Saturday, 2 April 2011

News Story - Scrapping Price Controls on Postage Stamps?

News today in an article in the Daily Mail suggest that current controls on the price of stamps could be scrapped, leaving Royal Mail to set their own prices without any challenge. Now, this post will be a discussion about whether this is beneficial to us, the consumers, and to Royal Mail itself.

The price of stamps are to rise on Monday anyway: first class stamps will rise by 12.2%ish and second class by 12.5%, meaning postage is getting more expensive anyway. But with the latest news, it could get worse. However, the real question is will this have any effect on consumers or on the Royal Mail itself?

A natural course of events should take place; price rises so demand will fall, probably at a lesser rate because stamps are currently still a necessity so the price of them will be very much inelastic. The families on lower incomes will be hit the hardest as it's a larger percentage of their income being spent on the stamps. But with  technology nowadays, the internet mainly, i question whether the price rises will be of any good to the Royal Mail. In 2010, 60% of adults accessed the internet every day - using the internet means access to e-mail, which means information can be sent in an alternative way to the mail... cutting out the need for letters to be sent. Plus, whats more, the internet can be seen as more reliable, quicker, easier and cheaper than the post anyway, leaving the Royal Mail in a sticky situation. I mean, come-on, if you have the choice out of sending an email (from the comfort of your own home, with no direct charge and knowing it will reach the destination almost instantly) or sending the same message in a letter (by leaving the house and heading to a post-box, paying directly for a stamp and knowing it will be at least a few days before it reaches the destination), it's not a hard choice.

Parcels and packages are where the Royal Mail might get lucky. As is fairly evident, you cannot send a parcel over the internet - for the not so bright ones out there. This means they have to be sent in the mail, 'ca-ching' for Royal Mail (you'd think)! Oh, but maybe not so lucky if you see the competition in this market.. plenty of other firms offer the package sending service cheaper and more efficiently than Royal Mail do. Ouch!

Last year, the Royal Mail lost £163 million on stamped mail, equivalent to 6.4p for every item handled, so therefore the price rises are justified. But from my point of view, it seems to be a dying industry... The internet is taking over and i feel that raising prices further will just encourage more people to seek alternative methods of communication and make the position of Royal Mail worse. What's more, they don't seem to do themselves any favors anyway - the service is still annoyingly adequate with mail going missing, late post and other such things. So, maybe if they sorted out  their current issues and restored the publics faith in the mail service first, they may have success increasing prices!

Full article at: Got a view on this issue? Comment away. Thanks for reading.

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