City Link 'won't benefit Royal Mail'

The City has scotched claims that Royal Mail’s parcels division could benefit from the collapse of City Link, saying that TNT Express and UK Mail would be the main winners from the company’s demise.
According to UBS, there will be a “relatively limited impact” on Royal Mail Group revenues from City Link, which entered into administration on Christmas Eve.
In fact, UBS analyst Dominic Edridge, believes that Royal Mail is facing the same problems as City Link, “whether the parcel industry can make money from the growth in e-commerce volumes, given the relatively low yield and drop density”.
He added: “One of the problems Royal Mail has faced has been the growth in parcel market capacity (including DPD, Hermes, UK Mail and, especially Amazon. Assuming City Link’s capacity disappears we believe this should offset the increase from Amazon – but not the others.” Amazon recently launched its same-day delivery service but has also now jumped into bed with Royal Mail.
Edridge also pointed out that City Link’s core market was the slightly larger and more premium parcels – such as next-day delivery items – meaning its collapse is likely to be more beneficial for “premium competitors”.
City Link was said to be losing £500,000 a week when it went into administration. Owner Better Capital – which also recently failed to turn round Reader’s Digest – had bought the business from Rentokil 18 months ago for £1.

City Link ‘won’t benefit Royal Mail’

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