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New 10 year Royal Mail Post Office deal but is it exclusive?

A new 10 year Royal Mail Post Office deal has been signed. This cements the relationship and ensures that many Royal Mail services will be available to access at Post Office counters through to 2032.

Royal Mail and Post Office entered into a long-term 10 year commercial agreement in 2012 in readiness for the separation of the two businesses. This new commercial agreement, known as the second Mails Distribution Agreement, reaffirms the long-term commercial partnership between the two companies.

The Royal Mail Post Office deal means customers will continue to benefit from being able to purchase a wide range of Royal Mail and Parcelforce Worldwide products through the Post Office’s extensive branch network. The new Royal Mail Post Office deal will commence on the 29th of March 2021 and operate at least until the 28th of March 2032.

The wording is interesting – ‘a wide range’ of products – currently you can’t buy Royal Mail 24 and Royal Mail 48 at a Post Office and there’s some protectionism going on forcing customers to buy direct from Royal Mail and drop off at Delivery Offices, Parcel Postboxes or arrange a collection of up to 5 parcels a day under the new service offering recently introduced. We don’t know what the ‘wide range’ of products will be yet but it does imply that the Post Office don’t get access to all of the Royal Mail portfolio.

The two companies say that the new agreement is good news for customers as it secures long-term access for Royal Mail to the Post Office network, and provides Post Office with the ability to continue to sell and accept Royal Mail’s range of postal products. It also provides greater flexibility for both parties to adapt to the changing ways that customers are buying and sending postal products, and to continue to innovate to provide convenience for customers.

And that’s the second interesting part – being able to adapt to the way customers want to buy their products and to innovate. From Royal Mail’s perspective, letters are a loss leader and a burden under the Universal Service Obligation and parcels are where the money is. We’ve seen in recent years that Royal Mail has attempted to force marketplace sellers to purchase direct through Click & Drop as they want a relationship with the customer. Royal Mail want to be able to leverage their relationship with the customer and keep their most profitable products close.

On the flip side, we’ve known for a long time that, at least some in the Post Office, have a much wider ranging vision and would like to be the parcel hub for the local community. It makes sense – the Post Office are no longer owned by Royal Mail and anyone looking at the service they offer can instantly see that being able to purchase labels and drop off parcels for a wide range of couriers would be an attractive proposition.

Until we see the wording of the contract we won’t know the detail, but it’s likely that at some point in the future that the Post Office will wish to offer services with additional carriers. It makes sense to leverage the real estate of 11,500 Post Offices and enable them to offer a broad range of parcel services and return services, some of which will inevitably compete with Royal Mail.

Just like Royal Mail’s protectionism wanting a close relationship with their customers, the Post Office also want that close relationship and this will be key if they are to attract regular shippers… and those who ship most regularly these days are inevitably marketplace sellers. If the Post Office can capture they details they’ll be positioning themselves well to sell additional parcel services whether they are from Royal Mail or alternatives.

“This new long-term agreement with the Royal Mail benefits postmasters and customers, with Post Offices offering convenient, expert advice when sending parcels and letters to any address in the UK and around the world.”

– Nick Read, Chief Executive Officer, Post Office Limited

“I am delighted to extend our long-term agreement with the Post Office. Royal Mail and the Post Office have a long shared history and both companies play an important role keeping the UK connected. This new agreement is good for our customers, Royal Mail, and the Post Office. We look forward to working together to build on our relationship and deliver a great service to our customers for many years to come.”

– Stuart Simpson, Interim Chief Executive Officer, Royal Mail

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