Competitive Market Review 2008

Each year, Postcomm’s Competitive Market Review looks at how competition is progressing in the postal market, focusing on factors affecting competition. The latest document updates the 2007 edition.

Full list of relevant documents:

Key findings in the 2008 report, published on 2 October 2008, are:

Market size and Royal Mail’s share

  • The UK addressed mail market was worth around £6.6 billion in 2007/08.
  • Mail volumes at 21.5 billion items, were 2 per cent down on the previous year – the forth consecutive year that volumes have declined1. 

Access arrangements

  • Royal Mail made 4 billion access deliveries in 2007/08, compared to 2.4 billion the year before.
  • In the four months to July 2008, access volumes continued to grow. Latest figures - at the time of publication - showed access accounting for 27% of Royal Mail’s volumes.

The make-up of the market

  •  Businesses generate 87% of mail in the UK market – mail sent from businesses to consumers accounts for 60%, with business to business mail making up 27%. 
  •  Domestic mail accounts for 13% of the market. Ten per cent is sent by consumers to other consumers and three per cent from consumers to businesses.

Mail Applications

  • Royal Mail’s figures show a decline of around 7 per cent in overall direct mail volumes.
  • It is estimated that transactional mail is declining by around 3 per cent a year.
  • Fulfilment and publications are two potential growth areas in the mail market. E-retail is a key driver of fulfillment mail and predictions suggest that e-retail will continue to grow, according to IMRG UK shoppers spent £26.5 billion online in the first six months of 2008 despite the economic downturn,  Customer magazines have strong potential for growth in the publications sector, a customer magazine was launched for every working day of 2007,  (For more information on the mail market, see Postcomm's series of downloadable factsheets.)

Royal Mail’s service quality

  • In 2007-08 Royal Mail failed to meet nine out of its twelve quality of service targets. Many of the service failures occurred as a result of industrial action caused by Royal Mail undertaking transformation activities. In 2006/07 Royal Mail achieved 11 out of 12 targets.

Competition

  • Postcomm is continuing to issue licences to new postal operators looking to compete with Royal Mail. In September 2008 there were 22 licensed operators including Royal Mail. Full list of licensed postal operators.
  • New operators have tended to enter the market through access agreements, targeting large mailers in order to build volume and customer relationships. Those access providers are now beginning to explore the unsorted mail market, by offering mail consolidation and sortation to customers with smaller daily volumes of mail.
  • At present delivery competition operates mainly in niche markets, and the volume of licensed area mail delivered by alternative operators fell by 15 per cent to 26 million items in 2007/08. However Postcomm is aware of delivery networks being set up by established and new operators.

VAT

  • Postcomm has consistently taken the position that there should be a level playing field regarding VAT for all postal operators. The European Court of Justice is considering a change to the UK’s current VAT position by TNT NV, and a decision is expected late in 2008 or early 2009. The decision will be binding on all European Governments. Postcomm is not a party to these proceedings.

 1 Based on Royal Mail operational volumes, including access. Includes all regulated and non-regulated mail, excludes door-to-door and some international.