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Pushing the Envelope

15 December 2005

The UK postal market will from next month be the most de-regulated in Europe when Royal Mail loses its monopoly. Among the new operators vying for a share in the £6.5bn mail market is TNT Mail. Jane Fenwick looks at some of the advantages of switching from Royal Mail

NEXT MONTH ROYAL MAIL’S 350-YEAR OLD STATUTORY monopoly comes to an end. From January 1st 2006 any licensed postal business will be able to deliver letters in the UK. Limited competition is already allowed and complete deregulation of the postal market will end the Royal Mail’s historic monopoly which has lasted since the days of Roland Hill, allowing other operators to provide a full mail service including collecting and delivering letters to business and residential customers – and even setting up their own post boxes. Royal Mail will, however, have to continue to provide one collection and delivery of first and second class mail each day at a standard price.

Later next year, there will another break with history when Royal Mail, which has always based its prices on the weight of letters and packages, changes to Pricing in Proportion. The move will, it claims, reflect that fact that its costs are closely related to the size of items as well as their weight. As a result, it will charge more for light but large mail such as very large greetings cards, rolls of photographic film and video tapes while heavier items such as catalogues and books will costs less.

The task facing the new operators that have entered the market is daunting. They include: TNT Mail, AMP, DHL Global Mail, DX Network Services, Express, Intercity Communications, Lynx Mail, Mail Plus, Racer, Royale Research Limited, Securicor, Special Mail Services, Speedmail, Target Express Parcels Limited and UK Mail.

Since the market was opened to limited competition nearly 21/2 years ago, Royal Mail’s rivals have won just 1.5 per cent of the letters market. By 2010 it still expects to be handling some 90 per cent of the market. But this is the third largest mail market in Europe, and according to PostComm’s Competitive Market Review 2005 published last month, it is still growing with mail volumes up 1.5 per cent - to a total of 20.3 billionn items.

Royal Mail’s competitors are gaining some share and are currently handling 106 million end-to-end items – up 86 per cent on last year. ‘Access’ items where Royal mail takes a letter ‘the final mile’ have risen and are now running at around 90 million items per month.

Entering this deregulated mail market is not for the faint-hearted and requires investment and experience to capture the business, and an established and effective and efficient service. In August 2004, TNT confirmed its interest with the launch of TNT Mail UK. It is aiming to be the number one challenger to Royal Mail in the addressed mail distribution market for business to consumer mail.

The business mail market is the key sector for new operators since it currently accounts for some 80 per cent of the £6.5bn mail market in the UK. Of that, the business to consumer (B2C) accounts for 62 per cent of the volume.

Part of the worldwide postal operator, TPG Group, TNT Mail has to hand not only experience of postal services in the Netherlands, but also the size, scale, resources, delivery and logistic expertise of its operations in the UK. It has 18,000 employees in the UK and a dedicated fleet of vehicles supporting its established logistics activities. Its mail movements already totals 3 million items a day.

TNT Mail was one of the first companies to be granted a full 7-year license to handle bulk mail over 4,000 items. The B2C sector is most likely to include most kinds of direct mail, magazines, catalogues and financial mail. TNT Express Services and Logistics will continue to be exclusively concerned with business-to-business mail operations.

Final mile
The TNT Mail strategy is to specialise in providing a 48 hour premium service for large volume B2C mailings through its agreement with Royal Mail’s for access to its 73 mail centres for delivery at ‘the final mile’. TNT calls this ‘cooperition’ - whereby your competitor becomes your partner - and it is key to the TNT approach. The access agreement enables TNT Mail to collect mail from its business customers and carry it along the mail ’chain’ to Royal Mail sorting offices, where Royal Mail will deliver to the doorstep of the 27million domestic addresses in the UK.

The B2C mail sector puts less value on frequency of delivery than on reduced costs and the added value of flexible collection times, mail tracking and payment by invoice. This will enable them to gear up their call centres ready for the influx of orders once the mail hits it target.

Better account management and improved reports and control procedures are also high on their agendas, and TNT Mail has given priority to modern technology to ensure a high level of communication between its drivers and operating centres, Royal Mail’s Down Stream Access Control and the customer’s production site for tracking and tracing mail bags.

On average, TNT expects to offer up to 15 per cent savings on the Royal Mail’s standard tariffs due in large part to the use of its state-of-the-art mechanical sorting system at its mailing centres in the Midlands, the North and the South West. Up to six more are planned around the country.

Fast sorting
The Bowe Bell & Howell Criteria Sorting System is super-fast and capable of sorting 36,000 items per hour in 120 CBC. It can read OCR, CBC or hand written addresses and handle C4 envelopes. It is highly accurate and reduces the incidence of unsorted mail so that fewer letters are rejected or deemed un-routable. Those that are rejected can be immediately returned to the customer for rectification rather than incurring the cost and time of actually being mailed to an incorrect address and then being returned.

Despite PostComm’s observation in its recent report that there is considerable inertia in the market, TNT Mail has attracted 25 customers to switch from Royal Mail. These include Lloyds TSB whose internal mail business is managed by TNT Managed Services, Sky, Caudwell Communications, Express Gifts and Booker whose mail will be delivered the ‘last mile’ by Royal Mail. In addition, Specsavers, Shop Direct, Screwfix and book publisher, Grolier, are using the end-to-end service. The latest to switch to TNT Mail is energy provider, npower, in a three year contract for mailing customer statements and direct marketing material. Npower sends about 60million pieces of mail a year.

UK mail market
● Worth £6.5bn (2004-05)
● 3rd largest mail market in Europe
● 20 billion letters delivered to 27billion households in the UK
● 97% mail volume handled by Royal Mail
● 80% sent by businesses customers
● 62% of this is B2C, 27% is B2B, 3% is C2B and 7% is C2C
● 381million items delivered the ‘final mile’ by Royal Mail
● 106 million items carried end-to-end by new operators

TNT Mail Premier
A two day premier business service, ideal for reliable and cost effective bulk delivery of bills, statements and direct mail items to UK households.

● Day 0 – Pre-sorted mail collected from customers and taken to TNT hubs for sortation to Royal Mail Centres.
● Day 1 – Sorted mail delivered to Royal Mail Centres for Royal Mail local sortation
● Day 2 – Delivery by Royal Mail.

TNT Mail Premier Sort
A 2 or 3 day service for unsorted mail

● Day 0 – Unsorted mail collected and delivered to TNT mail sortation centre
● Day 1 – Mail machine sorted and sorted bags delivered to Royal Mail centres
● Day 2 – Signature gained for every bag delivered for Royal Mail local sortation
● Day 3 – Delivery by Royal Mail


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