from Ireland. There was a bit of Wales in your background. How did you end up in Australia? Mark McGinley: Yeah, my brother has lived in Australia for maybe 30 years. We come over for the Millennium in 2000. Had a fantastic time, then we came back the end of that year for the Sydney Olympics, and then it was unbelievable. So, I think we got a bit of a false sense of the traffic, et cetera, certainly at the time, but the people were so friendly, the climate. And we were 40 years of age, with three kids, myself and my wife had our own businesses in Belfast. We ran a small chain of restaurants, had a small wholesale business. So, we've all been small businesspeople. We decided there and then that we would up sticks. I mean, Belfast is a tough city. It's improved a lot since then, but at that time, pretty tough working conditions as well. And when you're running cafes and restaurants, and we opened up a new restaurant in an area where all of a sudden people were rioting outside the door, and it really impacted us. It's not good for business. We upped sticks and came to Australia with the intention of starting our own businesses up in Australia. That was a lot more challenging than we thought. We were looking at importing and exporting, the fees, the duties, the taxes, when you start to look into that sort of thing. Employing people is not easy in Australia as well. So, that was the decision to uproot the family to come to Sydney. And then after a while, six months or so of trying to start my own business, my next-door neighbour was the CEO of CouriersPlease at the time. He said, "Look, there's an operations job done there. It'll keep you going for a few months." [INAUDIBLE 00:05:31] 18 years, actually. So yeah, I started off, had more experience of logistics as such. And obviously, e-commerce, as we'll talk about later, hadn't really kicked in in Australia during that time. So, I joined the CouriersPlease. So, at that time, CouriersPlease was owned by New Zealand Post. It's a franchise-based, last-mile courier, at that time traditional courier company. The growth has been amazing. They were run by New Zealand Post until 2011. Between 2011 to 2014, CouriersPlease was part of a joint venture between New Zealand Post and DHL, and it was sold to Singapore Post in 2015. So, it's a 100% owned entity of Singapore Post. I've been there all that time and just seeing the transformation and growth has been phenomenal. So, the reason I never left was because things kept changing. First off, I started off on operations, and then in 2006 was made national sales manager. And in 2011, national commercial manager. I've been CEO for the last six years, so I've moved through the organisation. The organisation has grown. The market has grown. It’s a very, very challenging market, Simon. I'm sure we'll talk later about it, but it also has a lot of innovation in last-mile logistics and e-commerce. [INAUDIBLE 00:07:09]. Simon Dell: Just from your own personal career, that moment you became CEO in 2016, was that something you'd put your hand up for, or was that someone just sort of tapped you on the shoulder? Was it a surprise or was it something that you were working towards? Mark McGinley: I was basically number two at the time, national commercial manager, working closely with the CEO. And when he left, I got tapped on the shoulder. And so, I didn't really apply for the role. The CEO of Singapore Post at the time rang me and said, "You would be interested in this role?" It didn't take me long to say yes. It was a very quick process. Interestingly, it had to remain confidential for six months. So, those were stressful times, six months of not being able to tell anyone that I have become the CEO. It's just the politics at the time and whatever. So yeah, that was interesting. All these roles, sometimes you don't think you're ready for them until you start to do them, and then you just grow into them. I've worked with a lot of really good people over the years, and a lot of not so good people who are in really good positions. And I have come across other companies or other organisations, and you wonder yourself: How did they get... Everyone has their own style, and I've learnt a lot from a lot of people of work I've worked with, but I've seen what doesn't work as well. Simon Dell: Have you changed as a person moving from more of a management role to the leadership role? What's maybe the one thing you've noticed in yourself change over that process? Mark McGinley: You do less of a hard work. The presentations, the research, you evolve into directing people and do all the hard work for you, you know. If anyone ever asked me advice around leadership, one of the main things is get quality people. I mean, I'm blown away by the quality of people that I work with. They make you look so good. They're passionate, motivated. You get those sort of people in your organisation, they'll just grow the organisation for you. So, the biggest difference was, as I said, in the early days, you were putting ideas together and then you had to put business cases together and do a lot of the hard work. But