Amazon delivers blow to Royal Mail growth potential

Online retail giant Amazon’s delivery service will more than halve the growth potential for Royal Mail’s parcels business, the former state-owned British company said yesterday, sending its shares lower.

Parcels make up half of Royal Mail’s turnover and the development of online shopping has made them central to its prospects when letter volumes are in decline.

However, competition from the likes of TNT, Yodel, and a new delivery service from Amazon, which was Royal Mail’s biggest customer accounting for 6% of sales, has hampered progress and hit revenues.

Royal Mail yesterday warned that Amazon’s plans to deliver more of its own packages would cut growth in the British parcels market for it and rivals from an annual rate of 4% to 5% to 1% to 2% for at least two years.

The squeeze showed in a 21% decline in Royal Mail operating profit for the six months to September 28, although the figure of £279m (€348m) was not as bad as many analysts had feared.

Moya Greene, Royal Mail’s CEO, told Reuters:

“When an online retailer of the size and scale of Amazon decides to build out its own delivery network, that changes the market for everybody.” She added that Royal Mail was sticking to its full-year forecasts.

Reuters