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Royal Mail sees rising demand for seven day a week parcel deliveries – and is talking to unions about structural change

Royal Mail is also using more electric vehicles to deliver. Image: SWNS/courtesy of Royal Mail

Royal Mail says there is demand for a seven-day a week parcel delivery services as it shifts to focus on its growing parcel business ahead of its declining letters business. The delivery services, which reported full-year figures today, says it needs to change the way it operates in the wake of the Covid-19 pandemic. It says there is now support for parcel deliveries seven days a week, while a five-day letter service would meet most people’s needs, given that letter volumes are 18% lower than before the pandemic – although volumes grew by 3% year-on-year following /declines the previous year.

About 75 of Royal Mail’s major commercial retail customers now use its new Sunday delivery service – up from 45 in November 2021 – and it now plans to scale up the service so it is available to all customers. Its upgraded Royal Mail App now enables customers to use its Parcel Collect service, to track and send items, and to calculate the carbon emissions from their delivery. Nearly seven million people used the app as of March 2021, up from 4m a year earlier.

Royal Mail Group today reported revenue of £12.7m in the year to March 31 2022, 0.6% higher than last year. Within that, Royal Mail revenue was 1.6% down at £8.5bn, as parcel revenues declined by 6.5%. Pre-tax profits of £662m were 8.8% lower than last time. The company now expects revenues to decline in its next financial year, as the volume of parcels declines in the UK, and as fewer Covid-19 tests are sent through the post.

In its latest year, domestic parcel volumes fell by 7% on last year, as the lockdown boom in online sales fell back. But volumes are also 31% higher than before the pandemic. This, says Royal Mail, reinforces “our view that the pandemic has resulted in a step up in domestic parcel volumes driven by increased ecommerce activity”. It believes that its share of the parcels market has increased.

At the same time, international parcel volumes fell by 42% year-on-year as customs processing into the EU increased, as costs rose, and as air freight capacity reduced. International parcel revenues decreased by 23.3% at the same time, with export volumes showing smaller declines than import volumes during the year. Average revenues from both export and import costs increased.

Five parcel sorting machines were installed in mail centres during the year, taking it to 25 by the end of March. In the coming year that total is expected to rise to 39 – meeting Royal Mails target of 50% automation, with a plan to reach 90% automation in parcel sorting by the end of its 2023-24 financial year.

Royal Mail is currently talking to the CWU (Communications Workers’ Union) about a new pay offer worth up to 5.5% – of which 2% of salary is performance related – in exchange for changes to working conditions related to structural changes in the service that it offers. The offer has been rejected by the CWU and the two parties are going into talks through its Dispute Resolution Procedures.

It is also running training schemes for apprentice postal workers, operations managers and drivers.

Simon Thompson, chief executive of Royal Mail says: “It has been a year of progress, but there is much more to do. Over 50% of parcels are now processed automatically, the delivery of two new parcel hubs are on track, and we are reinventing our services and digital experiences to make sending and receiving even easier in an online age.

“But as we emerge from the pandemic, the need to accelerate the transformation of our business – particularly in delivery – has become more urgent. Our future is as a parcels business, so we need to adapt old ways of working designed for letters and do it much more quickly to a world increasingly dominated by parcels.

“The last two years has shown us all how quickly customer needs can change. Our focus now is to work at pace with our people and our trade unions to reinvent this British icon for the next generations, so that we can give our customers what they want, grow our business sustainably and deliver long-term job security for our great team. We have no time to waste.”

Sustainability strategy

Royal Mail says its customers are now looking for less environmentally damaging delivery options, and it says its emissions per parcel are already the lowest among major UK parcel operators. Now it aims to reduce average emissions per parcel from 205g CO2e in 2021-22 to 50g CO2e, and to be a net zero business by 2040, ten years earlier than its previous target date. Royal Mail has announced in the last year plans for about 3,000 more electric vans, has trialled micro-electric vehicles and has introduced low emission gas powered trucks. All of its company cars will be electric by 2030.

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