if you're doing the CEO role right, your role is more leadership, vision, culture. You need to get away from that micromanagement. Because I was in sales and commercial, that worked well for our organisation because I was still able to go out and sell to customers, meet customers. It was a really important part of the role. I'm not an IT expert. I'm not a CFO. So, I got really good people that can do that and I trust, and I don't need to interfere with what they do. I don't need to interfere with it. I'm good at selling, I'm meeting customers, which is what I enjoy doing. That's what I see you should be doing anyway. It worked really well. Simon Dell: The organisation is a franchise-built, isn't it? How many franchisees do you have at the moment? Mark McGinley: We've got 900 franchisees. Let me talk later about the COVID growth. Last year was unbelievable. We've currently got 900 franchisees. We were originally a contract model, and the ACCC looked at us around 2011 maybe and said, "Look, you're operating like a franchise." We were the largest transformation of a contractor model to franchise model in Australian history at that time. We migrated 650 people to franchisees and we're a very proud franchise business. We are a logistics business that happens to be franchise-based. Our main focus is logistics, and we used the franchise model to do that. So, our franchisees operate within their own designated territory, and they earn their income from picking up and delivering parcels within that territory. So, the harder they work, the more money they earn. We have a lot of businessmen, maybe 3 to 4 vans, put on extra employees, and we have a lot of commercial, entrepreneurial type franchisees.
It's a great business model because they're a small business supporting small business, and they work really well with our customers. Same face every day, and they're really motivated to grow the business. It's a really good model. Simon Dell: And I guess franchises certainly in Australia have had a bit of a kicking in the last two or three years, and everybody talks about the bad franchises who aren't doing the right thing and all that. But very rarely people talk about the good franchisees or the good franchisors. Presumably, you must have some very successful people working and making good money as a franchisee for you guys. Mark McGinley: The one difference between us and I think nearly any other franchise business in Australia is we have a minimum earnings [INAUDIBLE 00:12:47]. So, most franchise businesses - and I have a lot of experience in franchising. I was a franchisee in the past, I've been a franchisor, and you buy into a system. Say a coffee shop, you buy into the system, and then the corporation, the franchise owner will help you with location, marketing, et cetera. But then your success, a lot of it is just down to you. Sometimes, you don't necessarily turnover enough money to make that business sustainable, you're relying on family members, typically. It can be a really stressful experience. Whereas CP, if you fall beneath a certain threshold, we will top you up financially. The difference between us and like a coffee shop franchise, or a restaurant, or lots of others, they're not a network [INAUDIBLE 00:13:48] businesses. We need all our franchisees to be successful or the network collapses, [INAUDIBLE 00:13:55] no one delivering parcels in a certain area, it impacts everybody. That's the big difference between us and other franchisees. Don't get me wrong, e-commerce has really impacted negatively our business model because we're actually selling - our average price is probably half of what it was 20 years ago. 20 years ago, our franchisees would be charging $12, $13 for a parcel [INAUDIBLE 00:14:28] Sydney. The average price is probably half that now. So, our franchisees and us as a company are working three to five times harder for the same money due to the rise of e-commerce and the rise of Amazon. The biggest change since I've been at CouriersPlease is the rise of e-commerce and consumer expectations. Consumers want choice of location, they want choice of time. "I want a twilight delivery, same day, next day. I wanted a locker. I want it picked up from my home delivered to my work." They want all this choice, but the one thing they don't want to do is pay for it. We are actually in a business where no one actually wants to pay for - a lot could go wrong. And then the social media abuse is off the scale. So, the challenge for carriers like CouriersPlease and others is to make those expectations. We're on no illusion that if you want to stay in this business, you have to meet those expectations. You can't complain about it. That's the reality. You just have to provide a better service. When you provide a better service, you can charge more for it. Whereas it's free, something has to pay for it. And typically, it's the retailers. So, the retailers would have to absorb that into their cost, but then the retailers put that pressure on us from a price point of view because they really struggle to absorb some of this pricing. And you see that quite typically