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Royal Mail hopeful over consumer trends

Parcel volumes give cause for long-term optimism, but the question is whether they form part of a permanent shift in consumer behaviour
July 21, 2021

 

  • Letter volumes remain in structural decline
  • Parcel volumes ahead of pre-pandemic levels

It is hard to think that we will ever really emerge from the shadow of the pandemic or, more specifically, the government-sanctioned disruption that followed in its wake. But when that does happen – truly happen - many business leaders will need to determine if changes in customer habits were merely transitory, or whether they have become hard-wired. Those determinations could impact the way we access the GP, or the way we shop, or the way we conduct business generally.

Bosses at Royal Mail (RMG) believe that the retail trends experienced during the pandemic, specifically the online sales boom, has changed the way that consumers behave and that the corresponding rise in parcel deliveries will become a permanent feature of the retail landscape. The number of parcels being sent remains above pre-pandemic levels, so it would be reasonable to conject that the lockdowns have simply accelerated a trend already in evidence.

Group chairman Keith Williams reckons there is certainly evidence to suggest that “the domestic parcel market is re-basing to a higher level than pre-pandemic”. So, although volumes of UK parcels were down in the three months to the end of June compared with a year ago, when all but essential retail outlets closed their doors, they remain up by 35 per cent on 2019 levels. That, as they say, is ‘statistically significant'.

Predictably, international volumes were lower than the prior year, largely a consequence of reduced air freight capacity and increased conveyance costs, both understandable given the circumstances. But with digital communications to the fore during the pandemic, it is ever clearer that letter volumes remain in structural decline.

Uncertainties remain, with the group citing the obvious clinical considerations, along with macro effects, GDP growth and inflation, but shareholders can feel reasonably satisfied with a 12.2 per cent increase in group revenue, though it could be argued that trading comparisons aren’t quite as revealing in 2021 given the unprecedented disruption through the prior year. Hold.