Post-Switch – Royal Mail most inefficient operator in Europe
Post-Switch says that Royal Mail has failed to react to the commercial world, describing it as one of the most inefficient operators in Europe.
Jonathan DeCarteret, Senior Market Analyst at Post-Switch, says that Royal Mail, under threat from competition, a ballooning pension deficit, shackled to a trade union and a conspicuous lack of innovation has put the USO (universal service obligation) in financial deficit and under threat.
“Royal Mail is one of the most inefficient operators in Europe and there is 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 need the commercial talent to create new revenue streams and take advantage of a liberalised European postal market.” he said.
His remarks follow the announcement by Royal Mail this week 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”.
The reasons for this view are as follows:-
* Postal volumes are decreasing by 1-3%.
* Further decline owing to financial crisis
* Competition from digital media/ e-substitution (e-mail, internet & txt)
* Environmental issues
Hooper explained that the UK postal sector must adapt in order to “first survive and then prosper”. Increasing prices alone is not sufficient and the “current set of policies’ are inadequate. Royal Mail also face threats from rival operators building their own delivery network of postmen & postwomen. If left unchecked Hooper “is in no doubt today, that the implications would be profound for the sector, its employees, customers and taxpayer”
* Businesses send 87% of all mail in the UK (mainly from financial sector)
The remaining 13% is from consumers.
* 21.5bn items are posted annually worth £6.6bn
21 Postal operators rival Royal Mail
* 40% of mail is posted through rival operators
Royal Mail deliver to 28.4 millinon
“From our analysis of Royal Mail’s operating margins, we would expect an initial price hike, at least until modernisation takes effect.” said DeCarteret.
“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 are impartial analysts and advisors 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.
