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Royal Mail shows how it’s evolving to suit the needs of online customers – at home, and in China

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Royal Mail today set out how it plans to maintain its leading position in the UK delivery market through initiatives that include giving online shoppers and retailers services that suit the way they buy and sell.

During its latest financial year, the company has moved further into the ecommerce market through initiatives that include giving Amazon’s customers the ability to collect their online orders through 10,500 Post Offices and setting up a shop on the Tmall marketplace to enable more than 300m Chinese consumers the opportunity to buy “distinctively” British products, shipped via Parcelforce Worldwide. Meanwhile, eBay buyers can now track returned items, while sellers through the marketplace can more easily print delivery labels.

But despite its partnership with Amazon, the delivery company said the effect of the UK’s largest online retailer delivering through its own Amazon Logistics network would be to hit its own parcel deliveries. It forecast that total parcel deliveries would grow by 4% a year in the medium-term but said the Amazon effect would restrict Royal Mail’s potential rate of growth to between 1% and 2%. “Overcapacity,” it said, “has combined with the reduced rate of growth in the addressable market to create pricing pressure in all segments.” In its latest financial year, UK parcel volumes were up by 3% but revenues rose by only 1%. Letter volumes fell by 4%, with revenues down 1%.

Other moves to suit online buyers and sellers include a move to extend opening hours across 3,000 Post Office branches during the year, with 2,000 now opening on Sundays.

The company has also refined its Parcelforce Select delivery service, giving control of pre-delivery notifications to the driver. This, said Royal Mail, “ensures that the actual delivery is based on local driver experience, rather than a centrally-generated time window.” And, it added: “We have won new business as a result of this initiative. Customer feedback has been very positive.”

Finally, a new returns portal was launched in March to enable online retailers to manage their returns.

The update came as Royal Mail announced revenue of £9.4bn in the year to March 29 2015, a 1% rise compared to last year. Operating profits before transformation costs came in at £740m, ahead of the £729m it reported last year. At the bottom line, pre-tax profits of £569m were ahead of the £421m reported last year. But those figures include discontinued operations. When the company focused on its continuing operations, revenue of £9.3bn was flat on last year, operating profits before transformation costs were down at £661m from £669m last time, and bottom-line pre-tax profits of £400m were well down on the £1.7bn reported last year.

Chief executive Moya Greene said: “We have delivered operating profits in line with our expectations. Our continued focus on efficiency resulted in a better than expected UK cost performance, offsetting lower than anticipated UK parcel revenue. At the same time we have delivered a large number of innovations at pace as we transform our business.

“Our trading environment remains challenging, but we are now poised to step up the pace of change to drive efficiency, growth and innovation, while maintaining a tight focus on costs.”

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