Royal Mail to transform bulk mail services, with prices to rise 11%

Royal Mail is preparing to launch the biggest ever overhaul of its bulk mail services since they were first introduced, simplifying its portfolio into just five distinct products. The new-look products are being introduced from 2nd April, alongside an average 11% increase in postal rates for Royal Mail business services.

The new products are being called Advertising Mail, Sustainable Advertising Mail, Publishing Mail, Business Mail 1st Class and Business Mail. Within the simplified products, bulk mail customers will be able to select various options to “fine-tune” the services to their own specific needs.

As well as renaming the services, Royal Mail said it is simplifying sortation requirements and is also looking to speed up delivery. Second class sorted items that had been delivered within three days will be delivered within two days under the new system, while economy options will be delivered in four days.

The UK postal operator said the new line-up would make its bulk mail services easier to use and “even more relevant to businesses today”.

Royal Mail told Post&Parcel today that it was implementing the changes to respond to the changes within the postal market in recent years, and as part of its overall modernisation effort.

Spokesman James Eadie said: “We’re launching the biggest improvement to our contract mail products since they were first introduced. There have been various changes in the market, so we’re changing the portfolio really to make it more accessible, simpler to understand and easier to use.”

Royal Mail’s 350-year monopoly on the UK mail market came to an end at the start of 2006, and since then it has lost considerable market share to private sector rivals, with Postcomm figures suggesting that competitors had a 38% share of the upstream bulk mail market in 2010, although Royal Mail still accounts for more than 99% of end-to-end mail deliveries.

Improvements

Among the key changes being made to Royal Mail’s bulk mail services, the company is opening up its Advertising Mail product to smaller businesses or large businesses running smaller advertising campaigns by adding new unsorted options requiring no sorting or address preparation.

To further open up access to a wider range of customers, Royal Mail is lowering its entry thresholds for sorted products to 4,000 letters or 1,000 large letters/packets.

New mail formats are being introduced for most of the new bulk mail services to include new options for large letters that can be read by optical (OCR) scanners for both unsorted and sorted options, including the option to use polywrap around items, and a new packet format for creative direct mail in the Advertising Mail service.

The new service portfolio includes:

Advertising Mail – The new direct marketing service brings together the Advertising Mail 70, 120 and 1400 products with Mailmedia products, Advertising Mail Light, Big Book and Royal Mail Heavyweight products. For sorted mail, options are simplified into Low Sort and High Sort, while three new options are being introduced for unsorted mail – standard, machine-readable and a machine-readable “plus” option. There will also be options within Advertising Mail tailored to reply mail and heavier items.

Sustainable Advertising Mail – The sustainable version of Royal Mail’s direct marketing service complies with the PAS 2020 environmental standards for direct marketing, bringing together all the old Sustainable Mail products under Entry Level or Intermediate Levels including Low Sort or High Sort options.

Publishing Mail – The category for mail that includes at least one sixth editorial content, published at least twice a year, brings together the old Presstream products under Low Sort or High Sort options, with high-volume and premium options available.

Business Mail 1st Class – The service for critical or time-sensitive bulk mail offers rapid delivery but with simplified unsorted, Low Sort and High Sort options and new large letter formats.

Business Mail – For all other bulk mail including bills, statements and other non-publishing or non-advertising items, similar speed improvements, simplified sort options and new formats will be introduced as in the other new bulk mail services. Together with the Business Mail 1st Class category, Business Mail brings together the old products including Cleanmail options, Mailsort options and Walksort.

Price changes

The changes to bulk mail services will take effect the same day – 2nd April – as new contract prices are also implemented at Royal Mail.

Price increases will average 11%, but individual business mail products could see prices increase by between 8% and 20%, while direct mail prices will increase between 1% and 5%.

The price changes are subject to approval by regulator Ofcom, which is expected to come next month. Royal Mail said some of the changes take into account a change in VAT status, with the 20% national sales tax set to apply to bulk mail services.

Eadie said that under Royal Mail’s previous regulatory regime, prices had been “artificially low”, while a 25% drop in mail volumes since 2006 had also contributed to the company losing GBP 1bn in its core mail business over the past four years.

“That is not sustainable for any business so we need to better align prices with the cost of providing our services,” said the Royal Mail spokesman.

“Since 2006, Royal Mail’s cashflows have been GBP 3bn less than anticipated. There has been significant under-investment in Royal Mail for a number of years. Including in crucial areas like IT, where we really lag behind our main competitors.

“We need to make a commercial rate of return so that we can invest in the business for the benefit of all our customers,” said Eadie.

The Royal Mail spokesman added that price changes were not the only way to keep Royal Mail afloat, the company has also been making cutbacks including closure of 14 mail centres during the last three years, reducing its workforce by 50,000 people in the last decade.

“This is a painful process of change, but one we are committed to completing,” he said.

The UK’s Direct Marketing Association’s chief of operations Mike Lordan said no price increase was welcome, particularly in the light of the VAT changes.

However, he said: “We are pleased that Royal Mail acknowledges the importance of direct mail and is keeping increases for advertising mail to a minimum. We also welcome the introduction of new products that will allow more direct mail to qualify for the advertising mail discounts.”