UK Royal Mail postal strikes disrupt big business customers

Wildcat postal strikes in London could hardly have come at a worse time as far as the Royal Mail’s relationship with its biggest business customers is concerned.

While most companies put up with the second disruption in less than a month, British Gas took matters into its own hands by announcing a £10 discount for customers who chose to receive bills via e-mail.

As one of the largest mailers in the country, sending 80m letters a year, the power company’s decision threatens a vital revenue source for the cash-strapped Royal Mail. More importantly, it heralds a growing trend.

Until now, Royal Mail management has tended to focus on the threat from alternative postal operators following the gradual introduction of competition in bulk mail, while banks and utilities have played down the prospect of replacing paper bills with e-mails to meet regulatory requirements for communicating with customers. But the news that British Gas has persuaded 100,000 customers to give up on home billing suggests the habit may catch on fast.

Mounting irritation at the disruption caused by postal strikes has provided an incentive for British Gas. “Strikes cause us a lot of hidden problems, such as the need to grant temporary extensions for customers receiving prompt-payment discounts,” it said.

In the City of London, traditionally worst affected by postal strikes in the capital, e-mail has already overtaken “snail-mail” in the delivery of bulk items. Merrill Lynch is one of several investment banks that sends out many times more electronic versions of its daily equity research publications than hard copies. Among wealthy City banks, sensitive documents have long been sent by courier due to the Royal Mail’s poor record for overnight delivery.

Until now, competition from express delivery companies has been outweighed by growing markets elsewhere, such as direct marketing and home shopping, but the industrial unrest in the postal industry is coinciding with signs that even the growth in these markets is not going to be as profitable as first thought.

The consumer backlash over “junk mail” means that direct marketing companies are increasingly focusing on a select number of addresses. Volumes of junk mail are still rising, but at a slower rate than for much of the past decade.

Home shopping via online and printed catalogues is growing fast, too, but not necessarily via the red postal van. Great Universal Stores, which has overtaken Marks and Spencer as the country’s largest non-food retailer, no longer uses Royal Mail for deliveries made through its fast-growing Argos division.

Not all customers are large enough to seek alternative routes, but the longer Royal Mail suffers these disruptions the harder it will be for it to return to the financial health needed to improve pay and working conditions.