UK Royal Mail defers stamp price increase
Royal Mail has had to defer stamp price increases due to Postcomm extending the consultation time over price controls. Royal mail’s strategy on price increases may be out of step at a time when successful competition is all about customer satisfaction and fulfillment.
Royal Mail has postponed a price increase on first and second-class stamps until next month. This follows UK postal regulator Postcomm’s decision to extend the consultation period for price control until March 21. Royal Mail hoped to increase basic first class postage to 28p and second class to 20p on April 17. This would generate an additional GBP170 million – money that should be used to aid the desperately needed and long overdue restructuring of the company.
The dispute over price control started around 10 months ago when Postcomm rejected Royal Mail’s request to raise the price of first and second-class stamps. In February, Royal Mail was given permission to raise the price from April, subject to Postcomm’s approval and under a strict price control plan for the next few years, designed to limit further increases. However, Postcomm has decided to take longer over the consultation period to give customers a longer notice period and more information about the price changes.
Royal Mail believes that because of the delayed approval, the actual price plan will not be effective before May. Furthermore, Royal Mail is questioning whether Postcomm’s price control proposal will give enough flexibility and financial headroom to cope with external events such as the introduction of VAT for Royal Mail postal products.
Stamp price increase issues are just one of many sticking points between the postal operator and its regulator. Many feel that Royal Mail, which is still losing about GBP1 million per day, should be thinking about conducting a radical but long-term business restructuring, and improving customer satisfaction to advance its competitive position. Instead it seems to be trying to put a band-aid over a bullet hole by increasing costs for customers.
