Royal Mail under fire as direct mail volumes slump 63%

royal_mail_new1Royal Mail’s efforts to promote direct mail during the Covid-19 lockdown have been branded “too little, too late” with the postal giant witnessing a “disastrous” 63% crash in advertising mail volumes.

The grim picture, revealed in Royal Mail’s end of year results, shows addressed letter volumes slumped yet again, down 8%, but this was in line with guidance provided in its Q3 trading update. However, total letter revenue was only down 0.9%, which the company only has the General Election and European Parliament Election to thank for.

Addressed letter revenue was also down 23% (excluding elections); with volumes (excluding elections) down 33%. Direct mail volumes crashed 63% due to the coronavirus. Business mail volumes proved more resilient, down 19%, but many of these mailings are a legal requirement from sectors such as financial services.

Even parcels have taken a hit. While other delivery firms, most notably DPD, have seen a surge in business due to the increased demand in online shopping, Royal Mail saw parcel volumes increase by just 2%.

The company blamed this on the threat of industrial action in Q3 and impact of Covid-19 on its international import volumes during Q4. Parcel revenue inched up 4.6%, due to targeted pricing actions.

Overall, in the year to March 31 group sales were up £259m to £10.84bn but operating profit slumped by £124m to £217m. The upshot is that Royal Mail is to axe 2,000 management jobs, with marketing, IT and finance roles in the firing line.

One industry source said: “You have to ask why Royal Mail was so slow out of the blocks. It waited until May – nearly two months into lockdown – to launch any sort of direct mail incentive package and even these are only available to certain sectors.

“It was all too little, too late. At a time when the whole of the UK was stuck indoors, Royal Mail sat on its hands. These results are not only disastrous for Royal Mail, they effect the whole direct mail industry, too.”

Royal Mail Group interim executive chair Keith Williams admitted that the UK business has not adapted quickly enough to the changes in the marketplace of more parcels and fewer letters.

He added: “Covid-19 has accelerated those trends, presenting additional challenges. We are implementing a three-step plan. Firstly, we’re taking immediate action on costs, which will result in a £130m saving in people costs next year and flat non-people costs, along with a reduction of around £300m in capex across the group over the next two years, to address the immediate impact of Covid-19. Regrettably, we are also proposing a management restructure impacting around 2,000 roles.

“We are committed to conducting the upcoming consultation process carefully and sensitively. We will work closely with our managers and their representatives during this difficult period, including supporting them as they transition into the next stage in their careers.

“Secondly, we’re accelerating the pace of operational change in the UK to address long-standing challenges and be sustainable for the long term. Thirdly, we’re working with all stakeholders to underpin the USO to ensure it reflects user needs and is modern, contemporary and sustainable. We want to ensure Royal Mail remains a key part of the UK economy, a good employer, and the nation’s delivery partner of choice.”

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