I had no idea when I started to plan this post how long it would take to put together and how much you are all annoyed by the Royal Mail. Postal price rises are always a bone of contention; every year people are up in arms, especially during the continuing economic difficulties. But as I pressed the send button on my email to you asking for your opinions, little could have prepared me for the torrent of responses I would receive. And the confusion! It has taken me ages to get my head around the new options that Royal Mail are bringing in so that we can give you some constructive advice to help your business. So here’s what we know, what you have told us and what we have uncovered.
Way back in December 2012 the Royal Mail published a consultation paper where they outlined their intention to change postal schemes particularly in relation to parcels. If you want to read the whole document you can find it here. Royal Mail’s overall aim seems to have been to bring clarity to the charges for sending a parcel and, inevitably, to raise more revenue and therefore prices, to keep pace with their costs. In fact they announced an expansion in October of last year which was described as “… part of Royal Mail Group’s strategy to grow its parcels businesses in the UK and overseas. In the last reported financial year, Royal Mail Group’s parcels businesses accounted for 48 per cent (£4.2 billion) of total revenues (excluding Post Office Ltd). Recent research suggests that online retailing will account for 12.4 per cent of GDP in 2016.” What business the size of Royal Mail wouldn’t take advantage of this kind of forecast?
Having previously only gone by weight RM are now mixing it up with size as well and therein lies the problem. Previously if your package didn’t fit in the large letter slot it was a parcel and all you had to do was weigh it. Simple
Now there are size guidelines which you can find here (can I point out that, after 15 minutes searching the RM website without any joy, I have had to use a link to an affiliate for you. And their aim is clarity?). As you can see, to qualify as a small parcel, your item can only be 8cm high. I’ll give you a moment to digest what that will mean for your business. Take the example of a product that won’t squash down to 8cm, is 20cm long and weighs 250gms. Previously your postage would have cost £2.70 but now you will have to pay £5.65 more than a 100% increase - a bit above the rate of inflation, wouldn’t you say? If, however, your item is less than 8cm high then your postage will be going up to £3.00 or just over 10% - still more than inflation. It is these figures that have caused the forums and chat rooms to light up with comments from confused and fearful small businesses. There are exceptions, a cardboard tube and a 16cm cube which a spokesperson from the Royal Mail explained: “We have introduced a new cube format to meet the needs of some customers in niche markets e.g. mug manufacturers and small toy manufacturers. Customers can present items that have a maximum outer dimension of 16cms on any side and if their item fits into our cube template, the items will be priced at the Small Parcel rate.” Why just these niche markets? And how does this achieve their stated aims of clarity and simplification?
Let’s delve a bit deeper into the numbers to get an idea of the scale of the impact this will have on all of us. If you look at the figures we had from BIS and Creative and Cultural Skills last year about the size of just the Heritage Craft industry you are looking at 85,000 businesses of which about 70% are sole traders which gives us roughly 60,000 businesses. If each of these businesses only sends 5 parcels per week that are over the 8cm threshold that is an increase in costs of £885,000 per week and just over £42 million in a year. And that’s just our sector.
What you said
You were brilliant and erudite in the comments that you emailed and PM’d to me. If I had the space we could have printed them all but there were a number of common strands.
What they said
We wanted to put your concerns to a variety of organisations including the Federation of Small Businesses, My Hermes (an alternative courier company), Post Office Counters and Royal Mail. We were particularly interested in what the FSB had to say since their input had resulted in some changes to help small businesses that send 1,000 parcels a year called the Online Business Account (of which more later). First of all the organisations to get back to us an FSB spokesperson had this to say: “At a time when our members are struggling with rising costs, Royal Mail’s increases can only add to the pressures they are facing. Our members are significant users of Royal Mail’s services. Our survey in 2010 showed that around 70 per cent used the Post Office to send parcels. At a time when other Royal Mail charges are increasing, we are concerned that the Government’s decision to remove price controls on Royal Mail has not yet led to any meaningful end-to-end competition in the mail sector that could benefit small firms. As long as this remains the case, businesses and consumers will continue to bear the brunt of unaffordable price increases. At a time when the Government should be doing all it can to support small businesses, we urge it to look again at this problem and defer these price increases.” Frankly, the price rises are unlikely to be deferred but their comments hint at more trouble to come in the future which is worrying.
The Post Office ( as a sister company and part of Royal Mail Group) were suitably non-committal and we are still waiting for a final comment. My Hermes didn’t even get back to us, which according to some of you is a pretty accurate reflection of their reliability as a delivery service, I’m afraid.
The Royal Mail got back to us in great detail. Unfortunately it didn’t really answer the questions we put and when we looked at copies of letters sent to MPs who had questioned the rises on behalf of their constiuents, the content we received was pretty much identical. Cut and Paste is a wonderful thing! I have tried to edit their comments to be more pithy and interesting for you but I think you deserve to see the whole response.
First our questions:
And the Royal Mail response:
We know how hard it is for businesses when our economy is as tough as it is. No-one likes to raise prices in the current economic climate. We have thought very carefully about the impact on business. We need to ensure we are more closely aligning our prices to the cost of providing a service.
Parcels are priced by weight but the size of a parcel has an impact on the cost of collecting transporting, sorting and delivering an item. For some time, Royal Mail has been losing money on delivering larger, heavier items. We are increasing parcel prices to more closely align them to the cost of handling and delivering those items, like any other business would do. We are also restructuring our parcel portfolio to make it simpler to understand and are introducing two broad parcel categories – small parcels and medium parcels. This will bring Royal Mail in line with other major postal operators, for example, in Germany, France and Italy,
Post Offices will continue to accept parcels on behalf of Royal Mail and Parcelforce, however there will remain a maximum weight limit of 30kg for parcels posted over Post Office counters using Parcelforce.
Small businesses which send larger volumes of parcels can benefit from significant discounts on their postage costs, either through contract or franking services. Franking customers benefit from discounts of up to 18 per cent on stamp prices for parcels. Further discounts are available for contract customers. To support smaller businesses, we are reducing the minimum volume threshold that they need to send to qualify for contract parcels. This means that businesses that send over 1,000 parcels a year, and spend £5,000 or more on Royal Mail’s range of products in total, can benefit from additional discounts on their postage costs. Previously the threshold was 5,000 parcels a year.
Does this answer your questions? It certainly doesn’t answer mine.
What can you do?
It may seem all doom and gloom but there are things you can do:
In our opinion the Royal Mail has not simplified the process of sending parcels at all. We understand that they were losing money on heavier parcels but it’s the dimensions that are the most problematic for small businesses. We will continue to monitor the situation and let you know if we become aware of any other options that can help.