GCA continues to push for reliable and affordable postal service
Delivering good news for the greeting card industry, Ofcom is planning to peg the price of second-class stamps to inflation at most, until at least 2029 so postal services remain affordable, while parcel prices would no longer be subject to a safeguard cap.
In the announcement yesterday, 26 June, the communications watchdog said it had made the proposal for the safeguard cap taking into account the impact on the financial sustainability of maintaining the six-day letter delivery under Royal Mail’s Universal Service Obligation.
“We might not be sending as many letters as we used to,” Ofcom’s director of post Marina Gibbs said, “but, when we do, it can be an important way for family and friends to keep in touch. So, we’re proposing that stamp prices for second-class letters should only rise by inflation, and no more, to make sure there’s always an affordable option available to everyone.”
The Ofcom response echoes the arguments being put forward by the GCA on behalf of the whole greeting card industry regarding the crucial importance of maintaining a reliable and affordable postal service so the tangible, meaningful sending of cards is maintained, something that is very important to the mental wellbeing of the nation.
Office For National Statistics data shows in 2020/21 the average household spent 90p per week on all postal services, representing 0.19% of total weekly expenditure, including delivery charges for items purchased online, so the average amount people spend on sending letters will be even less than this.
And Ofcom added: “While our regular survey of postal users showed an increase last year in concerns about affordability, our new in-depth interviews reveal this appeared to be driven by broader financial challenges that many consumers are currently experiencing, rather than by postal prices specifically.
“Very few people in our new research told us that sending letters or cards was unaffordable to the extent that they could not send them.”
The news comes off the back of a GCA-initiated survey which garnered over 200 responses from the industry, the results of which will be fed back to Royal Mail on what is deemed imperative about our postal system.
While the results have not been made public as yet, ceo Amanda Fergusson revealed show how they reflect just how crucial good service levels from Royal Mail and affordable stamp prices are to the greetings industry.
Commenting on the overwhelming response to the survey GCA Royal Mail strategy sub-committee lead and co-owner of Cardology David Falkner said: “I can’t say thank you enough to everyone who responded so quickly. The team and I are busy working through the rich detail within the responses, but what already stands out is how united we are as an industry in the passion we all feel about how our cards are delivered, and the clarity of the mandate you’ve given to the GCA to represent the issues which matter most to you.”
Amanda raised the survey at the Genesis Initiative meeting at the House Of Commons last week, and with the Independent Retailers’ Confederation (IRC) today, 27 June, and the results are currently being collated to be presented at the next GCA-Royal Mail meeting.
“We are in close dialogue with Royal Mail who have assured us how much they value our industry and want to support the sending of cards,” Amanda told PG Buzz.
Amanda cited Royal Mail’s confirmation that it will be supporting Thinking Of You Week 2023 with a with a special postmark again which will be printed on all mail stamped and posted between 18-24 September 2023 as part of this. “The message will be Send A Card, Deliver A Smile For Thinking Of You Week,” she revealed.
To make sure the universal service remains affordable and Royal Mail can recover its costs, Ofcom periodically reviews whether stamp prices should be capped and is now looking at the April 2024-March 2029 period after the last cap was set in 2019 for five years.
As Royal Mail is the only national scale provider of end-to-end delivery of letters in the UK Ofcom said: “This means we cannot rely on competition to ensure prices remain affordable so we have proposed to retain a safeguard cap on second class letters, and that on average these prices should rise by no more than inflation (CPI) from today’s prices.
“As well as making sure postal services remain affordable, Ofcom must also have regard to the need for the universal service to be financially sustainable. So, in setting this safeguard cap, we have sought to minimise its impact on the financial sustainability of the universal service, and considered the cost of providing these services.”
Ofcom’s residential post tracker survey covering 3,870 UK adults over the whole of 2022 found people’s use of postal services continues to shift with 68% now preferring to send emails rather than letters whenever possible, and 21% of users report posting fewer personal letters, with 20% posting less greetings cards, invitations and postcards, while formal letters are down by 19% compared to two years ago.
However, the Jigsaw qualitative research of 44 in-depth interviews conducted in April and May 2023 saw all participants report either reducing their general spending or struggling financially but said how important it was to them to send and receive physical birthday and Christmas cards, to keep in touch with family and friends – particularly with those less digitally confident.
Ofcom’s plans do give Royal Mail some flexibility to set prices for individual second-class letter products which vary in size, but the weighted average overall price for the set of products in the basket must not rise above inflation.
Based on 2022/23 volumes, standard letters would make up a high proportion of the basket, which naturally more tightly constrains price increases on the more commonly used standard letters than on large letters, as a change in their prices would have a far bigger impact on the overall average than a change in other prices.
With competition in the parcel market having grown since the 2019 review, and expectations this will continue, Ofcom said: “Competition in this market limits Royal Mail’s ability to raise prices, and has actually led to its prices reducing in real terms. As a result, it’s our current view that Royal Mail’s parcel services should no longer be subject to a safeguard cap. Royal Mail would, however, continue to be required to set a single price for these services across the UK.
“These parcel services will also remain subject to the general requirement for universal services to be affordable. If during this five-year period we have material concerns regarding affordability, we can step in to protect consumers.”
Ofcom’s consultation on the proposals is ongoing until 1 September, with the communications watchdog due to publish its final decision later this year. The GCA will be making submissions to the watchdog as well as continuing to work with Royal Mail in the interests of the greeting card industry.
