Amazon network will hit parcels growth, says Royal Mail

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The development of a delivery network by Amazon will reduce the growth in the UK addressable parcels market to between one to two per cent for two years, Royal Mail has warned.

“This was primarily due to the impact of a change in the mix of the parcels we carry and the highly competitive environment in the UK parcels market. We estimate Amazon’s own delivery network will reduce the annual rate of growth in the UK addressable market4 to 1-2 per cent for approximately two years. UKPIL parcel volume grew by two per cent.”

CEO Moya Greene said: “The UK parcels market remains challenging. As the pre-eminent UK parcels delivery company, we are targeting a number of new, growing areas, and delivered two per cent volume growth in a competitive market. We had a better than expected performance in UK letters. GLS, our European parcels business, demonstrated a strong performance with better than expected volumes in domestic and export parcels.”

Letter revenue of £2.2 bn was up one per cent, primarily due to election mailings, but addressed letter volumes decreased by three per cent. Total revenue in UKPIL was flat at £3.7 billion.

“The UK has one of the most developed e-retail markets in the world, with around 10 per cent of all retail sales conducted online. This is estimated to rise to 13 per cent by 2017. Online retailers and consumers are increasingly focusing on delivery. They want services that are quick, frequent, reliable and competitively priced. They also want a reliable returns service.

“We are targeting higher growth areas, including clothing and footwear. This is helping us to grow business with a number of large retailers and e-retailers. As we seek to increase our share of key growth segments, we are working with e-retailers to be more flexible about the dimensions of parcels, and packaging materials we will accept. Poly-wrapped clothing and footwear, including returns, can be delivered cost-effectively on foot using trolleys.

“We are offering more support to eBay sellers – key customers of ours. Royal Mail and Parcelforce Worldwide are one of the few delivery providers for eBay’s click and collect service with Argos stores across the UK. We have also strengthened our strategic partnership with eBay by enabling buyers who want to return items to track their parcel through to delivery back to the seller.”

Total group sales were up two per cent to £4.5bn in the half year to 28th September, but operating profit after transformation costs was down from £283m to £232m.

 Greene said: “We have delivered two per cent revenue growth together with margin expansion, in line with our expectations. Our tight cost control meant that UK costs were flat on an underlying basis and we are expecting a similar performance for the full year. Looking further ahead, we are targeting a flat or better underlying UKPIL cost performance in 2015-16.

“Our performance remains in line with our expectations for the full year. But, as always, this depends on us delivering another great Christmas, for which we are fully prepared.”

* Royal Mail defines the addressable market as that segment of the UK domestic parcels market which it, and other independent parcel delivery companies, can compete for. It includes the vast majority of individually addressed B2B, B2C and C2X parcel traffic weighing up to 30kg delivered by independent parcel carriers, but excludes parcels delivered by retailers’ own delivery networks.


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