In the News
Royal Mail losing market share in the contestable parcels industry
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29th December 2023
The privatised Royal Mail is losing market share to scaled rivals according to data for 2022 published by Pitney Bowes. The industry is an oligopoly - the top four carriers in the UK (Royal Mail, Hermes, Amazon Logistics and DHL) account for 66% of parcel market share by volume - but also a contestable market driven by price and non-price competition from other companies including UPS, Yodel and DPD.
![](https://tutor2u-net.imgix.net/subjects/economics/downloads/Royal-Mail-Market-Shares.png?auto=compress%2Cformat&fit=clip&q=80&w=800)
This is a sector where economies of scale matter! According to Pitney Bowes, in the UK in 2022, 162 parcels were generated every second, or 14 million each day. However parcel volume declined 5%, year-over-year, to 5.1 billion in comparison to 2021 - in part a reflection of the end of pandemic lockdowns. Parcels generated per person were down to 75 and parcels per household dropped to 181 from 192 in 2021.
This is a really good industry to consider different types of price and non-price competition:
Competition Strategies for UK Parcel Delivery Companies:
Price & Value:
- Competitive pricing: Offering lower prices or discounts for specific parcel sizes, weights, or destinations.
- Value-added services: Bundling additional services like insurance, tracking, or signature on delivery at competitive rates.
- Subscription models: Providing subscription plans for frequent senders with discounted rates or additional benefits.
Speed & Reliability:
- Speed options: Offering a range of delivery speeds, from same-day to economy options, catering to different time-sensitive needs.
- Delivery guarantees: Providing guaranteed delivery times with refunds or compensation for missed deadlines.
- Network coverage: Ensuring wide and efficient delivery networks to reach remote areas and rural locations.
- Reliability: Maintaining high success rates for on-time and damage-free deliveries.
Customer Experience:
- Convenience: Offering flexible drop-off and collection options, including self-service lockers, parcel shops, and home collections.
- User-friendly platforms: Providing easy-to-use online booking systems, tracking tools, and mobile apps.
- Customer service: Offering responsive and helpful customer support channels for inquiries and issues.
- Sustainability: Highlighting eco-friendly initiatives like electric vehicles or carbon offset programs.
Innovation & Differentiation:
- Specialised services: Catering to specific niches like oversized items, perishable goods, or same-city deliveries.
- Technological advancements: Investing in automated processes, AI-powered route optimization, and advanced tracking solutions.
- Strategic partnerships: Collaborating with other companies or marketplaces to expand reach and services.
Beyond the Core:
- Brand reputation: Building trust and positive brand perception through marketing and ethical practices.
- Employee satisfaction: Recruiting and retaining skilled staff to ensure quality service.
- Data-driven decision making: Analyzing customer data and market trends to adapt and improve services.
Ultimately, success in the competitive UK parcel delivery market requires a focus on a combination of these strategies, tailoring them to specific target audiences and constantly innovating to stay ahead of the curve.
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