Figure 6.1

UK postal services industry 2006 2007 2008 2009 2010 2011 2012

Addressed mail volumes 22.0bn 21.6bn 20.6bn 18.6bn 17.5bn 16.6bn 15.7bn

Addressed mail revenues £6.8bn £6.8bn £6.8bn £6.6bn £6.5bn £6.7bn £7.2bn

Proportion of access mail in total mail 9.6% 16.9% 24.6% 32.7% 39.9% 43.6% 46.0%

Value of UK e-retail market £30.2bn £35.2bn £43.8bn £49.8bn £58.8bn £68.0bn £78.2bn

Source: Royal Mail Regulatory Financial Statements, Royal Mail Wholesale, Royal Mail Group Annual Reports. Revenue figures are nominal. Note: Addressed mail volumes and revenues include Royal Mail total mails (excluding Parcelforce and unaddressed), access revenues and end-to-end delivered addressed letter mail. This does not include courier or express volumes and revenues. Royal Mail calendar year volume and revenue figures are derived from Ofcom calculations based on financial year figures in Royal Mail’s Regulatory Statements and estimates of 2011-12 performance informed by Royal Mail’s Report and Accounts and are therefore not directly comparable with Royal Mail’s published accounts. .

UK postal industry key metrics

Figure 6.2

2

Products or services bought online in the past six months

% Bought online

Source: Kantar Media Omnibus , March 2013 Base: All who use online shopping in the UK (N=1221) Q.10A: Which products or services have you bought online in the last 6 months?

5% 6%

15% 18%

22% 26% 27%

30% 32% 33%

38% 39%

44% 59%

0% 10% 20% 30% 40% 50% 60% 70%

Big value items e.g car/home Financial products New utility supplier

New furniture Household devices

Online groceries or takeaway food Digital multimedia

Electrical devices e.g.TV/stereos Car/home/travel insurance

Cinema/theatre tickets Transport

Hotel/holiday bookings Physical mutlitmedia Clothing or footwear

Figure 6.3

3

8% 9% 9%

12% 14% 15%

25% 30%

36% 38%

41% 54%

0% 10% 20% 30% 40% 50% 60%

Recommendation from newspaper/magazine Delivery provider

Recommendation from website Official/ quality looking site

Website predominantly listed on search page Have seen produict/service in shop

Comparison sites Delivery options

Recommendation from friends/family/colleagues Cheapest site for service / product

Security of site Well know or reputable sites/brands

Factors that influence choice of online vendor

% influenced by factor

Source: Kantar Media Omnibus Base: All who use online shopping in the UK (N=1221) Q.10B: And when buying these products online, which factors influence your decision of which website to buy these from?

Figure 6.4

4

40%

25%

11% 6% 6%

3% 1% 0%

10%

20%

30%

40%

50%

Any delivery concerns

Delivery costs too

high

Not be at home to receive delivery

Item too valuable to

send by post

Delivery not available in

area

Did not want to use

particular provider

Would take too long to

be delivered

Delivery concerns preventing online purchasing

% Reason concerned by delivery

Source: Kantar Media Omnibus Base: All who use online shopping in the UK (N=1221) Q.14: Have delivery concerns ever prevented you from buying items online? If yes, which of the following reasons prevented you from shopping?

5

23%

4%

17%

11%

5% 3% 2% 0%

12%

2% 0% 0% 6%

3% 3% 3% 1% 2% 2% 0% 5%

10% 15% 20% 25%

Bette

r del

iver

y se

rvic

e

Sim

pler

retu

rns

proc

ess

Spee

d of

resp

onse

to

quer

ies

Con

tact

det

ails

eas

ier t

o fin

d

Live

cha

t ser

vice

UK

base

d ca

ll ce

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Free

phon

e co

ntac

t nu

mbe

r

FAQ

's e

asie

r to

find

Mor

e pr

oduc

t inf

orm

atio

n

Show

sto

ck le

vels

Cus

tom

er re

view

s

Show

com

petit

or p

rices

Bette

r web

site

Secu

re w

ebsi

te

Low

er p

rices

Onl

ine

offe

rs

Bette

r loy

alty

sch

eme

Trai

n st

aff b

ette

r

Valu

e cu

stom

ers

Source: “Keeping your customers satisfied: The rise of online satisfaction “IMRG/eDigitalResearch, June 2013 Base: Online customers aged 16+ (n=1,660) Question: What one thing could retailers do to most improve their customer service?

