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Wednesday, December 2, 2020

Parcels overtake letters in revenue – online spend boom

A boom in online shopping sees parcels overtake letters in revenue.

Revenue from letters fell by over 20% whilst that from parcels increased by nearly 34%.

Turnover from parcels has risen to 60% of Royal Mail’s revenue, a 10% increase.

Despite this increase in revenue the parcel company suffered a sharp drop in profit, due to the increased costs associated with Covid-19.

Most of the costs came from hiring extra staff to process packages by hand and purchasing enough personal protective equipment to stay Covid-secure.

Two thirds of packages are sorted by hand, an expensive issue for the company.

It has been a very hard year for Royal Mail, with pre-tax profit falling more than 90%.

The company spent £85m in Covid-19 related costs in addition to £147m on voluntary redundancies.

Royal Mail processed 2.5 million tracked packages on it’s busiest day and is looking to invest in four new parcel sorting machines, to cut costs and keep up with demand.

“Royal Mail’s performance continues to reflect structural changes in the sector, which have only intensified through the Covid-19 pandemic,” said John Moore, senior investment manager at Brewin Dolphin.

“The fact that for the first time parcels revenue is now larger than letters revenue is a milestone for the business and only goes to underline the importance of Royal Mail’s restructuring programme, which was long overdue even when it was introduced.”

The company is currently building a new parcels hub in the North West to tackle the ever mounting demand with an estimated completion date of 2022.

Parcels overtake letters – end of the post box?

parcels overtake letters

“Adapting to the e-commerce boom is proving a painful shift for the company” says Susannah Streeter, senior investment and market analyst for Hargreaves Lansdown.

“With demand for letters plummeting, there is a risk that the red post box could go the same way as the iconic telephone box, revered for its history and not its usefulness,” she added.

Royal mail is facing an uncertain future and will hire over 30 000 workers in the run up to Christmas to try to tackle the surging demand.

Source:

https://www.bbc.co.uk/news/business-54998908

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