get more discussion here. I think this journalist has written similar sorts of articles in the same vein about RM before.
Daily Telegraph Tuesday 7 Mar 2023:
Post haste
Running the business into the ground is a defeatist approach – what it needs is entrepreneurial spirit
The Daily Telegraph 7 Mar 2023
Matthew Lynn
It has already punched its way through the £1 barrier. Before long, it will probably be £2. And not long after that, it might well go all the way up to a fiver, perhaps with deliveries restricted to every second Tuesday provided you live within 500 yards of a main sorting office and don’t mind staying home for half the day to sign for it.
In April the Royal Mail will put the price of a first-class stamp up, escalating a trend of pushing up the price of posting a letter way beyond the rate of inflation.
We can all understand what the Royal Mail is up to. Letters are hardly at the cutting edge of technology, and its strategists no doubt argue that the sooner they turn it into a premium, niche product the better. In time, they will be able to get rid of it completely.
Yet we also understand that the boldest entrepreneurs, and the best-run companies, revive products and open up new markets by cutting prices, not just increasing them.
There is no iron law that mandates the letter has to be finished – but with the current management in charge it soon will be.
With the price of everything climbing on a near daily basis, it probably didn’t come as a surprise to anyone that the price of a first-class stamp will soon surpass £1.
Royal Mail has announced it will go up by 15p to £1.10 next month, one day before the first stamps featuring the image of King Charles III goes on sale (presumably so it can milk a little extra for anyone who can still afford stamp collecting). A second-class stamp will increase by 7p, to 75p. Over the last five years, the cost of a first-class stamp has risen by 64 per cent, a rate that makes even our electricity bills seem comparatively good value.
The owner of Royal Mail, now known as International Distributions Services – a name so grimly unimaginative it suggests even the brand consultants had lost the will to live – was quick to defend the price rise.
“We have to carefully balance our pricing against a continued decline in letter volumes and the increasing costs of delivering letters six days a week to an ever-growing number of addresses across the country”, said Nick Landon, Royal Mail’s chief commercial officer.
Well, perhaps. In fairness, maintaining a daily delivery service to the entire country as intransigent trade unions block any attempt to improve efficiency, while your main product has arguably been made redundant by technology, is not an easy task.
The snail mail industry has experienced a tough couple of decades. And the company is hardly rolling in money. It is expected to report a full-year loss of between £350m and £450m this year, and the share price has fallen by 27pc over the past 12 months. It faces plenty of challenges.
Even so, it is not hard to work out what the Royal Mail is up to, even if it understandably doesn’t want to say it out loud. If it keeps pushing up the price of stamps, fewer and fewer of us will bother to send anything by post, and the easier it will be for the company to argue that its obligation to offer a universal service at the same price is hopelessly obsolete.
Letters can then be turned into a niche, premium product (after all, surely no one minds paying £5 to send a Valentine’s card) delivered to urban addresses two or three times a week at most. The company can get on with the far more lucrative business of delivering all the stuff we order online.
Its pricing may not be just about covering costs – it is arguably primarily designed to kill the product off.
On one level that is clever enough. It is hard for any commercial organisation to shift successfully from one business model to another.
And yet there is surely an alternative. The most ambitious entrepreneurs slash prices to build new markets, win over new customers, and take out the competition.
Henry Ford pioneered the strategy a hundred years ago, cutting the price of the Model T again and again until it was affordable for the ordinary family. The newspaper price war of the early 1990s transformed print circulation. Ryanair turned itself into the largest airline in Europe by ruthlessly cutting prices so that Prague and Barcelona were easy weekend destinations for anyone with £30 to spare.
Amazon has built one of the biggest businesses in the world on offering incredible value, while Aldi and Lidl have muscled into the grocery trade, and before that Tesco was built on relentlessly competitive pricing. The list goes on and on.
If you are willing to take some risks, and identify ways of charging less instead of more, you can turn a company around or build a completely new one.
It is complacent to assume the letter is finished. Email is instantaneous, but in many ways it has replaced the phone call rather than the written alternative.
There are still 8bn letters sent in Britain every year, and while that is way down on the 20bn sent in 2004, it is still a lot of mail. In a world saturated with meaningless social media, perhaps the letter could be revived?
If vinyl records can make a substantial comeback with the right kind of marketing, chutzpah and enthusiasm, perhaps paper and envelopes could as well.
The Tiktok generation could discover the letter’s slower pace for the first time, while older people might well be pleasantly reminded of its sincerity. But that won’t happen if the company simply prices the product into oblivion.
If its current owner can’t see that then surely it is time for Royal Mail to be sold to someone with a vision for its core offering – and who doesn’t just want to run it into the ground.
