Going Postal – how business should react to the Royal Mail’s price hike

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With the Royal Mail today announcing that the price of a first class stamp will go up by 30 per cent, what can businesses do to ensure their costs are not severely affected?

The correct response to any supplier radically increasing prices is to try and mitigate it: reduce volumes, switch to a different supplier or change the business model. Even in a situation where there only appear to be one supplier, there are still opportunities to reduce dependency on that supplier by thinking radically. Businesses which operate a franking machine might consider locking it up as soon as possible, whereas cash rich businesses may try to forward buy a year’s worth of stamps to delay the impact of the increase!

Is Digital Distribution the Answer?

Switching as much snail mail as possible to digital distribution may seem like the most logical response to the price hike, however, there are some issues which need to be taken into consideration. The first is whether or not the current supplier can cope with increased volumes, and whether contractual arrangements will allow massive reductions in print quantities through print suppliers.

The difference between digital and direct mail campaigns is huge and no drastic change should be undertaken without thorough analysis of the economies of scale each system enables. Existing alternative suppliers may also try to increase their costs in line with the Royal Mail.

The key to handling any situation where supplier cost increases dramatically is to be innovative and consider every possible alternative. Whether this means switching suppliers or completely changing the way in which the business operates, the important thing is not to remain static and react as soon as possible.

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