in e-commerce, and [INAUDIBLE 00:16:12] like Amazon especially. Simon Dell: Do you think consumer expectations are changing slightly? I feel that maybe three, four years ago, they were very demanding in terms of time and costs, but are they getting a little more relaxed? "I don't mind if it takes two or three days to get to me. I'm a bit more flexible about where it's delivered." Because you've seen the rise of all the dropping points and all those kind of things. My wife always seemed more comfortable with saying, "I'll go and pick it up from the post office. It doesn't really bother me." Do you think that's changing slightly or do you think the consumer's getting even more demanding? Mark McGinley: I think what they want is consistency. It's not about the speed. Yes, there is a market for same-day deliveries and urgent deliveries. One of the reasons people select that option is because of the certainty of it. It's the most likely way that they'll get something in a timely fashion, but they don't really need it that urgently. What they want is when you say you're going to deliver it, you deliver it. It could be in that day, three days, it doesn't matter three days as long as... When you say it's coming Thursday, it comes in Thursday because people are making plans. If you leave it at the door, they want to be comfortable that they're going to be back in a certain period of time. The collection points that you mentioned, we partnered with a company called HUBBED who've got over 2,000 collection points, and we are really trying to encourage consumers to use these collection points because for a number of reasons, one is sustainability. We've got data that shows it's about a 36% improvement in CO2 emissions because our data shows that consumers were going to go there anyway to these collection points as part of the journey. That's a trip saved. It doesn't really make sense for CouriersPlease or other couriers to deliver 20 to 30 residential deliveries when all 30 could be delivered at one point. So for us, we do get a financial benefit because there's consolidation. The consumers get the benefit because it'll get there quicker, and it's a good experience. We're not leaving cards. There's no dispute over where the parcel was left. [INAUDIBLE 00:18:41] It's a safe drop off, and then the third thing is sustainability. And that's a huge trend in our industry at the moment. You talked about consumer expectations. I mean, we've seen a lot of data that consumers will invest in sustainable solutions, buy sustainable products, and are looking for a sustainable delivery service as well. So, that's a big pillar of our strategy at the moment, is our sustainability strategy. But yeah, consumers, I think it's more that they want consistency, not necessarily speed. Simon Dell: Talk to me then about how the business changed last year. Obviously, COVID must have been fantastic for you or a complete nightmare, I mean, one or the other. What happened and how did you adjust to that? Mark McGinley: Every cloud has a silver lining. Initially, there was a lot of uncertainty in the market. Would we be allowed to trade? Are we an essential service? So, our first priority was our staff and our franchisees. So, the first thing we did was we just made everyone work from home with immediate effect, even though we haven't got the connectivity on day one or we hadn't got all the necessary equipment that you needed on day one. We just made sure that we start there, and then our IT people work weekends and nights getting connectivity. We furnished them. People were taking their chairs, their monitors home with them. We were always a pretty flexible company pre-COVID. We had people working from home certain days. We had people, one lady who works for me starts at 4:00 in the morning because it allows her to pick her kids up at three. All the people were coming at 10:00, leaving at 6:00. So, we were always a really good, flexible workplace and we continue to do that. Actually, what we're doing now around work from home is more the mental side of things. We know physically that you can do your job, but there's a lot of studies around the mental struggles, people working in isolation, no connectivity, they may be new to the business, maybe their home situation isn't ideal to be working, young kids, or there might be a carer. So, that's what we're going now, is the mental side of working from home. We're quite committed to the flexible workplace. We're actually only mandating that you come to the office two days a week. We try to make that the same two days so people can - that's the whole point. You're connecting. You can bond. So, that was the first thing we did around our staff. And then the franchisees, we had to make our [INAUDIBLE 00:21:38]. We did things like - we had to stagger shift time so we haven't got too many people in at once. We sourced very quickly masks and hand sanitizer to which we provide. We still provide free to all our franchisees, during the Victorian lockdown, we provide masks three times a day. They're not designed to be used consistently, so we had van sanitation