Royal Mail – Strike action poses big questions for Direct Mail

Fears mount that stalled services may drive sector to use alternatives to print.

It's not been a good year for Royal Mail so far. The company has been thwarted by postal regulator Postcomm over its plans for a zonal price structure and has faced an outcry from its own workers over its proposed modernisation.

This has now resulted in strike action that has all the signs of rumbling on for the foreseeable future. Last month, the Communications Workers Union (CWU) signalled its unhappiness with a 2.5% pay offer and got its way on industrial action. It started with two 24-hour stoppages and has since escalated its action to a rolling programme of strikes over the next week.

If this continues, then there are implications not only for Royal Mail but the direct mail sector. A knock-on effect is starting to concern printers and industry bodies with brands eying up potential alternatives to print.

'The postal strike is having an effect, no doubt about it,' explains Howitt managing director Gurdev Singh. 'I am convinced that the combination of the traditional summer lull and uncertainty over mail deliveries is making people postpone some campaigns.'

Looking elsewhere

Singh fears that clients will look at testing new media, such as email and SMS, to deliver their direct marketing messages. And if they like the results they get, then brands could look at shifting spend away from print.

'The strikes will pose questions in people's minds,' says the DMA's head of postal affairs Alex Walsh. 'There needs to be some form of continuity.'

Walsh observes that, so far, the strikes have had 'little impact' but the situa- tion is getting 'dangerously close' to having a negative effect on DM.

The charity sector is one potential victim of the industrial action. It relies heavily on mailings and some charities have already feared a drop in fundraising revenue.

Some suggest that it could mean a reduced amount of direct mail income over the next few weeks with declining response rates. Campaigns for the summer are also being delayed.

One marketer at Help the Aged, who declined to be named, said that the strikes have hit emergency appeals, which have had to be rescheduled. But the main problem has been responses; vital for any charity that needs to raise money.

'The danger is that people will be put off returning donations in the post,' she says. 'It is frustrating; mailings work best for us.'

But it's not all doom and gloom, according to Barney Hosey, client service director at print management firm Target Direct Print (TDP). While the strike is frustrating, it hasn't prevented campaigns from going out.

'We have a downstream access service, which means we hand it to another operator, DHL, to take to Royal Mail offices. It means that if there's a strike, we can move the postal day forward or backwards by around 24 hours. The standard Royal Mail Mailsort service allows post to go out in a seven day window.'

Restricted impact

But even that shouldn't be enough to put clients off mailings, adds Hosey. The strikes haven't proved to be too disruptive as, currently, they've moved away from a national level. 'It they go on to be national and last for two or three days, then it will give clients itchy feet,' he says.

There is a fear that organisations with a more youthful target audience will look more carefully at the alternative media on offer.

Singh adds: 'I am concerned that if Royal Mail does not get its act together, then companies will direct their pounds to new media, because of the uncertainty in the postal market.'

The theory is that the longer the disruption goes on, the more likely major brands will accelerate their testing of new media channels and cut their spend on direct mail. It's still considered a far way off, but with the UK mail mar- ket shrinking by around 2.5% a year, mailers are hoping that nothing speeds that process up.

Royal Mail certainly has its eyes open to the wider damage caused by the strikes, saying that they will 'inevitably drive customers away from Royal Mail to rival operators and to the internet'.

Vicious circle

The company is damned if it does make efforts to modernise and damned if it doesn't. If it does press ahead with its plans to modernise, then it faces the wrath of its workers and the CWU. If it doesn't, then Royal Mail could lose out to its rivals in the postal sector.

'The union members are harming the very organisation they work for,' argues Jonathan DeCarteret, senior market analyst at Post-Switch. 'The Royal Mail price structure is tied to the regulator Postcomm; they can't meet the demands of the union.'

While it's too early to say whether the strikes will be a defining moment in Royal Mail's history, they're certainly not helping and making many in the direct mail sector very nervous indeed. ISSUES FACING ROYAL MAIL

– The mail market is declining by 2.5% per year

– Royal Mail has lost 40% of bulk business mail to rival postal operators

– Rival companies, such as TNT, DHL and Deutsche Post, handle one in five of all letters posted in the UK

– Royal Mail claims its rivals are 40% more efficient because they have 'already modernised and have more technology'

– It also argues that its competitors pay their workers 25% less.