Royal Mail has warned for a second time that competition from other carriers, this time Amazon’s own delivery network, will damage its growth prospects.
In its half-year results, the company estimated that its total number of parcel deliveries in the UK should increase by 4% a year in the medium term, but said the impact of Amazon increasingly delivering its own parcels could reduce this growth to 1-2%.
Back in June Royal Mail called for Ofcom to protect it from last mile delivery competitors such as TNT Post, claiming that TNT's expansion plans could cut £200m from its annual turnover.
It is now targeting business in what it describes as “higher growth areas”, including the clothing and footwear markets, and winning business with large retailers and online retailers. It said it is working with online retailers to be more flexible about the parcel dimensions and packaging it will deliver.
The firm, which topped the MT Top 100 this year as a new entry following its privatisation in 2013, also revealed that it had won a contract to deliver for eBay’s click and collect service with Argos, and received extra volume after allowing later acceptance times and weekend collections for retailers and e-commerce sites.
Turnover in its UK parcels and letter division remained flat at £3.7bn for the half year to 28 September 2014. The majority of which (£2.2bn) was derived from letter volumes, which rose as a result of election mailings.
Parcel turnover was down 1%, despite a 2% increase in volumes compared to the first half of financial year 2013-14. This was due to a change in the mix of parcels it carries and pressure on average unit revenue.
CEO Moya Greene said: "The UK parcels market remains challenging. As the pre-eminent UK parcels delivery company, we are targeting a number of new, growing areas, and delivered two per cent volume growth in a competitive market. We had a better than expected performance in UK letters.
"Our performance remains in line with our expectations for the full year. But, as always, this depends on us delivering another great Christmas, for which we are fully prepared."
Royal Mail also revealed a £130m investment over five years in hand-held scanners, including 76,000 hand-held scanners, which will be rolled-out by 2016-17.
