In an Interim Management Statement issued today, Royal Mail say that “Changes to Amazon’s 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“.
It’s pretty amazing that just one company can impact the postal service so greatly, although competition was also a factor. We know many Tamebay readers were negatively impacted by Amazon’s minimum £10 FBA order value, but it’s potential impact on the postal service passed us by. It would appear that Amazon’s sub £10 order volumes must have been costing them millions in delivery charges for it to have such a significant impact on Royal Mail.
In addition to the minimum order value, Amazon’s own courier Amazon Logistics are delivering an ever increasing number of Amazon parcels to our houses, further lowering volumes to Royal Mail.
Adding to Royal Mail’s woes is the price of the pound lowering the attractiveness of UK goods to overseas customes. Royal Mail said “Export parcel volumes were lower than expected due to the impact of stronger Sterling and increasing competition in the export market“.
However the surprise news is that letters may save the day as they’re performing better than expected. Although addressed letter (i.e. excluding “to the householder” junk mail) volumes were down 3%, revenues were up 3% “benefitting from the impact of price increases and the uplift from the elections traffic”.
Royal Mail also say that the Universal Service is under threat caused by “unfettered cherry-picking of high density urban areas” by competitors.
It doesn’t look like Royal Mail’s first shareholder meeting will be a happy one. From a high of over £6.00, the share price has plummeted in the last six weeks hitting a low of £4.50 (which is still well above the vastly undervalued £3.30 that the government flogged our postal service for a year ago).