European Commission pleased with Royal Mail's efforts in preparing the U.K. for liberalisation of E.U.
The European Commission must be pleased with Royal Mail’s efforts in preparing the U.K. for the full liberalization of E.U. mail industry.
Poor service and intermittent strikes continue to spur the company’s customers to patronize competitors such as TNT and U.K. Mail Ltd, as resistance to using alternatives to the Royal Mail erodes as the British market opens to competitors.
The anger among Royal Mail’s customers caused by the disruption should be good news for the likes of Deutsche Post that are eyeing the U.K. market post-liberalization in 2011.
Royal Mail customers have unsurprisingly looked elsewhere for postal services after four days of strike action this week and threats of more disruption to the Royal Mail’s postal service.
Royal Mail has lost 20 pct of the business collection segment to its competitors in the last four years – Amazon canceled a GBP8-million contract with Royal Mail in June – and saw a decline in its 2006-2007 financial year volume of 10 pct compared with the previous period. However, it retains a 99 pct share of deliveries.
That loss of business is the last thing Royal Mail needs as it prepares for full competition in four years’ time.
It’s 40 pct less productive than rivals such as Deutsche Post, down mainly to the strong labor union that prevents the automatization seen in rivals’ operations. The union’s also ensured that Royal Mail workers are paid 25 pct more than competitors’ too.
Management has a long way to go to get the company ready for full competition.
But as good as the strike may be in the long-term for Royal Mail’s competitors, in the short-term it’s bad for the U.K. economy.
Retail sales are one of the few remaining drivers of an increasingly fragile U.K. economy, after house prices have begun to fall, business confidence has dropped and the official outlook for GDP growth in the U.K. for 2008 has been cut by 50 basis points.
Retail sales over the Internet stand to be hit by the postal strike. That’s worrying because they comprise 15 pct of total sales, worth GBP4 billion in July, according to the Interactive Media in Retail Group.
And small businesses have found the strike devastating as they don’t have the resources to arrange to use Royal Mail’s rivals on short notice or afford the alternatives over an extended period.
What’s more, they make up 95 pct of all U.K. businesses, and 94 pct of them use Royal Mail exclusively.
And they’re just one of Royal Mail’s market segments that rivals are waiting to snap up in 2011.