centres set up around all our locations. We introduced contactless pickups, contactless deliveries. And one of the best things we did was we also give financial support. We introduced a new type of leave which was COVID leave. That was for all staff and franchisees to get tested. We didn't want people being the hero and coming into work because they've got a cold. If you are a franchisee, your livelihood depends on you working. We didn't want people coming in, saying, "Well, if I don't come in, I'm going to lose money." So, we provided that financial support to everyone to make sure they were safe and they were doing the right thing. That worked really well. The last thing we did was we introduced private testing. So, during one of the many Victorian outbreaks, we got in COVID testers, and we were able to test 250 people in one morning, get the results at night. So, it allowed us to continue working and give the franchisees and staff comfort that we were a COVID-free organisation. That was on that side, and then the growth. We grew 80% last year. We're three to five years ahead of where we thought we would be. During the Victorian lockdown, when you talk about the Victorian COVID, some people think they did a great job and others don't. I'm not here to criticise him, but anyway, our growth was 80% Actually, in Victoria, it was 120% more than the previous year. But we have 30% less staff to do it because the government didn't want any more people in those facilities. They didn't want us stop yet there anymore. But you're talking about leadership and the way our team in Victoria stood up, they were working night and day getting the premises cleaned three times a day, deep cleaned at night, operating and delivering those parcels without missing a beat throughout that time was phenomenal. We introduced, and we still got them today, our BCP calls. Every morning 9:00 o'clock now, we've got a national call. In the early days, they lasted an hour, an hour and a half around what should we do about masks, what do we do about this. Now, it might only last 10 minutes, but it was really effective for making quick decisions. The whole team could react to it. If there was a delay in line haul, if we had to close a depot for deep cleaning, what are we going to do about it? And everyone was able to make really quick decisions. And that was one of the most effective things we did at that time. The leaders that just came through that was phenomenal. At the time of crisis, you could really see how good some of your team are. A lot of leaders grew out of that, getting back to growth. We opened up six new facilities to cope with the growth. We had 200 extra franchisees, we grew our staff by about 200. We invested millions of dollars in new software and technology, our franchisees be more efficient. We had to buy more - and you couldn't get half this stuff. It was a balance shortage. Anyway, we [INAUDIBLE 00:25:35]. And we did a phenomenal job all year. Where we really struggled, and it was the lesson learned for next year, was the cyber weekend. That just killed us. We did not perform well as we should have for those two or three weeks leading into Christmas. [INAUDIBLE 00:26:02]. We couldn't put it anywhere. And certainly alone, we had to hire three pop up facilities just to put the [INAUDIBLE 00:26:09]. And we had spent months and months planning for the volume. So, we got all our major retailers, what do you expect to do, what's peak? Give us a number. We would add 30% onto it. One retailer planned to give us about a quarter of a million parcels in a month. They gave us 360,000 parcels in two days. Simon Dell: You can't plan for that, can you? Mark McGinley: Not a pleasant experience for anyone working for CouriersPlease, and it wasn't a pleasant experience for our consumers. We did apologize at the time. And by the way, Simon, this is a global problem. It wasn't just us. Amazon in the US had to switch off. Fulfillment by Amazon, they'll deliver on behalf of sellers. They stopped doing that. FedEx stopped taking extra customers on. UPS, and the same with Australia. The freight was backed up onto the streets, and all the couriers in Australia. It was a really tough time. And we've spent ever since then, we're planning on this peak to make sure it doesn't happen again. So, we're going to invest in more facilities, more franchisees, more drivers. But to scale up for that sort of volume, I mean, cyber weekend was 120% more than the year before. And a lot of bricks and mortar retailers have pivoted from 10% of their sales were online last year to about 50% online. Simon Dell: Just on that note there, do you see a growth in any particular category? You guys don't necessarily understand what's in every package, but I guess you kind of get an understanding of where that growth is coming from. Do you have any particular areas that you see changing, fashion or electronics? Mark McGinley: Prior to COVID, it was traditional, fashion, electronics. The big trends that we see, maybe slightly short term was equipment. Obviously, more people working from home, renovation sector has gone