Royal Mail price increase announced

On June 26th Royal Mail Wholesale revealed their new postal access prices which will come into force from Monday 2nd?October 2023 – in 98 days time.

Following on from an operating loss of ￡419 million for 2022/23 Royal Mail have decided to bring in their price changes even earlier than last year when their new rates came into force from 4th?November. This year they will be right in the middle of most direct mail customers busy Autumn / Winter season affecting budgets being planned now.

Faced with what is an unprecedented cost of living increase, challenging inflation rates and the highest interest rates since 2008, direct commerce companies are faced with a sharp increase in what is the largest cost in their budgets.?

The headline letter access prices are 12.8% increase in naked mailings and 12.4% on Mailmark with a 4.67% increase for Mailmark Economy. For Large Letter mailings the increases are similar with a 12.2% increase for high sort and 12.3% for Mailmark Large Letter packs.

Let’s look at the rates in detail

Looking at the rates initially my first focus was on the most commonly used format of?Mailmark letter, the rates have increased by 2.654p per pack (+12.44%) to 21.341p which seems a higher increase than one would originally expect in the current climate. There is an option available for those clients where postage costs are critical but can plan ahead and allow a little more time for their mail to arrive using?Mailmark Economy. If a client was to choose this format, then they could send their mailing packs for 18.847p per pack which equates to an increase of only 1% on last years Mailmark price point meaning a marginal increase if they are able to move to this service level. There is a downside though they would move from a 2/3 day delivery service to up to a 5 day option. With the well documented struggles that Royal Mail have had in meeting the service levels for the 2/3 day delivery, most customers have probably been experiencing longer deliveries past the 2/3 day window already so they probably wouldn’t notice much difference in their drop dates.

Clients mailing Naked packs

For clients that currently don’t use Mailmark and still use the?Manual?or?High sort 1400/70?option for their mailings then the rates are set for higher increases with a cost price of 26.853p (+12.81%) which is a 3.44p per pack increase.

Royal Mail have been moving away from the high sort service for many years and are demonstrating this in the commercial levers that they are pulling in the pricing format, meaning that it now costs?over 8p per pack more?(￡80.06 per 1,000) to mail a naked mailing than if the pack was sent as Mailmark Economy.

A 50k mailing campaign sent as Naked would cost ￡9,423 more than if it were sent as Mailmark Economy this equates to a 29.8% saving.

For letter format mail, Royal Mail no longer differentiate the access prices between directs and residues (1400/70) and offer the same price for both. Their intention is to remove 1400 sortation completely from April 2024 to further simplify their service range.

Is it any better news for companies that use Large Letter mail formats?

For clients looking to mail using?Large Letter formats?then the increased rates unfortunately continue in a similar vein as we see?Mailmark Large Letter <100gms?at 26.333p (+12.37% +2.899p) and the?101-250gms?option at 37.792p (+12.08% +3.7792p).

Clients that still use?Manual?or?High Sort 1400/70?for their?Large Letter?projects may want to consider their plans for 2024 and beyond as the increases here are on a planned trajectory to continue to move higher, over and above Mailmark. Royal Mail are keen to move all the traffic over to their preferred method of automatic sortation and barcode tracking. Customers will be looking at costs of?Directs?28.83p (+12.29% +3.155p) for?<100gms packs?and for packs weighing between?101 and 250gms?the rates will be?Directs?41.266p (+12.02% +4.428p). For these heavier weight items an increase of 3.155p/4.428p per pack or ￡31.55/￡44.28 per 1,000 increase should certainly make clients consider if High Sort is the right option for their mailings. This is exactly the commercial driver that Royal Mail are using to force people away from the Manual/High Sort format and to adopt the Mailmark format for their mailings.

Trays, trays and more trays

Using another of their commercial levers to affect customer actions, Royal Mail are offering increased tray discounts from .5p to .8p for letter format and another movement up from 1.5p to 2p for Large Letter formats. If your supplier is not utilising trays in the production process for your mailing packs then there needs to be some serious justification into the reason for not adopting trays.

What can I do to mitigate the increases?

The plan for Royal Mail is more automation, the plan to move more mail over to Mailmark is demonstrated in its commercial actions in these new prices. In order to benefit from the very best rates available, customers will need to use the most efficient formats which may mean changing their pack formats to accommodate. The lowest possible cost mailing is Mailmark Economy, clients looking to get the very lowest rates should be looking to make sure that their packs meet this format and manage their mailing releases to meet the extended delivery drop dates.

The best example of this is for clients mailing letter format?Naked?currently, the rate increase is 3.44p per pack and a saving of over 8p per pack (￡80.06 per 1,000) could be made if the client can move to Mailmark Economy. Even with the additional costs of envelopes or paperwrap, customers moving to this format could actually?save money overall.

For clients using?Mailmark?currently the most common-sense approach is to move to Mailmark Economy. Clients who make this move will see only a marginal move in cost from current rates of .16p per pack or around 1% increase. Clients will need to consider the slower delivery window and plan accordingly if they move to this format.

Large letter?mailings have seen large increases across the board, however, Mailmark is still the most cost effective method of mailing large letter packs and should be used whenever possible. There are no Mailmark Economy options for large letter so anyone using Mailmark already has nowhere to go on improvements unless there is an option to fit into the letter format – a real challenge for larger format books and probably not realistic for many clients.

Trays continue to be the most economic way to present mail to Royal Mail and is part of their longer term plans. The tray discount has improved once again this year to .8p per pack saving for letters and 2p per pack for Large Letters. Make sure that your mailing house is presenting using trays to obtain the very best rate possible for you on your mailing campaigns.

Summary

Everyone was expecting the price of postage to increase (it does every year) but I don’t think anyone could have predicted the increases that Royal Mail have presented this year. Looking at the external economic challenges businesses are facing how is this going to affect their budgets, mailing campaigns and volumes overall? Just as the paper increases and availability from the previous year seemed to be settling down, another massive increase in cost could be a bridge too far for some.

Postage is always the most expensive element of any campaign being from 60-85% of the overall project costs, experts in postage can save customers ￡1,000s in lost or hidden costs. Don’t be a postage “ostrich” and put your head in the sand, take your time to review your new rates and consider your options – get someone to help advise you, it can be really simple to take a little more time and save a lot of money.

I have pulled together a simple spreadsheet with the latest access prices I am more than happy to share with you – just message me and I will send it through to you free of charge.

Please note all the rates quoted are the?Royal Mail Access prices?for Advertising Mail and in order to get an exact postage rate you will need to add in your postal carrier charge to these rates. I am simply comparing the access prices only to give you a base rate for percentage increases.

The actual price change is on Monday 2nd?October but any work handed over to Downstream Access Carriers will be affected from the Friday 29th?September (possibly earlier if you are using Economy mail)