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There is a very good reason why Neopost just bought a stake in Temando for $50 million

The rhetoric this week was that Neopost’s sizeable investment of $50 million into Brisbane-founded freight quoting and booking startup Temando, was a coup for the startup. I couldn’t disagree more. Yes, there are some major advantages that Temando will be able to leverage being partnered with Neopost. However I would argue that Temando will help Neopost’s future business plans more than the other way around.

Before I go further, it is important that I disclose that prior to launching Startup Daily I was part of the Australian senior management team for a US company called Pitney Bowes, which happens to be the biggest global competitor to Neopost. Although I have a great deal of expert knowledge of the industry I am no longer affiliated, hold shares in or consult for either party or the industry.

A brief history lesson

Neopost and its competitor Pitney Bowes are both very old (founded into the early 1900s) publicly listed and very cash rich companies. Both businesses have hardware and software solutions, but it is in the hardware space that both compete, most notably with their core postage meter and folding and insertion product lines. The two companies are the biggest names in the mailroom solutions industry and cater to everyone from small businesses to large outsourced mailroom setups like Australia’s Salmat.

While both companies have diversified over the years having made acquisitions and expanded their product offerings into the digital realm – an example of this is Pitney Bowes acquisition of MapInfo and the way that created a whole new market for the company – the mailroom solutions arms of the business are critical revenue generators for both companies. Neopost and Pitney Bowes are essentially leasing companies that rent out their postage meter and mailroom solutions equipment over periods that usually last between three and five years, this means that both companies have solid recurring monthly revenues and this has been the backbone of how they have both grown and remained such large and profitable companies for close to 100 years.

Both companies face some problems though. The steep decline in mail volumes across the medium sized and small business landscape, the shift to paperless offices, online invoices and payslips, have created a very real threat to the baseline business of both companies. Although with the growth of online shopping more people are beginning to send packages and parcels, there are many comparable and even cheaper services for those people to engage that don’t mean they have to lock themselves into 36 or 60 month contracts.

The appeal of Temando’s platform

The reason that Temando is appealing to Neopost is because it fits so nicely into the company’s overarching goal to protect its mailroom solutions business and the technology owned by Temando will help it do that. It gives the company an edge over Pitney Bowes immediately because straight away there is a global database of over 800,000 business customers that Neopost has which it can begin talking to about using Temando technology on a daily basis in their mailrooms. It allows Neopost to own a stake in an end-to-end mailroom solution – it has everything else except the software part of things right now and Temando will be able to help push the company’s PackCity product and white label shipping solutions.

Temando is the the perfect complementary software product to Neopost’s range of mailroom hardware and services. In the same way that Neopost will be able to leverage Temando, Temando will be able to leverage its new relationship with Neopost to grow – in fact, accelerate growth at an even faster pace now.

Smartlockers and Ecommerce

Companies like Neopost are very proactive in partnering and getting their salesforce to sell-in products that make the “fulfilment” process within a business easier. A clear example of that is its PackCity product, an automated smart locker parcel pickup and drop off solution. Essentially when a customer buys an item from an online store, rather than having it delivered to a local post office or their home or workplace which often requires them needing to be present at a location within a certain timeframe, they can have it delivered to a smart locker system, such as the PackCity locations currently expanding all over France. Users are sent a text message with the locker number and a code to get into it and collect their package.

In Australia, Pitney Bowes and Australia post have been trialling ‘smart lockers’ for a number of years looking at all types of scalability models when it comes to locations such as installing them at 7/11 stores across the country etc, but the concept is yet to take off in any major way. However, in Europe the progress is a little more evident with PackCity having become a major product line of Neopost.

There is a very big opportunity for Neopost to grow not just PackCity but its other shipping solutions and managed services products such as the company’s white label shipping/courier services that at the moment service over 23,000 shipping companies in Europe, fulfilling around 250,000 shipping requests a day for these clients. These Neopost services again are end-to-end; and in some ways the online service the company already has in place has a lot of the features that Temando has. However Temando is much more ingrained into the Australian and United States markets than Neopost is. That is where the major opportunity lies for both companies to work together to be the dominant full service player in every region they decide to play in.

The End Goal

It has been reported across multiple publications in the last couple of days that Temando founder, Carl Hartmann’s goal is to connect all the world’s logistical resources into an individual intelligent platform in order to make commerce universally accessible to everybody. This new investment by and partnership with, let’s be honest, the European power player in that space, is a very good indication that this vision which Hartmann first spoke to Startup Daily about in early 2012 is rapidly becoming a reality.

Featured image: Carl Hartmann |  Photo credit: Rob Homer | Source: BRW.





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