Ofcom have published their Post monitoring report for 2023/24 and it makes interesting reading. The highlights are:
Parcel volumes rose after two years of decline as the sector adjusted post-pandemic
Measured parcels across the UK increased by 8.3% to 3.9 billion items in 2023-24, close to the 4.0 billion pandemic peak in 2020-21. International inbound parcel volumes saw the largest increases year-on-year (49.7%), while domestic volumes grew by 5.3%; only international outbound volumes declined, down by 5.8%. Parcel revenues fell by 3.7% to £13.0bn in real terms (i.e. adjusted for inflation) but remained higher than before the pandemic.
Total addressed letters continued to decline in line with long-term trends
UK addressed letter volumes fell by 9.0% to 6.6 billion items in 2023-24. Royal Mail access mail continued to make up most letters sent (70.7%) at 4.7 billion items. Letter revenues stood at £3.7bn, down 1.4% year-on-year in real terms (a 4.2% nominal rise).
Consumers report a drop in value for money for postal services as prices rise
The perceived value for money of First Class stamps continues to decline, most notably after the price rises announced in April 2024. Consumers increasingly report switching away from First to Second Class products, a trend continuing over the last six years, with cost being the main driver for choosing Second Class stamps all or most of the time.
Consumers report modest improvement in satisfaction with complaint handling, yet over 25% still dissatisfied with the process when contacting a delivery company about an issue
Two-thirds of parcel recipients continue to experience problems or issues with their deliveries. This year, Ofcom’s survey found that satisfaction levels had increased with contact/complaint handling for some parcel companies, contributing to a statistically significant increase in the average satisfaction rating for contacting the delivery company to discuss an issue (up from 41% to 44%). Consumers with a disability or a limiting condition remain more likely to experience issues with their deliveries. Ofcom expect parcel operators to build on existing improvements and to keep their policies and processes under review and will continue to monitor market performance closely.
Royal Mail continued to fall below quality of service (QoS) expectations in 2023-24
First Class was 74.5% against the target of 93%, up from 73.7% in 2022/23. Results for Second Class were also below target, at 92.4% against the target of 98.5%, a slight improvement from the reported result of 90.7% in the prior year. In May 2024, Ofcom opened an investigation into Royal Mail’s compliance with its First and Second Class delivery targets for 2023/24.4 Postal users continue to report delayed mail as the most experienced issue (25% of residential users in the research).
Royal Mail reported a loss, made worse by increasing costs and competition in parcels
The profit (EBIT) margin for the Reported Business was -6.3% (equal to 2022-23), which is significantly below the indicative 5% to 10% range for a commercial rate of return. There was a small increase in revenues across both parcels and letters, but this was offset by an increase in costs mainly due to the pay award as the business implements its Business Recovery, Transformation and Growth Agreement. Although Royal Mail has started to win back parcel volumes lost during the industrial action, it is not achieving the market share it had pre-strikes.
