Royal Mail sees challenges line up
The Royal Mail has failed to get to grips with the commercial world and is hindering its business clients, according to Jonathan DeCarteret, Senior Market Analyst at impartial advisor Post-Switch. He gives his view of what the service needs to overhaul to meet the challenges indentified in the soon-to-be published Hooper Report.
As the head of Market Intelligence at Post-Switch.com, I believe that Royal Mail has failed to react to the commercial world, and is now one of the most inefficient operators in Europe.
Royal Mail face threats from competition, has a ballooning pension deficit, is shackled to a trade union and has shown a conspicuous lack of innovation that has put the USO (universal service obligation) in financial deficit and under threat.
Banner Ad
It is my opinion that the Royal Mail has an urgent need to modernise, streamline, cut costs and compete on customer service. There is a general consensus that Royal Mail has failed to shake off a culture of complacency that reigned under monopoly protection and there is a real need for a culture of change that is about customer obsession and innovation. Royal Mail desperately needs the commercial talent to explore new revenue streams and take advantage of a liberalised European postal market.
My remarks follow the recent announcement by Royal Mail that the pension deficit has grown and the universal service is now seriously in the red. The Hooper review, to be released imminently, is expected to recommend a radical shake-up of the Royal Mail, including part privatisation of the delivery network.
In a closed door speech on the Independent Review of the Postal Services Sector, Richard Hooper stated that “The situation in the postal services sector in the UK is and remains untenable”. I believe Hooper has come to this view because of three key challenges faced by Royal Mail:
* Declining postal volumes by 1-3% which are expected to increase with the financial crisis
* Competition from digital media/ e-substitution (e-mail, internet & txt)
* Pressure arising from environmental issues
Hooper explained that the UK postal sector must adapt in order to “first survive and then prosper”. It is clear to me that increasing prices alone is not sufficient and the current set of policies are inadequate. Royal Mail also faces threats from rival operators building their own delivery network of postmen & postwomen. If left unchecked Hooper “is in no doubt, that the implications would be profound for the sector, its employees, customers and taxpayer”
From Post-Switch’s analysis of Royal Mail’s operating margins, I would expect an initial price hike, at least until modernisation takes effect. There would be equivalence in the market and an open and fair competition, which would galvanise Royal Mail to improve and be a forerunner in competing in Europe.
Post-Switch.com is an impartial analyst and advisor to government departments, Top 100 mailers and consumer groups connected to the UK mail sector. Post-Switch monitors market fluctuation, legislative changes and negotiate preferential rates on the postage portfolio under our management