Key improvement areas for online customers Proportion of respondents (%)

Delivery Customer service contact Information Website Price Other

Figure 6.5

6

Factors influencing choice of delivery method % Influenced by factor

3% 3%

6% 7%

13% 15%

25% 33%

38% 59%

0% 10% 20% 30% 40% 50% 60% 70%

Environmental factors Existing subscription to delivery service

Weekend delivery Specific delivery company

signed for delivery Delivery on a nominated day\time

Order tracking Speed of delivery

Cheapest delivery option Free delivery

Source: Kantar Media Omnibus Base: All who use online shopping in the UK (N=1221) Q.13: And which of the following factors influence your decision on which delivery method you choose? PROBE: Any others?

Figure 6.6

Figure 6.7

7

57%

40%

3%

Economy

Specified day (including next day)

Specified time

Source: Ofcom analysis of IMRG/Metapack Delivery Index, January – December 2012 Note: Specified time includes, AM, PM, Before 10am, Evening and School run; Specified day includes Same day and Next day. Proportions rebased to exclude International

Service types used for the fulfilment of e-retail, by proportion: 2012

8

90% 86% 91% 96%

4% 7% 3% 2% 4% 5% 4% 1%

Total 16-34 35-54 55+ 0%

20%

40%

60%

80%

100%

To post office To store Friends/families home Work Home

Where items bought online are ‘usually’ delivered % Delivered to

Source: Kantar Media Omnibus Base: All who use online shopping in the UK (N=1221) Q.12: When shopping online where do you usually get the items delivered to?

Figure 6.8

9

Consumer delivery decisions in online shopping Delivery decision tree after choosing to buy an item online

Item selected to buy

Choose delivery option

Cost Speed Convenience

Choose delivery destination

Home Work Friend / Family Store Other

Figure 6.9

6,843 6,764 6,661 6,517 6,704 7,185

6,755 6,653 6,522 6,371 6,551

7,022

6,254 5,922 5,601 5,281 5,279 5,569

501 731 921 1,090 1,272 1,453

88 112 140 142 150 157 0

2,000

4,000

6,000

8,000

2007 2008 2009 2010 2011 2012

Total mail

Royal Mail total mail Royal Mail end-to-end Royal Mail access

Access operators

10

Figure 6.10 Mail revenue: 2007 to 2012 Revenue (£m)

Source: Royal Mail Regulatory Financial Statements, operator returns to Ofcom, Ofcom estimates. Note: Royal Mail end-to-end refers to Royal Mail total mail revenues excepting access. Royal Mail calendar year revenue figures are derived from Ofcom calculations based on financial year figures in Royal Mail’s Regulatory Statements and estimates of 2012-13 performance informed by Royal Mail’s Report and Accounts and are therefore not directly comparable with Royal Mail’s published accounts. Addressed mail only. Figures are nominal.

21,587 20,553 18,632 17,527

16,657 15,675 17,946

15,489 12,528

10,519 9,502 8,444

3,641 5,064 6,092 6,996 7,147 7,213

0

5,000

10,000

15,000

20,000

25,000

2007 2008 2009 2010 2011 2012

Total mail

Royal Mail end-to-end

Total access

11

Figure 6.11

Mail volumes: 2007 to 2012

Volume (million items)

Source: Royal Mail Wholesale, Royal Mail Regulatory Financial Statements, Operators’ returns, Ofcom estimates Note: Royal Mail end-to-end refers to Royal Mail total mail volumes excepting access. Royal Mail calendar year volume figures are derived from Ofcom calculations based on financial year figures in Royal Mail’s Regulatory Statements and estimates of 2012-13 performance informed by Royal Mail’s Report and Accounts and are therefore not directly comparable with Royal Mail’s published accounts. Addressed mail only.

