Most business regards mail as ‘core’ or ‘critical’ to success despite increased e-communication competition
2 October 2008
The importance of mail to business users features strongly in the 2008 Business Customer Survey published today by Postcomm, the independent regulator of postal services.
Almost half of the survey’s respondents regard mail as a ‘core activity’ of their business, and a further 31 per cent say it is critical for communication with their customers. Only 17 per cent report that mail is used simply for administrative purposes. This year almost a quarter of respondents said they were using more than one provider of mail services.
The effect of electronic communication on the postal market – and ways in which the internet and mail complement each other – are clearly demonstrated in Postcomm’s annual review of the postal market, the 2008 Competitive Market Review, also published today.
Tim Brown, Chief Executive, Postcomm, said:
“Our annual Business Customer Survey is a valuable guide to the way businesses regard mail services. This year’s survey shows that the competitive market is spreading to include smaller mailers. Despite the increasing challenge from electronic media, 49% of the companies surveyed said mail was core to their business.
“Our Competitive Market Review clearly shows that mail patterns are changing. But as well as challenges, electronic communication also offers opportunities for innovative mail companies. It is well known that people value the personal nature of a letter much more than a message on a screen. And mailers can be much more confident their message will reach the right recipient if it goes by post rather than online. With the right products, the postal market can look forward to a bright and busy future.”
The Business Customer Survey collected information from more than 1800 businesses, ranging from ‘super top’ users spending £2 million a year or more on mail, to very small companies with an annual mail budget of £5000 - £10,000. Key findings of the survey include:
- Electronic media: 26% of respondents have moved mail to other media (mostly email) in the last year.
- Trigger points for change: If prices rose 10%, a majority (52%) would look for another mail provider. One in four would move if prices rose 5%.
- Competitive choice: Overall 23% of business customers surveyed are using more than one provider of mail services (usually Royal Mail plus one other). This compares with 15% last year and includes a rise of 8% (from 12% to 20%) among small and very small mailers. Of the 77% of companies giving all their business to Royal Mail, 39% said they would never move from Royal Mail, but this compares with 47% in 2007. 55% of respondents say that choice has improved as a result of competition.
- Mail volumes in the next five years: 36% of customers expect an increase in their own mail volumes, 43% predict they will stay the same. Of the 17% that expect a decrease, the main reason given is a rise in the use of electronic media.
- Awareness: As expected, there is almost 100% awareness of Royal Mail, but awareness of alternative operators is increasing. Since 2007, awareness of TNT and DHL has increased, respectively, by 11% and by 8%. Eight out of ten customers said they saw no barriers to switching to a different operator.
The Competitive Market Review revealed a number of interesting developments. Businesses such as banks, mobile phone companies and utilities that regularly send statements or bills to their customers, are increasingly turning to electronic billing, and this has helped reduce the overall volume of the market by 2% compared with last year.
Against this, UK shoppers are estimated to have spent more than £26.5 billion online in the first six months of 2008 despite the economic downturn – up 38% on the £19.2 billion recorded for the first half of 2007, generating an upsurge in fulfilment business.
Postal magazine subscriptions have grown and now account for 14% of magazine sales, up from 3% 10 years ago.
Research conducted by Key Note, a market intelligence company, shows that the greetings card market was worth £1.4bn in 2006, and is predicted to continue to grow at a rate of between 1.9 per cent and 2/4 per cent per year between 2007 and 2011.
The overall effect of these changes in mail patterns mean that the UK addressed mail market was worth £6.6 billion in 2007/08, the same as in the previous year. Volumes, however, declined to 21.5 billion items – a 2% reduction compared with 2006/07.
Within the postal market, Access competition – where alternative operators or major customers collect and sort mail and pay Royal Mail to deliver it – at 4 billion items, accounted for 21% of Royal Mail’s delivered volume. In 2006/07 it was 12%.
Delivery competition – where mail is collected, sorted, transported and delivered by operators other than Royal Mail – fell to 26 million items in 2007/08, a decline of 15% on the previous year and the second year of decline for licensed delivery competitors.
Following changes to Postcomm’s licensing regime in 2008, there have been five new entrants to the market, bringing the total of licensed operators, including Royal Mail, to 22. Some of the new, smaller, operators have developed local delivery networks, and one of the more established operators, TNT Post UK Ltd has launched delivery trials. Competition is now reaching smaller businesses, and Access operators are increasingly targeting smaller mailers.
In Europe, mail volumes are generally continuing to decline slowly, although there are significant differences between Member States. In 2008 a new European postal directive was agreed, establishing full market opening from 31 December 2010 for the 27 Member States, with a transition period available to 11 of those states if needed.
Notes for editors
- Copies of Postcomm’s 2008 Business Customer Survey and 2008 Competitive Market Review can be downloaded from Postcomm’s website www.psc.gov.uk. Hard copies and copies on a USB key of both publications are available from Postcomm at 6 Hercules Road, London SE1 7DB.
- Businesses generate 87% of all UK mail. Of the remaining 13%, mail between domestic customers – for example greetings cards – makes up 10% while the remaining 3% is mail from domestic mailers to businesses.
- Royal Mail’s financial performance for the year ended 30 March 2008 was weaker than the previous year with operating profits (before exceptionals) for the Royal Mail letters business falling from a profit of £136 million 2007 to a £3 million loss in 2008.
- In 2007/08 Royal Mail failed to meet nine out of its 12 quality of service targets. Many of the failures occurred as a result of industrial action. In 2006/07 the company achieved 11 out of 12 of its targets.
More information
Jayant Chavda T 020 7593 2114 M 07770 381325 jayant.chavda@psc.gov.uk
Chris Webb T 020 7593 2164 M 07779 635881 chris.webb@psc.gov.uk
Joseph Bonner T 020 7593 2116 M 07773 329902 joseph.bonner@psc.gov.uk
