Tag: Royal Mail

New Zealand Post introduces new pricing in proportion system

Posted by | Mar 28, 2008 | |

On 28 March 2008, New Zealand Post introduced a new pricing in proportion system for all standard domestic mail. Similar to the system recently introduced in the UK this means letters and parcels sent within New Zealand are now priced in direct proportion to their size and weight. Previously parcels have been priced mainly on weight.

Motivations behind the change are very similar to that of the UK and reflect the worldwide drive for cost reflective pricing among incumbent postal operators. Previously some larger sized items of mail have been the same price to send as smaller items and this has not reflected the cost of handling them. As most of the mail that passes through our network is of a smaller size, it is fair that the postage price is in proportion to the size and weight of the item.

• larger items require manual processing (not machine processing)
• larger items require double handling by both Mail Sorters and Posties
• larger items are more costly to transport due to size

A further parallel with the UK can be seen with many standard items remaining the same price although New Zealand has not introduced a grace period for surcharging it will consider the change when assessing under paid items. The postage price for most of the standard domestic letters that go through the network remains unchanged at NZD 0.50 (USD 0.39)because most of these letters are of a smaller size.

However, a more selective brand of PiP is employed in New Zealand with the more lucrative bulk mail products escaping the new system. Bulk mail products (VolumePost, GoFlexible and PrintPost) and international products are not changing.

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UK Mail Operators likely to see Uniform VAT rates

Posted by | Mar 28, 2008 | |

Postcomm has hinted at the introduction of a uniform VAT rate (possibly 5 pct) that could be applied to all mail services in the UK.

In it’s ‘Forward Work Plan 2008-11’ Postcomm said it recognised the complexity of the UK mail market and was looking at the constraints that have been holding back the development of end-to-end competition in the UK:

Postcomm said that one barrier to entry was the uneven VAT regime. Royal Mail is currently exempt from VAT, whereas other operators have to charge customers VAT at 17.5 pct. Postcomm said it continued to support a level playing field on VAT for all postal operators, with no significant price rises for customers.

More significantly, it believed that a reduced rate of VAT (of say 5 pct) should be applied to all mail services. It said that in light of the European Commission’s ongoing infringement proceedings against the UK, Germany and Sweden on the interpretation of the VAT exemption for postal services, Postcomm has modelled the effect that different VAT exemption scenarios might have on the UK postal services market.

The result of this modelling has shown that the imposition of the full rate of VAT on all mail services (17.5 pct) could result in around a 5 pct decline in Royal Mail volumes, while the imposition of the reduced rate should only result in a 1 pct decline.

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Postcomm highlights many Royal Mail failures

Posted by | Mar 28, 2008 | |

Royal Mail is failing to invest properly, is too inefficient and is not developing sufficient new products, the industry regulator has said in a sweeping indictment of the business.
The criticisms by Postcomm are in response to a government review of the impact that competition has had on the state postal group.

The postal group recently warned unions that its pension fund trustees could be forced to liquidate the business or force through huge alterations of the pension scheme unless changes were made.

The warning over the GBP 3.4 billion pension deficit comes as Royal Mail is facing another major industrial showdown with unions over planned pension changes, just months after the end of the last national strikes, which were triggered by pay. A clash moved nearer yesterday when the pension fund trustees approved the changes, which include ending the final salary scheme to all members and raising the retirement age from 60 to 65.

Postcomm highlighted the benefits of competition, such as lower prices and greater innovation for large business customers and record levels of service quality for residential customers.

Royal Mail said that competition was now far ahead of the forecasts from the regulator when the market formally opened to competition four years ago. The business part of the market, which is the only area properly active at present, opened four years ago when Royal Mail finally agreed access terms for its infrastructure.

Royal Mail said that Postcomm’s criticisms had failed to recognised the postal group’s universal service obligation (USO) – its duty to provide a flat-rate service anywhere in the country for domestic customers.

Postcomm argued that the USO was not under discussion for the part of the review it responded to.

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UK mail volume figures continue to decline

Posted by | Mar 28, 2008 | |

According to the latest figures, this is the third consecutive year of mail volume decline in the UK and is contributing to Royal Mail’s shrinkage.

According to Royal Mail, 5.03 billion items of direct mail were sent in the UK in 2006, a decline of 2.1pct in volume on the previous year. The UK addressed mail market was worth around GBP 6.8 billion in 2006/07. Mail volumes amounted to 21.9 billion items, down 2pct on the previous year. These figures included downstream access, all regulated and non-regulated mail, but excludes door-to-door and international.

Transactional mail volume estimates range anywhere from 6bn to 10bn items per year, this volume is estimated to be declining by around 2-3pct per year. This is due largely to businesses encouraging their customers to move physical bills and statements online.

In 2006/07, mail carried via access arrangements (both operator and customer direct access) accounted for 11.8pct of total mail volumes. This is an increase from 5.6pct in 2005/06.

Royal Mail’s financial performance for the year ended 25 March 2007 was weaker than in the previous year with operating profits (before exceptional items) for Royal Mail Letters’ business falling from GBP 344m to GBP 194m, caused by increasing costs, falling mail volumes and constant revenue. For the licensed area, Royal Mail recorded operating losses of GBP 29m in 2006/07 compared with profits of GBP 168m in 2005/066.

The USO remained profitable overall though less so than the previous year (operating profit was GBP 27 million compared with GBP 54 million in 2005/06) with profits from non-licensed mail weighing over 350g continuing to offset losses on licensed mail weighing 0-350g.

Postcomm has warned Royal Mail that it’s slow reaction to competition and lack of innovative ideas for the growth in the internet and ecommerce could be damaging.

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Postcomm: Royal Mail must transform for a healthier mail market (UK)

Posted by | Mar 27, 2008 | |

Postcomm has argued that fundamental reforms are essential if Royal Mail is to have a long-term sustainable future and the needs of all users of mail are to be met.

In its first submission to the independent panel reviewing the postal services market, Postcomm has highlighted the positive impact for customers since the addressed letters market was opened fully to competition over two years ago:
* Larger customers have enjoyed lower prices and increased innovation;
* Residential mail users have experienced record levels of service quality from Royal Mail; and
* Smaller businesses and public sector customers are also now beginning to reap the benefits of choice.

During this period, there have also been significant structural changes in the mail market that are directly linked to advances in technology and the increasing use of alternative forms of communication such as email and the internet. These changes pose challenges but they also create new opportunities. Royal Mail’s performance in rising to meet these new challenges has been disappointing.

Royal Mail continues to lag significantly in terms of investment, efficiency and substantial product innovation. Their recent focus has been on forestalling new entrants to the mail market and far less on adapting to these more far-reaching structural changes. This situation is unsustainable and unless addressed will result in accelerating decline.

Postcomm believes the future health of Royal Mail, the universal service, and the addressed letters market as a whole are inextricably linked. Decisions about fundamental reform have to be taken swiftly if Royal Mail is to lead a healthier mail market and provide a strong universal service.

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