Outlook For Britain's private sector postal operators, you would have thought yesterday was like Christmas arriving early. After all, by voting for a national strike – on top of the hugely disruptive local actions that have already caused delays to the postal service – Royal Mail workers appear to have presented private sector rivals with a golden opportunity to snaffle even more business from the demoralised organisation, especially at the lucrative business end of the market. Indeed, valuable customers such as Amazon have already begun to think about deserting Royal Mail.
Why then do companies such as TNT, Business Post and others seem so downbeat about the prospect of further industrial action at Royal Mail? The simple answer is that for all the talk about deregulation of the postal market, these operators are often as dependent on the Royal Mail as the rest of us. The idea that free market competition now reigns is, in much of the postal industry, a myth.
That's because, as my colleague Alistair Dawber explains on page 51, the private sector relies on Royal Mail – and pays it – to make most of its deliveries. Their services – collection, collation, sorting and so on – do not extend to the "final mile" segment of the service, actually shoving post through letterboxes. Or to put it another way, when you see pictures of mountains of mail sitting in post office depots waiting for striking posties to return to work, much of it will have come from Royal Mail's private sector rivals.
According to Postcomm, the postal services regulator, less than 1 per cent of mail in the UK is currently delivered by an operator other than the Royal Mail. By "mail", it means the type of post it regulates – items that weigh less than 350 grams or cost less than £1 to post – but it is clear that in this market, almost all customers, business or domestic, rely for at least some of their postal service on the workers now set to go on strike.
That includes some of Britain's most prolific postal service users. Fed up with the Royal Mail, many banks and utilities, for example, now operate their own sorting units, or pay a private sector firm to do the job. But your bank statements and energy bills still arrive at your door courtesy of a Royal Mail-liveried postman. No one can compete, at least when it comes to this type of post, with the network that Royal Mail has built up over more than 300 years of delivering to every home and business address in the UK.
The parcels market is a little more competitive, though as it is not regulated there are no centrally collated figures on how many deliveries are made each day that bypass Royal Mail at every stage of the journey. Still, if they want to offer to-the-door delivery services at an affordable price, Royal Mail's rivals have to work in bulk.
Home Delivery Network, for example, the company with which Amazon is now considering working, markets to clients that send out at least 100 parcels a week. Clearly, only larger businesses are going to have the option of taking advantage of such a service.
In fact, the frustration for Royal Mail's competitors is two-fold. Not only does this strike not present them with quite the business opportunity that one might imagine, their own reputations may suffer along with that of Royal Mail. Many customers may not even be aware that the private sector operators they pay in preference to Royal Mail are using the service for final mile deliveries. In which case, they're going to be pretty cross when their post gets stuck in the backlog along with everyone else's.
Nor, by the way, is it in the private sector's interests to make a huge fuss about this industrial action. As customers of Royal Mail – albeit often in regulated business sectors – they are vulnerable to the service's charging policies. They can ill afford to fall out with their delivery boys.
What this strike will prove then, is that while parts of the postal market have been opened up to competition in recent years – one reason why Royal Mail now feels obliged to modernise – the vast majority of customers, including the service's rivals, are stuck dealing with a monopoly operator.Reuse content