Privatise the Royal Mail?
February 8, 2011 § 1 Comment
We are PenFountain.com and, based in Cranleigh in the depths of Surrey, are able to offer our range of discounted pens with options of free delivery in the UK on orders over £15.00, and a flat rate of £3.49 for guaranteed next day delivery. We can offer this for the whole of the UK.
During an entertaining ‘10 O’Clock Live’ (Channel 4, 10.00pm 6/2/11), Sir Christopher Bland, former CEO of BT, advocated the privatisation of Royal Mail citing his experience with BT, but failing to understand the monopoly that the Company had in its market, (and still has in Cranleigh) which still enables them to dominate their market. Sir Christopher’s position was that Royal Mail should be privatised as soon as possible because it is already losing market share at a significant rate. Apparantly, the privatised company would then be responsible for covering all the services currently offered by Royal Mail but on a more commercial footing and allowing it to compete with the existing postal and courier companies.
On the face of it it sounds perfect. However, my business model allows me to offer flat delivery rates over the whole of the UK using Royal Mail, arranging despatch as late as 4.30pm and 12.00pm Saturdays. If we want to use an alternative, all the courier service companies are prepared to offer competitive rates for next day parcel delivery within the core of the UK, to any business address, with prices very much dependent on regular volumes. However, if we want to send a consignment to an exotic location such as, the Isle of Wight or Belfast, we start paying significant premiums. Taking our notional consignment a stage further, if this is a single parcel despatched in isolation, it becomes cheaper to drive the package to deliver it yourself than ‘post’ it. Examining Sir Christopher’s argument in more detail, we start analysing the ‘lost market share’ argument. We believe that we will find that a significant proportion of the lost share will be found in servicing the business districts of our major cities, their hinterlands, and within the M25. These are the profitable areas of the mail business; the easy areas to service. If you live in the more distant corners of Scotland, even on the mainland, you will almost certainly be discriminated against by the likely cost of the proposed privatised service as being un-commercial and, by default, effectively discriminated against by on-line and mail order services as a result.
In our opinion, for our fountain pen business it is essential to be able to offer a flat rate, competitively priced, reliable delivery service, across the UK and its islands. These aspects are not all readily compatible with the commercial demands of a PLC and its shareholders. The potentially low volumes, distances, and waters to cross for some the more exotic locations will inevitably lead to discrimatory pricing. We are not advocating a situation where the services offered are not collectively commercially viable, but a service which, across its range breaks even. In our opinion, this can only be managed within the public sector and therefore, support for the existing business model must be a priority for our customers and competitors alike.
This is not a politcially motivated view – both the Labour and Coalition governments have proposed this route.