TNT Post UK expected to trial delivery service in London

Private sector postmen wearing orange could be taking to the streets of London from April, as one of Royal Mail’s biggest postal rivals launches a new trial delivery service. TNT Post UK, part of the Dutch postal company PostNL, is itching to break Royal Mail’s near-monopoly of the end-to-end delivery market.

It is now expected to follow up a 2009 trial in Liverpool with a new trial in the British capital from the week of April 16.

Although the UK’s postal market opened up to competition at the start of 2006, virtually all private sector entrants still use Royal Mail for the final mile of delivery. For mail collected and delivered by the same company, Royal Mail holds more than 99% of the market share.

The major barrier to companies challenging Royal Mail’s stranglehold on the end-to-end market has been that as the universal service provider, its services have been exempt from value-added tax, while others have to levy the 20% sales tax on customers.

TNT Post UK, which describes itself as the second biggest UK postal company, has been lobbying hard against Royal Mail’s VAT advantages, and some of those exemptions for business services are ending from April.

“Exploring trials”

Sources close to the company have told Post&Parcel that they are now moving ahead with plans for a trial to be run in London from April.

Officially a company press spokesperson could not confirm or deny the London project was going ahead, but stressed that UK VAT rules still need to be changed if TNT Post UK is to run “comprehensive” end-to-end services. Such a move would also require sign-off by regulator Ofcom.

Regarding the London trial, spokesperson Eimear Galvin would only say: “TNT Post has a clear intention to launch an end-to-end delivery service and we would like to do this as soon as possible. We are currently reviewing plans on how we can further trial the service following the conclusion of a successful small-scale trial in Liverpool.”

The spokesperson would not reveal further details about the trial, but confirmed that as with the Liverpool trial, delivery people would be put out on the streets in the orange TNT Post branding.

The London location would suggest TNT Post is looking into services in mainly urban areas where profitability would be highest, but asked whether its trials might involve rural areas as well, Galvin said: “We are exploring the possibility of trials in various types of location.”

Similarly, asked on what grounds a TNT Post end-to-end service might compete with Royal Mail, for example on price grounds, delivery speed or reliability, the TNT Post spokesperson said various models for trialling end-to-end services were currently being considered.

TNT Post UK currently handles more than 200m items a month, on behalf of businesses including telecoms giant BT and energy utility Centrica, and has been delivering mail since 2004.

It currently claims a market share in the addressed mail segment of around 17%, which it has built up with a regional approach to its network, which comprises offices and depots in Scotland, the North of England, the Midlands, London and the South East and the South West, along with Northern Ireland.

Royal Mail is currently in the process of re-launching its bulk mail services as it seeks to shore up market share while raising prices to cover its universal service and need to modernise. It is launching a new simplified service portfolio in April.

Ofcom

Separately, the UK postal industry regulator Ofcom issued a formal direction today extending Royal Mail’s get-out clause for difficult addresses in relation to its universal service obligation to deliver to every address in the UK.

The exceptions mean that if it is not possible for Royal Mail to deliver mail to the door or collect mail from a certain post box, for example for health and safety reasons, it can refuse.

The new direction essentially changed little other than the details in the document related to Ofcom taking over regulatory responsibility for the market in October 2011 in place of Postcomm.

But, it extends the exceptions through to 31 December 2013.