17% 25%

33% 40% 43% 46%

0%

10%

20%

30%

40%

50%

2007 2008 2009 2010 2011 2012

12

Figure 6.12

Proportion of access mail in total mail: 2007 to 2012

Proportion of access in total mail volume

Source: Royal Mail Wholesale, Royal Mail Regulatory Financial Statements, Operators’ returns, Ofcom estimates

Year on year growth rate of access volumes

71.8% 39.1% 20.3% 14.8% 2.2% 0.9%

Figure 6.13

13

88.2 87.7 81.3 80.1

11.3 11.7 16.3 16.8 0.5 0.7 2.4 3.3

0%

20%

40%

60%

80%

100%

2011 2012 2011 2012

Volume Revenue

Packet/A3 Large Letters Letters

Source: Royal Mail Wholesale, 2011-12 to 2012-13

Access volumes and Royal Mail’s access revenue, by format: 2011 to 2012 Proportion of format in total access mail (%)

Figure 6.14

14

11.8 11.3 8.5

18.0

0

5

10

15

20

2009 2010 2011 2012

Source: Operators’ returns

Other operators’ end-to-end delivered volumes: 2009 to 2012 Volume (million items)

Figure 6.15

15

34p 36p 39p 41p

46p

60p 60p

24p 27p

30p 32p 36p

50p 50p

0

20

40

60

2007 2008 2009 2010 2011 2012 2013

First Class Second Class

Source: Royal Mail. Figures are nominal.

First and Second Class stamp prices Price (p)

Figure 6.16

16

Source: Ofcom Residential Postal Tracker, Q3 2012-Q2 2013 Base: All respondents (n = 4844 16+, 1338 16-34, 1582 35-54, 1924 55+) QH2A-H. SHOWCARD - AGREEMENT WITH STATEMENTS ABOUT SENDING/ RECEIVING POST

Attitudes to sending / receiving post

Adults 16+

16-34 35-54 55+

I prefer to send letters or emails to companies rather than make a phone call so I have a written record 61% 62% 65% 56%

I trust second class post to get there in reasonable timeframe 59% 55% 56% 66%

I love to send and receive letters and cards 58% 52% 57% 67% I prefer to send emails rather than letters whenever possible 53% 68% 57% 33%

I would feel cut off from society if I can't send/don’t receive post 51% 41% 48% 63%

I only send mail first class if it needs to get there next day 50% 45% 48% 56%

I only use post if there is no alternative 44% 54% 41% 36% I send fewer letters due to cost 29% 25% 29% 33%

Proportion of all respondents agreeing with each statement % Ranked by adults 16+

Figure 6.17

17

18 26 14 15

22 28

21 16

18 18

17 18

25 20

27 29

9 5 11 12

6 3 9 8

0%

25%

50%

75%

100%

Adults 16+ 16-34 35-54 55+

Don't know

21+ items

11-20 items

5-10 items

3 or 4 items

1 or 2 items

None/ don't send mail

Source: Ofcom Residential Postal Tracker, Q3 2012-Q2 2013 Base: All respondents (n = 4844 16+, 1338 16-34, 1582 35-54, 1924 55+) QC1. Approximately how many items of post - including letters, cards and parcels - have you personally

sent in the last month?

Approximate number of items of post sent per month (including letters, cards and parcels)

Items of post sent per month (% of respondents) 7.0 7.8 8.7

Mean number of items sent per month 4.5

Figure 6.18

18

38

29 37

58

38

22

38

24 32

47 39

25

43

29 34

58

42

24

33 32

43

66

31

18

0

20

40

60

80

Formal letters Payments for bills Personal letters Invitations/greetings cards/postcards

Larger parcels Smaller parcels

Adults 16+ 16-34 35-54 55+

Source: Ofcom Residential Postal Tracker, Q3 2012-Q2 2013 Base: All who have personally sent any items of post in the last week (n = 3889 16+, 956 16-34, 1330 35-54, 1603 55+) QC5. Which of these types of mail would you say you have personally sent in the last month by post? (MULTICODE)

Type of post sent in the past month

Proportion of consumers (%) Net parcels: 16+ = 40% 16-34 = 42% 35-54 = 44% 55+ = 34%

