UK Parcels, International and Letters (UKPIL) comprises parcels, international and media & unaddressed mail.
As the UK’s Universal Service provider, the traditional letters business delivers letters and parcels, six days a week, to over 29 million addresses across the UK.
But, UKPIL is also home to some of Royal Mail’s growth stories. The increasing popularity of online retailing is driving volume growth across its core parcels network and its UK express carrier, Parcelforce Worldwide. The company is also renewing its focus on its advertising and direct mail business to grow its share of the UK advertising market.
Today, parcels represent a very significant proportion of the Group’s revenues.
Across the Group our parcels networks are benefitting from growth in online retailing. It is estimated that by 2016, online retailing will account for 23 per cent of the UK’s overall retail spend. Royal Mail is well positioned to benefit from this.
Our parcels business offers a high quality service. In the busy Christmas 2011 period, Parcelforce Worldwide delivered 96.7 per cent of parcels first time.
We are taking steps to optimise delivery processes to reflect the increasing number of parcels in the mailbag.
We have distributed 44,000 Postal Delivery Assistants to postmen and women, we have a fleet of more than 5,500 shared delivery vans, and we are increasing efficiency and reducing cost wherever possible by routing traffic through our core network.
We are innovating and investing in this business to ensure we can continue to drive profitable growth without compromising on quality. We know customers use us because of our brand, our reach and our commitment to quality.
Together, GLS and international mail represent a growing proportion of the Group’s revenues. Our international operations, based in the UK, work closely with postal administrations across the world to despatch outgoing mail from the UK and deliver items from overseas to customers at home.
The increase in borderless online retailing continues to drive growth. As with our domestic business, parcels are a growing percentage of the mail mix.
The international market is a key focus for future revenue generation. In addition to our existing network, including our state of the art processing hub close to Heathrow Airport, we are investing and innovating for the future:
· Improved tracking technology allows international mail customers to track mail to 20 key destinations. We will expand this service in 2012-2013;
· We have simplified our UK pricing structure for Airmail and Surface mail; and
· We have relaunched a streamlined product portfolio for export customers. This is an important growth area, with 10 per cent year-on-year increase in revenues.
Direct Mail by itself is one of the most effective advertising stratagems. Coupled with other channels, its effectiveness is significantly enhanced. That’s why some of the world’s leading internet companies advertise their services through Royal Mail.
We have renewed our focus on media and marketing mail to leverage our reach, our customer data, and customer relationships, and have targeted our top 3,000 advertisers with our improved end-to-end services.
Collecting and delivering stamped and metered mail is our core business. Ofcom, our regulator, has said that Royal Mail is the only company capable of delivering the Universal Service: a one-price-goes-anywhere, six day a week delivery service to 29 million addresses across the UK. For more detail, please see our Universal Service section.
In March 2012, we welcomed a new regulatory framework, which allows Royal Mail to compete fairly in the transactional, bulk mail, and direct mail sectors. The new framework will allow us to earn a fair commercial return for the majority of services we provide. Even with this return, we remain highly competitive.
Modernisation remains a priority. During the year we completed the upgrade of letter automation in our mail centres, which has made delivery rounds more efficient.
Our modernisation programme, along with a simpler portfolio, will also help reduce costs across UKPIL’s Business mail arm. But more remains to be done. We must complete our process of modernisation so as to compete effectively in the UK market.
This means not only making savings on costs, but also delivering a more efficient network and changing every process in the business. The time of maximum change is now.
Registered Office Royal Mail Group Ltd, 100 Victoria Embankment, London, EC4Y 0HQ
© Royal Mail Group Limited 2013