UK postmen bitten on both sides

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Britain’s Royal Mail Will Be A Business-School Case Study. Its Customers Are Becoming Competitors As The Internet Squeezes Both Its Dying And Growing Businesses.
E-mail has put letter deliveries into long-term decline but internet-buying means Royal Mail’s parcels division is booming. It looked like the technology was both the problem and the solution. Unfortunately, parcels are booming so much that the newly-nationalised company is losing that business too.

We send fewer personal letters and now receive bank statements by email, but even in a shrinking market, other companies – notably Business Post and TNT – are happy to pinch part of the commercial business. These companies remain customers of Royal Mail though: they have needed Postman Pat to deliver the post to people’s homes.

However, TNT - now renamed Whistl – is taking on the easier parts of home-delivery too in big cities such as London and Manchester. So Royal Mail has lost the best bit of its business as a customer turns into a competitor.

Still, parcel delivery is booming thanks to internet retailers – the modern equivalent of the mail-order catalogue. It has boomed so much that Amazon became Royal Mail’s biggest client. But that customer too has turned into a competitor: Amazon has provided so much volume that it is big enough to set up as a rival.

Royal Mail is thus losing business in its successful sector too. That is affecting pricing: in the first-half of its trading year, it delivered more parcels for less money.

So far, Royal Mail has survived by modernisation (including sorting out its labour problems), technology and cost-cutting. But that doesn’t solve the basic problem that it is both losing custom and seeing customers become rivals.

In time, the obligation to deliver letters nationwide at a common price will have to go. But while government has cashed in its asset, it will be slow to remove that liability. Royal Mail thus remains shackled when rivals are free to eat its lunch.