Critics attack Royal Mail as competition heats up

UK postal operator Royal Mail is expected to be slammed by communications watchdog Ofcom in December when the firm posts its annual reports.

According to tip-offs published in The Independent and the Evening Standard, Ofcom will tell Royal Mail it is falling behind services offered by rival European parcels delivery companies.

The operator’s shares fell over eight per cent in November after it issued a warning that other companies – including online retail giant Amazon – were encroaching into the package delivery industry.

However, Royal Mail later announced a new deal which will see it partnering with Amazon to enable customers to collect parcels directly from Post Offices via the postal firm’s Local Collect service.

Royal Mail announced a small reduction in pre-tax profits for the six months leading up to September 28, which this year totalled £218m – a fall of £15m compared with the same period last year.

It said competition in the market was threatening its delivery commitments, and cited delivery firm Whistl (formerly TNT Post) as chief among its rivals – and said the rebranded company could wipe £200m off Royal Mail’s annual revenue.

But others in the industry stated there was room for competition in the sector. Jon Taylor, joint CEO of Transline Logistics, said one organisation holding a monopoly limits the choice available to users of the service.

“Online retailing has grown exponentially over the last decade and as a result, delivery expectations are constantly evolving,” Taylor said. “E-commerce has changed the face of how and when people expect to receive parcels and in a growing market place, the door for competition opens.

“It was only a matter of time before challengers to Royal Mail saw a gap to launch their own cost-effective delivery services and capitalise on the need for more options.

“We operate in a world where disruption is applauded and encouraged. You only have to look at the technology and finance sectors to see that competition – especially from smaller players – is invigorating, not stifling,” he concluded.