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Ecommerce driving parcel growth, says Royal Mail, as it warns Amazon’s move towards self-delivery set to brake that growth

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E-retailing continues to drive the growth of parcel deliveries in the UK, the Royal Mail said today. Currently, it said, about 10% of retail sales were made online and this was expected to rise to 13% by 2017. But the delivery company warned that Amazon’s development of its own logistics network was likely to hold back its own potential growth.

The update came as Royal Mail announced revenue of £4.5bn in the half-year to September 28, 2% up on the same time last year. Pre-tax profits came in at £218m, before one-off costs, down from £233m last time. Profits after those costs were at £167m, down from £1.58bn.

But UK parcel revenue fell by 1% to £1.46bn in a “highly competitive environment” in which fast, reliable and competitively priced delivery and returns were increasingly a priority for shoppers. “We estimate Amazon’s own delivery network will reduce the annual rate of growth in the UK addressable market to 1 to 2%,” said the Royal Mail in today’s half-year statement. “We expect this dynamic to continue for approximately two years. Additional capacity in the market has contributed to increasing price pressure as other players seek to fill their networks.”

Royal Mail’s strategy is to target high growth areas of online shopping, such as clothing and footwear. It is working to become more flexible on the parcel dimensions and packaging materials it will accept. eBay sellers are a priority, and a new web-shipping tools allows online traders to integrate their eBay accounts so as to print labels and send parcels in bulk.

The company also aims to be easier to work with, and has introduced later acceptance times for parcel deliveries and weekend collections, while its parcel delivery business Parcelforce Worldwide has introduced Sunday deliveries. Its Post Office-based click and collect service has also been extended to contract SME customers. Following Sunday opening at enquiry offices, where customers can pick up their online deliveries, this is now the third busiest day of the week, said Royal Mail.

Moya Greene, chief executive, said: “The UK parcels market remains challenging. As the pre-eminent UK parcels delivery company we are targeting a number of new, growing areas and delivered 2% growth in a competitive market.”

She added: “Our performance remains in line with our expectations for the full year. But, as always, this depends on us delivering another great Christmas, for which we are fully prepared.”

Elsewhere, the Royal Mail said revenue from letters remained flat at £1.67bn but that from marketing mail grew by 5% to £571m.

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