OfCom shows parcels market is healthy

The UK parcels market is healthy according to Ofcom. Its annual monitoring update shows that the market is growing quite quickly, yet the revenues per unit are declining due to competition between carriers.

According to the Ofcom report: “In 2015-16, average unit revenue for a domestic parcel was £3.39. The average unit revenue for a domestic parcel of £3.21 in 2016-17 therefore represents a 5% decrease in last year’s figure. This is the second consecutive year of decline in average unit revenue and may reflect, at least in part, growing price competition among parcel operators.

“The average unit revenue for an international outbound parcel decreased in 2016-17 by 1% from £11.77 in 2015-16 to £11.62 in 2016-17.”

Ofcom also found that the UK parcels market is on the up, and this is being driven by e-commerce. According to Ofcom: “Total measured national volumes increased in 2016-17 by 7% to 2.1 billion items and revenue increased by 3% to £8.7 billion.” However, the rate of growth was slower than in 2015-16.

Customers have higher expectations regarding the speed of delivery according to Ofcom. A majority of customers (55%) had used a next day delivery service in February this year.

It seems that letter volumes are still declining. The 2016-17 addressed letters volume fell by 5% to 11.7 billion units. This is a greater decline than the average of 4% in recent years. Revenues from addressed mail was £4.2bn, a real term decrease of 5% against the previous financial year.

On the plus side. Royal Mail’s quality of service (QoS) performance in 2016-17 improved compared to the prior year. Its performance was the same as, or better than, 2015-16 against seven of the eight QoS measures.

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