through the roof. Sportswear, sports goods was another one that went through the roof. The big two, we're not really in this space, is alcohol and food. So many people are ordering their alcohol online. Obviously, their groceries online too, companies like Woolworths and Coles. So, they have grown massively, at all rows, Simon, I mean, I think Australia Post stats showed there's a million new addresses that they were delivering to last year. A lot of those people will stick to it. Stick online. Simon Dell: Have you seen that trend continue? It's not slowing down? Mark McGinley: No, and it hasn't dropped. It slowed down but it hasn't dropped to the level it used to be. So, it's still 40% more than it was a year ago, but it's not growing double digits from there. It's more like it has calmed down, but more people are shopping online. And as they get more comfortable with it, I think it's only going to go one way. We're way behind other markets like the US and the UK as a large percentage of online sales. But it's always going to be an omni-channel experience. People love shopping. They love [INAUDIBLE 00:29:36] goods, and what you see and what we're seeing with all our major retailers is trying to merge their online and bricks and mortars together and give that holistic consumer experience. And that makes perfect sense. Simon Dell: Absolutely. There's two more questions I wanted to ask you. I think the first one is, you talked about sustainability and all those kind of things. I want to think about sustainability in technology. Where does the delivery industry move to in the next 10 years? There's a lot of talk about drones. There's a lot of talk about electric cars. There's a lot of talk about autonomous cars as well. Are they realistically things on your horizon, or are you just taking them all which a pinch of salt? Mark McGinley: Two of those [INAUDIBLE 00:30:28] right now. There is a user case for drones, again, remote medical deliveries, shop-to-shore deliveries, definitely very, very niche. There's no way there's going to be masses of drones flying over Sydney for security reasons. There's just a million reasons. So, we're not focusing on drones, a bit of a novelty in our industry. That last mile delivery. Autonomous vehicles, they're trialling that in certain places, [INAUDIBLE 00:31:03] in Sydney. There is a person falling behind it. So, [INAUDIBLE 00:31:10]. The one for us, the obvious ones that we can do is, our operation is carbon-neutral and we're looking to offset our fleet by 2030, but that's just offsetting. That allows us to continue to do what we're doing. The technology we use around fleet optimisation and route optimisation certainly makes us - I think it's about 30% more efficient, so there's a efficiency there. Using the collection points, as I said earlier... In Poland, 80% of all deliveries are delivered to lockers. We've got a very low adoption of lockers in Australia so far, but that again, that's a more sustainable solution. We've got micro hubs at the moment where we are bringing the freight in bulk to a location, then the deliveries are a lot smaller journeys, do that final mile. That helps a lot. But the real one - and you mentioned there's EVs, electric vehicles, I visited an electric vehicle company last week and the technology is phenomenal. It's a wee bit expensive, so it's three times the price of a traditional van or truck, and it takes five years to get the pay back. Now, as a company, I'm prepared to invest in that but it's hard to get an independent franchisee to do that. [INAUDIBLE 00:32:40] five years. What we'd like to see, Simon, is some government incentives for electric vehicles. And that would accelerate the use of them, the adoption of them. You have to look at other markets. You look at London, I think diesel may be already banned from the city of London, petrol's going to get banned soon, the taxis are transitioning to electric. A company I look at quite closely, DPD, their plan for 2025 is to have 25 million parcels delivered by electric vehicles. 25 electric micro centres in 25 cities. I mean, that's the sort of thing that CouriersPlease are looking at at the moment, is the electric vehicle side of things. Our limitation is there's probably a 250-kilometre radius that doesn't work for all our type of freight, but it does work where it needs to, and that's the inner city where you've got that density. So yes, for rural deliveries, but then it's not as necessary right? We definitely see electric vehicles as - that's the future, and government needs to introduce incentives and also the penalties as well. They need to encourage us to get these vehicles. And then the guy who was selling electric vehicles made a good point. He said he's always asked, "What will the value of my electric vehicle be in five years’ time?" He flips it the other way around, he says, "What's the value of your diesel vehicle in five years' time if government started to introduce these sorts of things?" Which they should, right? We'll get onboard when that happens. We encourage franchisees to invest in it. We're starting to look at