Net letters: 16+ = 62% 16-34 = 61% 35-54 = 63% 55+ = 63%

Figure 6.19

19

-10%

0%

-12% -17% -20%

-10%

0%

10%

20%

Adults 16+ 16-34 35-54 55+

Source: Ofcom Residential Postal Tracker, Q3 2012-Q2 2013 Base: All respondents (n = 4844 16+, 1338 16-34, 1582 35-54, 1924 55+) QC10: Compared with two years ago, would you say that the number of items you send through the post has...increased greatly, increased slightly, stayed the same, decreased slightly, decreased greatly? Note: chart shows net percentage (% who claim their use has increased - % those who claim their use has decreased)

Net percentage of respondents reporting increasing or decreasing amount of post sent in the past two years

Figure 6.20

20

14 11

35 30

17 17

21 23

13 17 1 2

0%

25%

50%

75%

100%

First Class Stamp Second Class Stamp

Don't know

Very poor

Fairly poor

Neither good nor poor Fairly good

Very good

Source: Ofcom Residential Postal Tracker, Q3 2012-Q2 2013 Base: All respondents (n = 484416+) QF3/4. It currently costs 60p/50p to send a standard letter first /second class within the UK. How would you rate the Royal Mail's first/second class service in terms of value for money

Perceived value for money of First and Second Class stamps Value for money of First and Second Class stamp s(% of respondents)

40% Total who agree First or Second Stamps are good value for money

49%

Figure 6.21

21

8 12 5 7 16

24 10 14

17 20

16 16

34 29

40 34

18 12

22 21

6 3 7 8

0%

25%

50%

75%

100%

Adults 16+ 16-34 35-54 55+

Don't know

21+ items

11-20 items

5-10 items

3 or 4 items

1 or 2 items

None

Source: Ofcom Residential Postal Tracker, Q3 2012-Q2 2013 Base: All respondents (n = 4844 UK, 1338 16-34, 1582 35-54, 1924 55+) QD1. Approximately how many items of post - including letters, cards and parcels - have you personally received in the last week?

Approximate number of items of post received per month (including letters, cards and parcels)

Items of post received per month (% of respondents) 8.4 9.6 9.4

Mean number of items received per week 6.0

Figure 6.22

22

45 50 46

81

28 33 32

26 35

17

41 39 36

74

21 25 33 29 27

11

48 57

49

87

28 37 39

28

40

19

46 54 53

80

34 36

25 19

38

20

0

30

60

90

Letters from organisations you have a relationship

with

Standard circulars from organisations you have a relationship

with

Addressed direct mail from other

organisations

Bills/invoices/ statements

Personal letters

Invitations / greetings

cards

Larger parcels

Smaller parcels

Catalogues / brochures

Subscription magazines

Adults 16+ 16-34 35-54 55+

Source: Ofcom Residential Postal Tracker, Q3 2012-Q2 2013 Base: All respondents (n = 4844 UK, 1338 16-34, 1582 35-54, 1924 55+) QD4. SHOWCARD Please think about items that are addressed to you personally rather than leaflets or charity collection envelopes or bags that may come through your letterbox. Which of these types of items would you say you have personally received through the post in the last month? (MULTI CODE)

Type of post received in the past month Proportion of consumers (%) Net parcels:

16+ = 40% 16-34 = 43% 35-54 = 45% 55+ = 31%

Net letters: 16+ = 60% 16-34 = 53% 35-54 = 61% 55+ = 63%

Net publications:

16+ = 41% 16-34 = 32% 35-54 = 47% 55+ = 44%

Figure 6.23

23

18 26

36 28

7 5

22 24 20

6

18 20 22

38

8 5

22 26

13 5

17 26

42

23

6 6

27 28 22

8

19

34

51

17 8 6

16 14

29

7

0

20

40

60

80

Letters from organisations you have a relationship

with

Standard circulars from organisations you have a relationship

with

Addressed direct mail from other

organisations

Bills/invoices/ statements

Personal letters

Invitations / greetings

cards

Larger parcels

Smaller parcels

Catalogues / brochures

Subscription magazines

Adults 16+ 16-34 35-54 55+

Source: Ofcom Residential Postal Tracker, Q3 2012-Q2 2013 Base: All who say the number of items received by post has increased compared to two years ago (n = 1181 16+, 466 16-34, 371 35-54, 344 55+) QD6. Which of these types of addressed items are you personally receiving more often through the post now? (MULTICODE)

Type of post being received more often Proportion of consumers (%) Net parcels:

