Not Such A Festive Season? Competitors Threaten The Future of the UK’s Royal Mail:

What presents are you hoping to receive this Christmas? If you were one of the thousands of people who stampeded into the supermarkets on “Black Friday” 28th November and managed in the melee to grab (among others) a discounted Blaupunkt 40in TV (reduced from £299.99 to £149.99 in Sainsburys) or a Dyson Animal Vacuum Cleaner (down £319.99 to £159.99) perhaps you feel you already have everything you need. Even more so if your wardrobes are full of (virtually unused) clothes, you recently acquired the latest Smartphone and are not particularly keen on chocolates.

If none of this applies to you, how can you make sure that there will be parcels around your Christmas Tree on the morning of 25th December? The Royal Mail says it has the answer: Its approximately 150,000 postmen and women (supplemented by the additional 19,000 temporary workers it will be employing during December) are “gearing up to deliver the thousands of letters addressed to Santa Claus from across the nation”. Due to the “very busy Christmas ahead”, the Royal Mail has asked anyone thinking of writing to Santa to do so at the latest by Saturday 6th December, to put the correct address on the envelope -“Santa/Father Christmas, Santa’s Grotto, Reindeerland, XW4 5HQ” (Even Santa has a postal code these days) –and, of course, not to forget to stick on the correct stamp.

It’s because of this final requirement that many people might prefer to rely on their friends and family rather than on the prospect of anything arriving from the North Pole. Even though the Greeting Cards Association (GCA) seems optimistic that the estimated average of 750 million Christmas cards posted from within the UK in recent years will be maintained this December, the rising costs of stamps could significantly lower this figure. On 31st March, the cost of a first class stamp was increased by 2p to 62p and for second class from 50p to 53p. The charge for a large first class letter up to 100g is now 93p and for second class 73p. Royal Mail insists that their prices nonetheless compare favourably with those in “Germany, Spain, Italy and France where the cost of a first class stamp is 67p and 60p for second class”.

The BBC News journalists Ruth Alexander and Polly Hope have, however, calculated that “if you convert the local price into dollars, the UK is the fifth most expensive in Europe (not the ninth as the Royal Mail contends), behind Finland, Switzerland, Denmark and (in first place), Norway”.Kjetil Kooyman, a Norwegian postal user, complained to them that “we pay the most for petrol in Europe, but if postal charges keep rising it might soon be cheaper to drive over and deliver the mail yourself.” Jamaica tops the list in the BBC News survey (the equivalent of 88p) followed by Peru (71p). Charges are lowest in Bangladesh and in Dubai there are apparently no deliveries at all to home addresses. Instead “mail has to be collected from the Post Offices”.

Meanwhile, Royal Mail is hoping to at least repeat the 115 million parcels it handled in December 2013. As with the GCA statistics, this target could prove somewhat unrealistic. Santa can keep costs down by using his sleigh, but for a considerable number of people on the ground, sending a parcel has become financially prohibitive: If it weighs up to 1000g, the price is £3.20; 1001-2000g (£5.45); 2-5kg (£15.85); 5-10kg (£21.90); 10-20kg (£33.40).

For anyone prepared or able to pay these rates and thinking of sending a parcel abroad, it’s probably already too late to do so by using Royal Mail. Even for greeting cards and normal letters, their recommended last posting date for Africa, the Caribbean, Central & South America and the Middle East is Friday 5th December. For Cyprus, Eastern Europe, Greece (8th December); Canada & Poland (9th December); USA (12th December); Western Europe (13th December).

Within the UK, however, letters (as the Guardian columnist Jennifer Rankin pointed out on 22nd July) are still “the biggest earner for Royal Mail, bringing in 59% of its annual income compared with 41% from parcels”. This figure, though, is “expected to decline by around 4% to 6% each year” (mainly replaced by e-mails), whereas parcel delivery “is usually seen as a growth business as consumers embrace online shopping”.

It’s in the parcel sector that the Royal Mail faces “stiff competition” from rivals such as Amazon, UPS, TNT (now known as “Whistl”) and Yodel. The London Evening Standard’s City Editor, Chris Blackhurst, highlighted on 19th November the concern expressed by Royal Mail Chief Executive, Moya Green, that the challenge from Whistl “could reduce Royal Mail’s revenue by more than £200 million by 2018”. Similarly, Blackhurst’s colleague Nick Goodway noted on 25th November that Amazon’s decision to launch its own delivery service – whereby customers using a “click and collect” system can pick up parcels direct from shops – “could knock growth in revenues from Royal Mail’s parcels business by 1-2%”.

At a meeting of Parliament’s Business Innovation & Skills Committee (BISC) on 27th November, Moya Green declared that the Royal Mail’s “Universal Postal Service” (UPS) – which is required by legislation to deliver mail throughout the UK for a uniform price six days per week and costs Royal Mail £7 billion pa to operate –  is in “imminent danger”. Its rivals are “cherry-picking” – focusing on the most densely populated areas and the most profitable post codes, leaving Royal Mail with the more expensive task of delivering lower volumes to rural areas.

This “unfair competition” (she asserted) is “syphoning off a lot of Royal Mail’s revenue, thereby rendering UPS unfinanciable and uneconomic”. She wants the postal service regulator, OFCOM, to immediately “look at the options to preserve this cherished and essential service”. Nick Wells, Whistl’s Chief Executive, when questioned at the BISC meeting, dismissed Green’s accusations as “emotional rhetoric”.

Filed under: Society | Posted on December 1st, 2014 by Colin D Gordon

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