Royal Mail sets out plans to boost parcels revenues

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Royal Mail has set out a series of initiatives to counter falling revenues in its parcels business resulting from increased competition in the market.

It has reported a one per cent fall in parcels revenue in the first quarter despite a one per cent rise in volumes.

In contrast, the letters business saw revenue rise by three per cent while addressed letter volumes were down by three per cent.

The group expects overall performance for the year to be in line with expectations as a result of cost control measures and continued good letters performance.

Royal Mail cited a number of factors contributing to the fall in parcels revenue, including the response to size-based pricing, and currency effects.

Changes to Amazons minimum order level for free delivery and expansion of its own delivery network have reduced addressable market volumes. Competition in account and consumer/SME parcels has intensified more than expected as other carriers seek to fill capacity in their networks by aggressively reducing prices.

Royal Mail is working on a number of initiatives to deal with these market changes including opening the network longer on Saturdays and on Sundays to receive goods from e-retailers; Parcelforce Worldwide has started a Sunday delivery service for online shoppers; and it has introduced new shipping tools for large online retailers.

The benefits of these initiatives are expected in the second half of the year, it said.

GLS, the continental delivery network, produced rises in volumes and revenues of six per cent.

Moya Greene, Royal Mails chief executive officer pointed out that the performance on costs had better than expected.

Given the increasing challenges we are facing in the UK parcels market, our parcels revenue for the year is likely to be lower than we had anticipated. However, through cost control measures and with continued good letters performance we expect to be able to offset the impact on profit such that our overall performance would remain in line with our expectations for the full year.

Our parcels revenue will be dependent on our performance in the second half, which includes the Christmas trading period, and on no further weakening in our addressable UK parcels market, she said.

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