Costs up as Royal Mail aims to “react quickly” to online competitors

Royal Mail saw operating costs for its European parcel business increase in half year results, as the group aims to invest in IT in order react quickly to its competitors’ online initiatives.

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Royal Mail saw operating costs for its European parcel business increase in its half-year results, as the group aims to invest in IT in order react quickly to its competitors’ online initiatives.

In the firm's first results since partial privatisation, Royal Mail also revealed that it has rolled out 74,000 handheld electronic scanners to postal workers in time for the busy Christmas period. The scanners enable Royal Mail to track items in real time at key points throughout the network, through to the customer’s doorstep.

The group is relying on the parcel business to drive growth going forward, as online business has chipped away at the distribution of addressed letters. 

“The parcels sector is highly competitive, with a number of distinct market segments and multiple players. Our competitors have introduced many initiatives in the online parcels delivery market, aimed at taking share from Royal Mail,” it said in its earnings report.

“We aim to react quickly in response to competitor initiatives to ensure we continue to deliver what customers want. It is vital that we continue to invest in the customer experience. IT investment to enhance customer convenience, including tracking, is an important sectoral theme.”

Both eBay and Amazon were cited as two of Royal Mail’s main competitors.

In April 2013 Royal Mail introduced an online tracked returns service as well as delivery information for its Special Delivery offering. It also plans to introduce new click and collect services, where customers can buy items online and select somewhere locally to pick them up.

“As previously announced, we are ready to capitalise on the increasing popularity of ‘click and collect’ networks and have introduced our own ‘click and collect’ service in Post Offices, providing more convenient parcel delivery options for online retailers and their customers,” Royal Mail said.

“Post Office has one of the largest retail networks in the UK - its branches are in ideal locations to provide convenient, secure parcel collection facilities.”

Compared with H1 results last year, the Royal Mail’s parcel business’ operation costs were up 19 percent to £27 million, which it largely attributed to “IT consultancy costs”.

Pre-tax profits for the group were £233 million for the six months 29 September, up from £29 million a year earlier. Since selling 60 percent of the company on the London Stock Exchange, the Royal Mail’s share prices have continued to soar.

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