Postcomm research finds that competition has delivered early benefits but greater progress needed
Competition in the UK postal market has begun to benefit many business customers through lower prices, greater choice and better quality in Royal Mail’s service, but there is still much progress to be made if its potential is to be fully realised, Postcomm, the independent postal services regulator, said today.
The market research, which forms part of Postcomm’s latest annual Business Customer Survey, revealed:
20 per cent of respondents said that their mail prices had reduced significantly;
38 per cent said that the choice of services available to them had improved; and
34 per cent believed that the quality of Royal Mail’s service had also improved.
Although the competitive market is still in its infancy and Royal Mail still has more than 96 per cent of the addressed letters market, the survey shows that the company’s competitors are expanding their customer base. Compared with last year, twice as many businesses switched to Royal Mail’s top three competitors during 2005/6, while the proportion of businesses using other competitors was four times higher.
Also published today is Postcomm’s annual Competitive Market Review (CMR), which looks at factors affecting competition in the postal sector.
The CMR found that mail carried through Royal Mail’s ‘access agreements’ (which allow companies to collect and pre-sort mail from customers before transporting it to a Royal Mail delivery office for final delivery) had increased dramatically:
Royal Mail made 1.2 billion access deliveries this year, compared to 87 million in 2004/05; and
in the five months to August 2006, access volumes have continued to grow, and it now accounts for 10.5 per cent of Royal Mail’s total volume, according to latest figures.
Launching both documents today during her speech at the UK Mail Show, Postcomm chief executive Sarah Chambers said:
“The results of both the Business Customer Survey and Competitive Market Review show there is great promise for the further development of competition in the UK mail market, but it is clear that the is much still to be done, particularly to meet the challenges posed by alternative means of communication. Although Royal Mail remains by far the largest operator in the market, competition has encouraged it to raise its game, especially on quality of service. There have been major changes in the business mail market, particularly the rapid growth of ‘access’.
“End-to-end competition has so far been slow to develop, due mainly to the difficulty of competing with Royal Mail’s economies of scale and their VAT advantage. We hope that growing competition in downstream access will encourage operators to build up sufficient mail volumes through access traffic to allow them eventually to develop their own end-to-end networks and new ranges of innovative services for customers.”
Notes for editors
The postal services market was opened to full competition on 1 January 2006, but competition has been allowed in the bulk mail market since 2003.
The Competitive Market Review 2006 (pdf, 303KB) looks at the state of the mail market in the UK, and the 2006 Business Customer Survey (pdf, 893KB) is based on market research prepared for Postcomm by NERA Economic Consulting and Accent. Postcomm prepares and commissions these reports as part of its monitoring of the UK postal market. It is important that Postcomm has a detailed knowledge of the market and how it might develop in order to inform its regulatory decisions. A summary document (pdf, 143KB) is also available.
Both documents were launched today by Postcomm’s Chief Executive Sarah Chambers in her speech at the UK Mail Show. Printed copies are available from Postcomm at 6 Hercules Road, London, SE1 7DB. A detailed summary of the key findings of both documents is also available.
