Could SingPost’s Parcelgate scandal underscore the ‘better for cheaper’ race in e-commerce?

JUST days before Christmas, three Singapore Post (SingPost) executives got a rude shock when they were unceremoniously fired by the board for being “grossly negligent” in their handling of a whistle-blower report.

The three former key management executives – group chief executive Vincent Phang, group chief financial officer Vincent Yik, and chief executive of its international business unit Li Yu – were not directly involved in the allegations raised.

However, investigations revealed that three managers in SingPost’s international e-commerce logistics parcels business had manually updated or approved “delivery failure” (DF) status codes for parcels the group had agreed to deliver for one of its largest customers – without supporting documents or delivery attempts.

SingPost said this was a breach of its code of conduct, and has since owned up to the e-commerce customer and paid a settlement.

As the Parcelgate drama unfolds, it appears the fraud allegedly carried out by these three unnamed managers was with the intention of avoiding contractual penalties.

In response to queries from stakeholders, SingPost said in a bourse filing that the three key executives, while not directly involved in the infringements, had made “serious representations” to the audit committee investigating the whistle-blower’s allegations.

These included false assertions that there was no evidence of data manipulation and wrongdoing in relation to the manual “DF” data entries; that the practice of manual “DF” data entries was requested by the customer; and that the customer was fully aware of the assumptions of the manual “DF” data entries.

They also allegedly claimed that such action was in line with industry practice.

All three of the key executives had earlier rejected the findings that they were “grossly negligent” and said they will contest the reasons for the termination of their employment.

Industry watchers, however, may point the finger at a deeper underlying cause: that e-commerce platforms’ never-ending quest to provide better experience at cheaper rates to end-consumers could simply be unsustainable.

Attempts to improve customer experience

E-commerce platforms have gone through several competitive cycles, and there has been intense focus on improving customer experience and costs – especially with delivery.

Platforms have long obsessed over any variable that could improve customer experience and encourage bigger purchases or higher average order value. From the user interface to policies that favour the customer over the merchant, e-commerce platforms have tried it all. And delivery is one of the key customer touchpoints where market share can be won or lost.

Shopee, for instance, offered free shipping at the height of the e-commerce customer grab – a factor that helped it take the largest market share in Singapore and the region, consultancy Momentum Works indicated.

Third-party logistics (3PL) players such as SingPost and Ninja Van have jumped on to the e-commerce wave by helping to deliver parcels to customers.

But with customers now expecting their e-commerce purchases to reach their doorstep in a day or less, there is significant pressure by platforms using 3PL players to meet that expectation.

Also, as volumes grew, e-commerce platforms gained more bargaining power to drive costs down. Coupled with a labour crunch and high costs of operating in a market like Singapore, 3PL players’ would have found their margins squeezed.

These margins would have been further squeezed when e-commerce platforms started their own logistics arms to deliver a portion of the parcels themselves.

Interestingly, Qoo10’s logistics arm managed to survive the e-commerce platform’s demise, and has now rebranded from Qxpress to TracX Logis.

There is also intense competition in the 3PL segment, with big names including J&T Express, which recorded revenue of US$0.74 per parcel in South-east Asia in the first half of 2024. This was a drop from US$0.87 per parcel in the first half of 2023, due to a flexible pricing strategy to gain more market share.

Underlying the drop in revenue was a drop in cost of goods sold from US$0.71 in the first half of 2023 to US$0.60 in the first half of 2024, which was due to improving operational efficiency and expertise in cross-border shipping.

These factors are reflected in SingPost’s financial results. While SingPost does not break down revenue or cost per parcel, revenue from its e-commerce segments in the international and Singapore business has fallen in the recent results for the first half of FY2025 ended Sep 30.

The e-commerce revenue contribution in the international business segment fell 29.1 per cent from S$141.8 million in H1 FY2024 to S$100.5 million in H1 FY2025. In the Singapore business segment, e-commerce revenue contribution fell 10.6 per cent to S$35.5 million in H1 FY2025 from S$39.7 million in H1 FY2024.

SingPost also noted the increased competition in the international logistics market in its H1 FY2025 results presentation as well as lower volumes for the e-commerce segment. In the Singapore segment, the fall was attributed to a drop in one-off deliveries.

With e-commerce platforms looking to differentiate themselves with their customer experience, it is likely that these pressures will remain on 3PL players.

SingPost is not the only 3PL player suffering under these conditions; competitors including NinjaVan have also decided to diversify into cold chain logistics to get better margins on the delivery business.

In this ongoing operating environment, 3PL players will continue to find their margins squeezed by high labour costs and lower delivery fees.

For SingPost, even as the Parcelgate scandal plays out, it is unlikely that e-commerce will provide the revenue to lift its fortunes.