Royal Mail is to start rolling out automated parcel sortation to improve efficiency at around 20 of its busiest mail centres in the UK. The move comes after it reported that stiff competition in the parcels market meant that parcels revenue rose just one per cent last year despite a three per cent rise in volume.
Total parcels revenue was up at £3.19 billion for the year to 29th March, from £3.16bn the year before. The number of parcels carried through the core network was up three per cent to 1.02 billion.
Royal Mail said Parcelforce Worldwide had strong volume growth of 12 per cent, “driven by growth in the existing customer base and new business wins, including customers from the former City Link business. However it has seen downward pressure on pricing as a result of over-capacity in the market such that its revenue growth has been impacted.”
With the letters business continuing to decline, parcels now account for 41.1 per cent of Royal Mail’s domestic sales compared to 40.6 per cent last year.
Royal Mail estimates that the total volume of parcel deliveries in the UK – across B2C, B2B and C2X (consumer to any recipient) – will grow at about four per cent a year in the medium term.
However, CEO Moya Greene warned: “We estimate that the impact of Amazon delivering an increasing number of parcels using its own delivery network will reduce the annual rate of growth in our addressable market to around 1-2 per cent in the short term. Overcapacity has combined with the reduced rate of growth in the addressable market to create pricing pressure in all segments.”
As well as automated sortation, Royal Mail is also planning to track significantly more parcels, using 2D barcodes on as many parcels as possible.
“Our largest customers are already beginning to make the switch. From summer 2015, we will begin a process to deliver the technology we need to scan significantly more parcels at the Mail Centre and on the doorstep. Over time, this will give us greater visibility of traffic in our network, which will allow us to tackle any quality of service issues in real time. Tracking will drive the uptake of higher value services.”
GLS, Royal Mail’s continental business saw underlying sales rise seven per cent to £1.65bn while operating profit was up from £108m to £115m. Total group revenue was down marginally at £9.42bn, while operating profit (after transformation costs) was up five per cent at £595m.