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Royal Mail parcels hit as international deliveries fall and Amazon delivers more of its own

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Royal Mail’s parcels business has been hit by Amazon's move to expand its own delivery network as well as the strength of sterling, which meant fewer international orders were sent.

The delivery service said in an interim management statement that in the three months to June 29, performance in its parcels division had been weaker than expected. Volumes rose by 1% but revenues fell by 1%. This, said chief executive Moya Greene, was "largely driven by the intensifying competitive environment in the account, consumer/SME and export channels."

Amazon’s changes to its minimum order level for free delivery and the expansion of its own delivery network had reduced overall market volumes, the company said. “Competition in account and consumer/SME parcels has intensified more than expected as other carriers seek to fill capacity in their networks by aggressively reducing prices.” And overall, June’s performance was weaker as the retail sector slowed. The company pointed to measures it had taken such as longer weekend opening to receive e-retail parcels, as well as Parcelforce’s Sunday deliveries for online shoppers. The benefits of these measures, however, were not expected to be seen till the second half of the year.

The letters division, however, performed more strongly, with volumes down by 3% but revenue up by 3%.

Greene said: "Given the increasing challenges we are facing in the UK parcels market, our parcels revenue for the year is likely to be lower than we had anticipated. However, through cost control measures and with continued good letters performance we expect to be able to offset the impact on profit such that our overall performance would remain in line with our expectations for the full year. Our parcels revenue will be dependent on our performance in the second half, which includes the Christmas trading period, and on no further weakening in our addressable UK parcels market."

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