Bottom Line: Postman Pat tries for a competitive edge

 
Marc Sidwell
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WE GOT an advance delivery from Royal Mail ahead of its first full year results as a private company this morning. It announced plans for Sunday opening of some offices for parcel collection and a pilot Sunday delivery scheme.

That’s significant, given how much of the delivery market Royal Mail has – 99 per cent of the downstream letter market in fiscal year 2013. But in a sense it was also delivering late. Amazon has had Sunday deliveries in several UK cities since January, DPD announced Sunday deliveries last month and UK Mail, which reported yesterday, turns out on the Sabbath during seasonal peaks.

Competition is intensifying around the former monopoly. TNT’s end to end service is perhaps the most striking addition, with its move into letter delivery. Its black and white posties have been hard at work since April 2012, and a team of 3,000 is now serving London, Manchester and Liverpool. Espirito Santo in a note this week suggested that this innovation alone could cost Royal Mail £320m a year by 2018, 4.2 per cent of all its 2013 UK parcels, international and letters revenue.

Letters still account for 40 per cent of Royal Mail’s revenues, but look out for a decline in letter and marketing mail revenue in today’s figures. All eyes are on the lucrative, expanding parcel market, which already makes up 48 per cent of revenue. Yet even as ecommerce booms and increases the potential of the parcel market, this is where competition is fiercest. Royal Mail will have to fight to stay on top.

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