Royal Mail: loss leader or lost cause?

Royal Mail shares have fallen sharply, the BBC reports, with competition said to be threatening its universal service which guarantees single price postage to all UK addresses. Despite government assurances that privatisation would act as a safeguard, we are now told that daily deliveries are under serious threat as profits have slumped by £74million.

As we have previously blogged, we are big fans of our local post offices, where we hand over parcels on a daily basis for delivery by Royal Mail. As an exclusively online business, a reliable delivery service is obviously vital for the fulfilment of our orders and we have remained loyal customers over many years, albeit using couriers for larger parcels for which Royal Mail is simply not competitive.

For UK orders, we charge flat rate postage for standard and special delivery options and our rates have remained the same for nearly eight years, despite postal charges being hiked up year on year and mind-boggling new rules about size and weight complicating matters. Adding tracking and a signature - our standard practice - greatly increases our business costs, but it is important for us to be sure that orders have been delivered.

So what happens when packages don't make it to their destination via Royal Mail? Customers may be surprised to learn - but we know other ecommerce businesses won't be - that claiming compensation for delay and/or loss is not at all straightforward. Unlike online traders, who are responsible for ensuring that goods reach their customers, Royal Mail appears to have no corresponding obligation to provide the service that they have been paid for.

When customers are not at home, a 'while you were out' card should be left but some are reporting no notification of attempted deliveries and are having to track down errant orders themselves. Fortunately, they are usually located at the sorting office, but in those (thankfully few) cases where they are deemed 'lost', we always refund customers promptly. Royal Mail, meanwhile,  makes it so difficult for us to claim compensation that it is often not worth bothering.

Unlike our customers, we as Royal Mail customers are never fully compensated for our loss, since they will only reimburse the wholesale cost - not the retail price - of our sold items, plus our actual postage, and they demand rigorous evidence of each, which takes up considerable time and effort. Makers of bespoke items are undoubtedly the biggest losers on this ridiculously uneven playing field as the compensation for raw materials alone can never reflect the time and skills involved in creating their products.

By contrast, courier companies do offer proper compensation for any failure to deliver on their part and are generally reliable. Since the latest eye-watering, inflation-busting price rises inflicted by Royal Mail, we have been using Collectplus couriers on a regular basis and have so far found them to be very reliable with a handy network of drop-off and collection points across the UK, as well as a fully tracked service with optional signature on delivery. We now use them for anything other than small parcels and special delivery items and have had no complaints. We have never yet had to claim for loss, but would expect to be reimbursed the full sale price on production of a copy of our invoice.

When it comes to international shipping, we still use Royal Mail, but have learned the hard way that the expensive international tracked and signed service isn't all it's cracked up to be. Just this month an order sent to the USA has gone missing, although the online tracking link reported an attempted delivery and return to the local post office. Despite our American customer making extensive enquiries in true super sleuth style, it had simply vanished without trace - presumably stolen or otherwise diverted. Now we can't blame Royal Mail for the vagaries of the US postal system, but if the tracking details supplied in the UK are useless in such circumstances, why even bother? And who knows how long it might take to be compensated for the loss?

The sensible business decision would probably be for us to cease shipping to the USA and far flung overseas destinations altogether, and restrict delivery to the UK and Europe, to minimise our potential losses. It is something we are seriously considering, as once we hand over our parcels, we are at the mercy of those we have entrusted to deliver the service we have paid for.

It very much looks like Royal Mail is on a downward spiral as the competition becomes even more cut-throat, but small businesses simply can't keep on paying more for less and taking financial hits for losses through no fault of their own. "Do we stay or do we go?" is the quandary over which we will be deliberating in the coming months, since we obviously need to remain both solvent and competitive to survive and thrive. There are only so many straws this camel's back can tolerate.