Is the Royal Mail privatisation a mistake?
The government has announced its intention to float Royal Mail on the stock exchange to overarching grumblings and resentment. But it could be a massive opportunity.
In just three years, Royal Mail will celebrate its 500th birthday, yet long before then this much-loved institution will undergo its most drastic transformation to date. Understandably, this has caused consumers concern following widely reported fears of price rises and the potential loss of the universal service obligation – not to mention the potential for imminent industrial action.
While I certainly sympathise with these concerns, we’ve been watching events unfold over the past few months with keen interest. The seismic changes taking place in the parcel sector represent an excellent opportunity for private companies to stake their claim, but this needn’t be a bad thing from the consumer’s point of view.
Perhaps the most common reason for anger at the sell-off is the claim that prices will rise to satisfy the greed of private investors. What some people seem to be forgetting is that prices have been rising steadily already for some time now. Three years ago a second-class stamp cost just 32 pence but has now risen to 50 pence – an increase of more than 50 per cent. It’s not just letters either: we are ever more becoming a nation of parcel senders. On 1 April 2013, Royal Mail again increased the price of sending a parcel after introducing a new size criteria when calculating costs. Under the new system, some types of parcels doubled in price.
Whether or not Royal Mail prices continue to rise remains to be seen. What we do expect is that, in a more equal market, competition for customers will accelerate – leading to increasingly attractive pricing models.
When British Telecom was privatised in 1984, an often quoted concern people raised was 'But what will happen to the phone boxes?' Twenty years later, this point seems entirely immaterial following the mobile phone revolution. Since then, we’ve gone through another revolution with our lives being lived increasingly online. Since the arrival of email, we send and receive fewer letters. Since the arrival of online shopping, we send and receive more parcels. The rise of e-commerce means we all have the convenience of buying something at the click of a button, why shouldn’t we have it delivered at our convenience too?
Just like with BT phone boxes in 1984, in the very near future a six day a week delivery system where you need to be at home to sign for parcels will seem similarly outmoded. Most people don’t have time to wait around for a parcel or to trudge to a far-flung depot to collect it. It’s up to the delivery companies to react quickly to meet this demand.
Looking into my crystal ball, the future of the Royal Mail appears uncertain though I’m not sure the same can be said of the private sector as a whole. In recent years, options for sending and receiving parcels have flourished with the advent of convenience based services such as Click and Collect and Collect+. These allow consumers to send and receive parcels, seven days a week and sometimes 24 hours a day. These days you have the ultimate choice of how you want to send a parcel: you can send it according to what’s cheapest, what’s fastest or what’s most reliable.
Ultimately, that’s what all businesses in the 21st century should seek to do: offer consumers flexibility and choice. The lustre of Royal Mail’s heritage will slowly fade along with the public’s loyalty. But as this happens, perhaps the public will open their eyes to the alternatives out there.
James Greenbury is Chief Executive Officer at Parcel2Go.com