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First Class Business Bashing?

First Class Business Bashing?

As the increases in Royal Mail postage costs come into effect at the end of the month, we take a look at how these changes will affect UK businesses and the alternatives to the humble stamp.

Royal Mail has been given the freedom to set the price of both its first class and business mail, with second class also increasing. These changes are designed to protect the future of the service which has seen postal requirements fall by 25% since 2006, with a continued decline expected. The rise of the internet and e-mail has had a dramatic impact, and whilst online shopping has boosted parcel demand, this is much more competitive than the letters side of the market.

The Changes:

First Class Stamp 46p to 60p ΓÇô 30% increase

Second Class Stamp 36p to 50p ΓÇô 39% increase

First Class Franked 39p to 44p ΓÇô 13% increase

Second Class Franked 28p to 31p ΓÇô 11% increase

In summary thatΓÇÖs an average 9p (or 24%) increase for both first and second class, stamped and franked mail. Interestingly 10 years ago a first class stamp cost 27p and a second 19p.

Stamping on UK Businesses?

Whilst price rises are inevitable, it seems that the actual size of the increase has angered the public and business alike, intensifying the media attention. The shadow postal affairs minister, Ian Murray, told The Telegraph newspaper that he would write to Ofcom accusing the Royal Mail of ΓÇ£shameless profiteeringΓÇ¥ over the largest price hike in nearly 40 years.

In the current economic climate these changes will not be welcomed, with small businesses most likely to feel the strain.

The BBC has reported that the “Royal Mail delivered 16 billion letters to around 28 million addresses last year” with the letters side of the business making “a loss of £120m in 2010-11”. Whilst no-one would argue that £120m is a substantial figure, it’s nothing compared to a potential £1.4b increase in revenue based on an average 9p price rise. With increases also coming into effect across other areas of the business, including special deliveries and parcels, it seems that significant moves are being made to return Royal Mail to financial viability. Not so surprising with the possibility of up to 90% of the company potentially being sold via a share sale in the next few years.

What are the alternatives?

Reports have surfaced across the press of some business owners ‘stampeding’ down to their local suppliers and stocking up on 1000’s of stamps. Whilst this will save money in the short term, there are few more viable alternatives…

What seems clear from the above, the individual price increases favour those who utilise franked mail. The substantial increase in the cost of a stamp will perhaps see more companies turn to a franking machine to help reduce their postage costs. Of course all businesses have varying postage requirements and the costs of renting or buying and then implementing a franking machine can dramatically vary. For a business that sends out 500 letters a month, 6000 a year, the current cost of buying 1st class stamps would be £2,760 rising to £3,600 at the end of the month. The same scenario repeated using a franking machine could produce savings upwards of £960 per annum, with the cost of renting a machine often being offset by further discounts in postage costs. The downside of this is the commitment to renting the machine, often 12 months, or paying upfront for one of your own.

Turning to Technology

Email is the obvious choice for businesses that send out large quantities of mail, especially when itΓÇÖs marketing material. Text messaging is also a popular method. Not only are these options cutting the cost of postage, theyΓÇÖre taking out the physical costs of paper and ink and also perhaps eradicating the masses of unread junk mail. Whilst junk mail landing in your email inbox can be as equally frustrating, the environmental impacts of moving it into the trash arenΓÇÖt quite as severe.

The NHS is a prime example of a business utilising the power of a text message, sending appointment reminders that with the power of smart phones can now synced with your personal calendar. These donΓÇÖt only save on the cost of posting the reminder, but have substantially reduced the amount of missed appointments.

Perhaps embracing one of these alternatives could be enough to offset the price increase, but it couldnΓÇÖt harm to pop down to your local newsagent or post office to indulge in a bit of stamp collecting for personal use.

Please let us know your thoughts on these price increases and if you’ll be looking at alternatives for your postal requirements…

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