16+ = 34% 16-34 = 37% 35-54 = 38% 55+ = 21%

Net letters: 16+ = 24% 16-34 = 25% 35-54 = 21% 55+ = 24%

Net publications:

16+ = 23% 16-34 = 16% 35-54 = 25% 55+ = 32%

24

24

40

11

18

7

0%

20%

40%

60%

80%

100%

Reliance on post

Not at all reliant

Not very reliant

Neither

Fairly reliant

Very reliant

Reliance on, and satisfaction with, postal service Proportion of all respondents %

39

48

8 4 2

Satisfaction with postal service

Very dissatisfied

Fairly dissatisfied

Neither

Fairly satisfied

Very satisfied

Source: Ofcom Residential Postal Tracker, Q3 2012-Q2 2013 Base: All respondents (n = 4844 UK, 1338 16-34, 1582 35-54, 1924 55+) QE1. How reliant would you say you are on post as a way of communicating? (SINGLE CODE) QE2. Thinking about your experience of using the postal service to send and receive mail, how would

you rate your overall satisfaction with the postal service? (SINGLE CODE)

Figure 6.24

Figure 6.25

25

Source: Ofcom Business Postal Tracker, Q3 2012-Q2 2013 Base : All respondents (n = 1604 UK) QV1. On average, how much money does your organisation spend per month on sending mail items? Please think about all the letters, packets and parcels you may send as an organisation.

Monthly spend on sending postal items Monthly spend (% of respondents)

69%

18% 7% 5%

0%

20%

40%

60%

80%

100%

<£83 (less than £1k per annum)

£83-£208 (£1k-£2.5k pa)

£209-£420 (£2.5k-£5k pa)

£420< (more than £5k pa)

Figure 6.26

26

Source: Ofcom Business Postal Tracker, Q3 2012-Q2 2013 Base: All respondents (n = 1604) QV2a. On average, how many letter items does your organisation send per month? Please think ONLY about all the letters and large letters you may send as an organisation.

Volume of letters sent each month Proportion of respondents (%)

45% 61%

27% 28%

19%

19%

26% 17%

15% 10%

18% 21%

14% 7%

16% 23%

5% 2% 11% 6%

3% 1% 2% 6%

0%

20%

40%

60%

80%

100%

All businesses Administrative only Critical for communications

Core to business operations

500+

250-499

100-249

50-99

25-49

0-24

Role of post in the organisation

Figure 6.27

27

Source: Ofcom Business Postal Tracker, Q3 2012-Q2 2013 Base: All respondents (n = 1604) QV4. And who does your organisation use for its mail service?

Postal operators used Proportion of respondents (%)

73% 78% 69% 68%

24% 19% 28% 31%

2% 2% 2% 1%

0%

20%

40%

60%

80%

100%

All businesses Administrative only Critical for communications

Core to business operations

Other provider only

Royal Mail + other provider

Royal Mail only

Role of post in the organisation

Figure 6.28

28

65% 60% 48%

33%

16% 16%

33%

0%

20%

40%

60%

80%

100%

Standard 1st class stamp

Standard 2nd class stamp

Large letter 1st class

Large letter 2nd class

Franked 1st class

Franked 2nd class

Standard parcels

Source: Ofcom Business Postal Tracker, Q3 2012-Q2 2013 Base : All respondents using RM standard delivery services (n = 1460) QV6d. Which, if any, of the following Royal Mail services does your organisation use to send your standard mail?

Royal Mail services used to send standard mail Proportion of respondents (%)

Figure 6.29

29

Source: Ofcom Business Postal Tracker, Q3 2012-Q2 2013 Base: All respondents (n = 1604, less than £1k = 1016, £1k-£2.5k = 311, £2.5k-£5k = 127, more than £5k = 150) QS1. In the next 12 months, do you anticipate the volume of mail your organisation sends to increase, decrease or stay about the same?

Predicted change in volume of sent mail by businesses over the next year

Proportion of respondents (%)

15% 16% 13% 11% 9%

76% 79% 73%

65% 60%

9% 5% 13% 24% 31%

0%

20%

40%

60%

80%

100%

All businesses Less than £1k £1k-£2.5k £2.5k-£5k More than 5k

Increase

Stay the same

Decrease

Annual spend on post