Royal Mail announces price changes for Access customers

Britain’s Royal Mail has announced plans to introduce a new discount for Downstream Access customers, along with price changes. The changes, which will come into force on 31 March 2014, aim to help the company deal with the fixed costs of its universal postal service network in the light of declining mail volumes and intensifying competition.

Price increases will average between 0.3% and 1% depending on customers’ service plans.

The changes to pricing will not affect mail services used by small businesses and consumers using Royal Mail’s end-to-end mail services – only the 31 Downstream Access companies, who collect and process mail before handing it to Royal Mail for final delivery.

Downstream Access mail accounts for around half of Royal Mail’s delivery volume, about 70% of all business mail.

With letter volumes continuing to decline, and with the recently privatised Royal Mail facing growing competition over the last mile of mail delivery from TNT Post, the company said on Friday that it needs to make some changes to its Downstream Access arrangements – including price changes – in order to secure the universal service.

Among the changes will be changes to the differences in pricing for mail delivered between the four zones – London, Urban, Suburban and Rural. The changes would mean prices being more reflective of the costs of mail delivery, Royal Mail said.

Discounts

Along with the zonal pricing system, Royal Mail said it would be introducing new discounts for Access customers who provide it with more certainty about their future volume intentions.

A 0.25p per item discount will be available for Access customers providing monthly local volume forecasts up to two years ahead, when mailing items to 86 local geographical districts across the country. This last requirement rewards Access customers who use Royal Mail for their nationwide mailing without handing certain area contracts to rivals like TNT Post.

Royal Mail said the discount would allow it to plan more accurately at a local level, allowing a more efficient delivery process.

Stephen Agar, the Royal Mail managing director for consumer and network access, said his company was constantly driving efficiency across its operations considering the challenge from declining mail volumes.

“Our Access customers are responsible for around half of the mail we carry and we want to work with them to improve our planning and the generation of cost savings across our delivery network,” he said. “The changes we are introducing will ensure Access customers can, where possible, share those benefits with us.”