UK Royal Mail price plan could hit senders of bulky packages
Magazine publishers, greeting card makers and photograph developers are among the businesses that could be hit by a plan by Royal Mail to charge more for handling bulky items of post, rather than pricing purely by weight.
Postcomm, the postal regulator, will launch a three-month consultation on Royal Mail’s size-based pricing proposals, but have warned that the group need to provide more information to justify the changes.
Under Royal Mail’s current pricing structure, which harks back to the days when all post was sorted by hand, heavy but regular-sized items such as books and catalogues are relatively expensive to post while light but bulky items cost less.
Royal Mail wants to change its tariffs to reflect the fact that sorting is now mechanised, and to charge more for irregular-shaped items that are not compatible with its machines.
The group, which is expecting to return to profit in 2004 after years of heavy losses, said yesterday its proposed size-based pricing plan was “a fairer and simpler system . . . because the size and shape of most mail is a more important factor in the cost of mail sorting and delivery than weight”.
Prices would be unchanged for three quarters of all mail, it said.
Royal Mail needs approval from Postcomm before it can change its prices. If the regulator agrees, the new charges would not apply until the end of 2005 or early 2006. Items that would cost more to post under the plan include posters in cylindrical packaging, large greetings cards, magazines in larger formats and those carrying free gifts, and also rolls of film.
Ian Lock, from the Periodical Publishers Association, said that the overall effect of the plan on the magazine industry would be neutral but that certain publications would lose.
Raymond McCarthy, of Truprint, the mail order photo developers, said the effect on his business would be more serious.
Customers sent their films in a free-post envelope, and Truprint would have to absorb the price of postage rising from 20p to 80p, wiping out the company’s profit margin.
Nigel Stapleton, chairman of Postcomm, noted that postal groups in many other countries charged by size but said the change was not inevitable.
“Size-based pricing is directionally right, but we have to be convinced that there is a sound justification for change”.
He said that the information put forward so far by Royal Mail on its costs was “not robust enough” to justify such a shift.
Meanwhile Mr Stapleton said he would make a decision in the next few months about whether to fine Royal Mail for missing reliability targets.
The group is expected to miss its targets for 2003-04, and is facing a customer compensation bill of more than GBP50m, before any fines.
