OfCom – competition healthy in a changing market

Reflecting global changes in parcel and letter delivery around the world, postal and communications regulator OfCom has released an annual report that suggests that mail volumes are falling gently, parcel volumes are rising and competition in the market is good.

The research primarily focused on the dominant Royal Mail in the market. The national postal operator seems to be doing well, meeting its targets in terms of items being delivered on time. Royal Mail’s mail volumes have fallen by only 1.1% to 12.6bn items. This compares favourably with other countries – notably New Zealand’s postal service which has seen annual declines of 10% annually.

One of the issues within the market was Whistl pulling out of the end to end (E2E) mail delivery market. This has killed competition in this sector as there are no end to end mail delivery businesses other than Royal Mail now. However, with the problems faced by UK Mail and DX, there could be an issue with Royal Mail stifling competition in this sector – though there are well known structural issues with both companies.

Parcel deliveries across the market are on the rise, seeing a 7% increase in volumes between all the companies in this market. Even though a key company, City Link went under in late 2014, competition seems to be healthy as is exhibited in the increase in parcel revenues in the market, of only 6% in the same period – this suggests that competition is making companies force down prices to compete for business.

OfCom also found that a number of businesses that had previously only worked in B2B deliveries are looking to take a piece of Customer to Anyone (C2X) and B2C markets. This is seen as a growth market and competition if anything is blossoming in the fight to access something that is seen to have good growth well into the future.