UK Royal Mail plans discounts with 'zonal' scheme

Royal Mail is planning a pre-emptive strike to prevent competitors from cherry-picking major business clients, by bringing in a pricing structure that offers major discounts for city deliveries.

Called ‘zonal pricing’, the scheme will charge various rates according to the destination, and is to affect all mail sent through Mailsort 3 – the most popular service for direct mail. It will include magazine- delivery scheme Presstream.

Mailsort 1 and 2 are not affected, as they come under the Universal Service agreement.

The plan is part of the company’s long-term strategy to make mail delivery more cost-reflective. This was the rationale behind the launch of its controversial pricing in proportion programme.

The postal operator argues that zonal pricing will allow it to compete effectively for bulk mail business, claiming “customers will be able to obtain the lowest cost source of supply”.

But one industry source claims Royal Mail is acting too early: “It is a logical step, but it is far too early. Most people recognise it will be at least five to seven years before it faces substantial competition.”

Royal Mail wants the scheme, which must be approved by Postcomm, to come into force in April 2007.