Competition is starting to benefit smaller businesses but more progress and greater innovation needed

30 October 2007

  • Smaller businesses are beginning to benefit more from competition, more progress needed.
  • Mailers are exploring alternatives to mail reconfirming the need for more innovation.
  • Businesses are strongly in favour of competition in the postal services market.

Research commissioned by Postcomm, the independent regulator for postal services, has found the benefits that large mailers have been experiencing since the market was opened have now started to slowly spread to smaller businesses. However, much more progress is needed and the challenge posed by growing alternatives to mail confirms the need for mail operators to continue to pursue greater innovation.

The market research, which forms part of Postcomm’s latest annual Business Customer Survey, revealed:

  • although Royal Mail remains the dominant operator, one in five small and medium mailers and more than a third of large mailers are using more than one mail provider;
  • one in five respondents have explored alternatives to mail and have moved some of their mail to other media in the past 12 months which confirms the need for all postal operators to place more emphasis on customer service and innovation; and
  • more than half of respondents agreed that competition has improved choice and more than a third believe competition has improved Royal Mail’s quality of service.

Also published today is Postcomm’s annual Competitive Market Review (CMR), which looks at factors affecting competition in the postal sector. Key findings of the CMR included:

  • mail volumes were 2 per cent down on last year but there are indications that direct mail is growing in sectors such as building societies, charity, and health;
  • end-to-end competition has declined by four million items and stands at less than one per cent of total mail volume, but mail volumes collected by ‘access’ operators and delivered by Royal Mail have more than doubled and now represent 19 per cent of revenue-derived mail volumes.

Launching both documents at the UK Mail Show today, Postcomm’s deputy chief executive Richard Moriarty said:

“Our research shows that a larger number of small businesses are beginning to benefit from competition. However, much more needs to be done before small businesses begin to experience the full benefits of competition that larger mailers have done since the market was opened. The awareness about the opportunities created by competition among all businesses is growing and many mailers are now using more than one provider. Indeed, our research found that businesses were overwhelmingly in favour of competition in the postal services market.

“There is plenty to be optimistic about, but the findings of Business Customer Survey also reaffirmed the need for all mail operators to continue to innovate to meet the challenges raised by alternative media. Although respondents still value mail as a communications medium, in the past year, more businesses have moved some of their mail to other media such as email.

“One key to the success of mail as a medium is to focus on getting more value into the product through innovation which can enable the sender to generate more revenue or provide greater satisfaction for the recipient.”
 
Notes for editors

  • The Competitive Market Review 2007 looks at the state of the mail market in the UK, and the 2007 Business Customer Survey is based on market research prepared for Postcomm by Quadrant Consulting and BMG Research. Postcomm prepares and commissions these reports as part of its monitoring of the UK postal market. It is important that Postcomm has a detailed knowledge of the market and how it might develop in order to inform its regulatory decisions.
  • Both documents were launched today by Postcomm’s deputy chief executive Richard Moriarty in his speech at the UK Mail Show and are available in hard copy from Postcomm at 6 Hercules Road, London SE1 7DB. A detailed summary of the key findings of both documents is also available.
  • The postal services market was opened to full competition on 1 January 2006, but competition has been allowed in the bulk mail market since 2003.