28 July 2009 - Jonathan DeCarteret - © Hellmail Postal News

Royal Mail today announced it plans to reduce MailSort 3 and sustainable rates by around 3% from October 26th 2009. This has far reaching implications for Royal Mail’s rivals, who will find that their rates no longer undercut MS3.

Royal Mail rates are used as the benchmark for comparison, which means that some of the more expensive operators will be priced out of the market. Post-Switch estimate that TNT and UK Mail will need to price review approx 300m – 400m items of post.

Post-Switch.com founder Jonathan DeCarteret states that “we have witnessed a huge spike in visitor numbers to our website, as customers search the market for a cheaper rate”.

For a typical client mailing 500k items over a year will find their Royal Mail bill reduced by £3,000. From our analysis 3 large operators who previously undercut Royal Mail are now more expensive.

This announcement squeezes the headroom between Royal Mail’s retail rate and the Wholesale cost that rival operators buy at. Having consulted with all leading operators, Post-Switch.com believes there is little headroom for profit, for all but the leanest of operators. Senior Market Analyst Chris Phillips comments “There a still operators out there who can beat the new MS3 rate, but you need to re-negotiate and talk to the right operators”

PostComm have announced that they were notified by Royal Mail on the 26th July and provided with the minimum 3 months notification period. They intend to review the new pricing along with their existing consultation on Mailsort Lite. “In reality we don’t expect PostComm to take decisive action until the next pricing review in April 2010”.

Post-Switch estimated that the reduction will result in an instant loss of income to Royal Mail of over £150m. “Royal Mail are using their market advantage to price competition out of the market, but its difficult to justify these costs in light of Royal Mail’s balance sheet” Jonathan DeCarteret.

Post-Switch.com confirm that they are still able negotiate rates that beat Royal Mail’s prices because they aggregate their client’s portfolio to guarantee exceptional discount. Customers are invited to visit the Post-Switch.com website and hit the Quote button to compare the market.

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