our facilities, making sure we've got the charging stations, et cetera, required to do it because that is - you said 10 years. I'm hoping a lot sooner than that. Simon Dell: My last question today, obviously the courier industry, delivery industry, everybody in your area, your industry, tends to get picked on quite a lot. There's various TikTok videos, some of them quite funny, but how do you guys deal with that online abuse, that negativity online? Because I suspect for people like yourself, it must be pretty constant to have to deal with that. Mark McGinley: It is. And one of the challenges we always got was our brand has been - and by the way, you've seen everybody gets abuse. Simon Dell: Absolutely. It's not just one of you. It's the whole industry. Mark McGinley: I'm pretty thin-skinned, I have to say. I do take it personally. [laughs] Obviously, the first thing we do is deliver the parcel on time, and answer the phones on time, and fix the problem. On Product Review for example, I think there's about 5,000 reviews. We've delivered 20 million parcels at that time, but that is dictated by the 5,000 reviews, not the millions. So, we do respond to every social media complaint, and sometimes we can help and sometimes it's too late. A lot of times, we can help and people are really grateful. They were just frustrated at that time. No one was answering the phone, they get angry, but they rarely go back and remove the negative or give an update on it. We use a company called Trustpilot. Trustpilot is proactive. We've got 500,000 reviews, I think, off the top of my head, and we're around 4 stars. That's a much more balanced reflection of our delivery service. The thing about our delivery - the industry runs around 95% delivery on time. If you deliver millions of parcels, which we all are, that's a big number that aren't being delivered on time. It's just the reality. It is very challenging for the logistics industry because no one ever, ever sends you a video or a TikTok video saying, "I got my parcel today, thank you!" It just doesn't happen. It's always when things go wrong. The numbers are so big, Simon, that shit happens. It's a bane of my life, these social media complaints. Don't get me wrong, I'm not saying they're not true, but there's no context with them. Simon Dell: Yeah, expectation versus reality. Sometimes, people expecting things to be there probably in like a 15-minute window or something like that, when it's just - those kind of things potentially aren't feasible for what people are expecting to happen. Mark McGinley: I think people, the most common thing that I get is, I could have jumped in a car and driven and delivered that myself in the time [INAUDIBLE 00:38:00]. A lot can go wrong with logistics, and the whole thing is, your T-shirt is the most important thing in your life when you order it, or your handbag or whatever. It could be a $1,000 handbag or whatever. For us, it's a $6 piece of business, not a $1,000 transaction but we do represent the brands. If you ordered that from Nike, we stuff up a delivery, that reflects on Nike and we understand that. So, we're constantly working on it. We understand it's a huge issue. As I say, it's more comfort that everybody gets hammered, so we're not uniquely hammered. As I say, a lot can go wrong in logistics. Trucks get derailed, traffic... [INAUDIBLE 00:38:53] you live in Sydney. Simon Dell: Yeah, Sydney traffic, absolutely. Mark McGinley: If you drive alone, when you deliver a parcel... I mean, Sydney's seven times the size of London. We service Perth, which is a 6-hour flight away. That's like someone in London servicing New York as part of their network. There's a lot that can go wrong. You'd be shocked at the number of bad addresses. Simon Dell: No, I wouldn't be shocked at all. I've worked with enough e-commerce companies here in Brisbane. That wouldn't shock me at all. People who can't even type their own right address in, yeah. Mark McGinley: Yeah. I mean you say 3 High Street, Sydney. There's 20 High Streets in Sydney. Units are a massive challenge for us. We can't get access to units and it's not secure to leave parcels where people can steal them. So, that's a challenge. And then people say, "You didn't try." Our franchisees don't get paid to try twice. They will not go to your house and not try and deliver it because they don't get paid to do that. So, our whole motivation is to get that parcel in the consumer's hand as quickly as possible, first time. Every time we don't do that, we lose money because people will ring. Each time we answer the phone, we lose money, because the margins are so thin in our business. Every failed delivery is a loss, and that's the name for all carriers. Simon Dell: Mark, it's been absolutely fantastic having you on the show. Really appreciate your insights and I can only applaud what you guys do. To most people, you're an essential service to the retailers and certainly the people receiving the goods. Mate, appreciate your thoughts and enjoy the rest of your day. Mark McGinley: Thanks, Simon. Thanks for having me. Appreciate it. Simon Dell: My pleasure.