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The new mail order

Open-access content 22nd August 2008

With the Royal Mail's monopoly ended and new operators joining the postal service market the days of simply putting something 'in the post' are over, writes Prys Jenkins

 

13 January 2006

 

In 1997, the European Parliament issued a directive that would shake up postal services across Europe. Its intention was to create an internal market for all postal services within the EU. The newly-created competitive market would serve to encourage a greater variety of services both nationally and across borders, as well as improving the quality of services.

 

Following this mandate, in 2000 the Postal Services Act become law and the legislation heralded arguably the most significant reform of the UK's postal services during its 350 year history. The act stripped Royal Mail (then known as The Post Office) of its monopoly status and opened the way for competition into our postal services market for the first time.

 

To avoid a loss of consumer and business confidence in the mail system, it was decided that, unlike the immediate opening up of other deregulated utility markets such as gas, the postal market would be liberalised in three structured stages between 2003-2007. Like other markets, official bodies overseeing liberalisation and consumer interests have been established - Postcomm and Postwatch. During 2004, Postcomm advanced the date for liberalisation of the UK's postal services market to 1 January 2006 and the beginning of this year signalled the future of postal services in the UK.

 

Since 2003, companies wishing to compete against Royal Mail to carry letters weighing less than 350 grammes or having a postage value of less than £1 have been able to do so, subject to various restrictions, under a licence granted by Postcomm. Letters above these values, including express letters carried by courier companies have been open to competition for almost 25 years.  To date 15 licences have been granted and names more familiar for courier and international services including TNT and DHL are among those now providing mail solutions. 

 

But despite such wholesale reform of a service that the UK relies upon to transit 20.3 billion items of correspondence that fall into the licensed spectrum each year, very few of those who are responsible for sending the bulk of all mail appear aware of the staggering changes. A survey undertaken by Postcomm in November last year showed that while businesses are responsible for sending 80 per cent of all mail posted through the Royal Mail network, only a quarter of them were aware that the UK mail market would deregulate in January of this year.  

 

In its 2005 Competitive Market Review, Postcomm urged the newly-licensed alternative mail services operators to do more to make the market aware of their services and the opportunities that the deregulated market offered to businesses. 

 

The Royal Mail's competitors acted quickly, making themselves known to prospective customers. In the last year the volume of mail carried by alternative providers has grown rapidly. Within the first nine months of 2005 alternative service providers had already carried more than the whole of the previous 12 months.

 

Even with such impressive rises in the amount of mail being carried by new market entrants and although officially Royal Mail's prima facie monopoly status has been dissolved, in practice it continues to operate in an extensively dominant position, still carrying over 97 per cent of all mail that falls within the licensed arena - this is only to be expected.

 

Like other industries that have been deregulated, it takes time for the market to adjust and become comfortable with new purchasing options. All the signs indicate that the mail market is moving ahead in a positive manner. In 2005, over double the number of business mail users than in 2004 indicated that they would be prepared to switch some or all of their mail to alternative carriers and as many as 72 per cent said that a 5 per cent cost saving and where service levels were on a par or better than those they were already receiving, would entice them to use another service provider. 

 

But what does switching to a new mail service provider entail? Ideally anybody seeking to maximise the opportunities the new market structure offers should start by understanding their mail usage pattern - how many items are sent, how vital is it that the mail reaches its destination the next day, would it be prepared to sacrifice next-day delivery for significant cost savings - are just some of the facts a business should ask itself.

 

This knowledge will aid the customer's decision and which company to use. The majority of the new market entrants are offering access-based solutions which suit volume as a lead factor rather than urgency of mail. Their services are based on collecting mail from a customer, managing parts of the process such as sorting and transporting to Royal Mail's depots and then injecting back into the Royal Mail network for what is termed 'final mile delivery'.   It is the work they do on Royal Mail's behalf that enables them to negotiate an access discount for the mail they manage and this saving is shared with the customer.  

 

The technicalities of such a service mean that mail is unable to be delivered on a next-day basis so businesses are offered a two-day or more option. For many sending bulk consumer mail, this is suitable. For those businesses with a high volume of mail requiring a next-day delivery Royal Mail or an entire service managed by one carrier using its own end-to-end network will prove more beneficial. The UK is expecting to see further mail service providers develop such networks over the coming years but presently only Royal Mail and DX have networks that are substantial enough to offer companies a reliable service with sufficient collection and delivery penetration across the UK.

 

With market liberalisation designed to drive efficiency, cost saving and service improvement, the time is now opportune for business to begin taking control over one area of their operation where choice has never been a factor. The number of firms opting for services from the new operators remains to be seen, what is without doubt is that the days of simply putting mail into 'the post' are gone.

 

Prys Jenkins is director of network partnership at DX Services, one of the first Postcomm-licensed firms

 

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