And when the operator rolled-out its second trial to more than a quarter of a million households in west London late last month, creating 400 jobs in the process, many in UK print welcomed "increased competition" in the mailing sector.

Royal Mail, not unexpectedly, has fired a warning shot to the market, stating that despite "modest" initial coverage, TNT Post is offering collection and delivery on behalf of a number of large-volume clients to a concentrated area of addresses.

"It raises the prospect of competitors cherry-picking the profitable, high-population-density routes around the country while being allowed to deliver fewer than six days a week," it said in a statement.

And speaking to the Communication Workers Union last week, Royal Mail chief executive Moya Greene warned that the operator is facing a "spiral of decline" if unregulated competition, such as TNT Post, can intrude into the final-mile space.

But, Royal Mail’s fears aside, is increased competition in the market as clear cut a benefit to UK printers and mailing houses as it is made out to be?

Lance Hill, sales and marketing director at Northamptonshire-based 4DM, says TNT is expanding its service offering at a time of great change in the postage sector.

"My view is that competition is good in any market in terms of a competitive offer and choice for customers. I disagree that this puts the universal service at risk as it is already at risk, regardless of this move by TNT," he says.

Rapidly changing landscape
According to Hill, the postage landscape is "changing rapidly" and the reality is that the E2E service from TNT will not have significant scale for a few years at least.

"During that time Royal Mail has the opportunity to continue to modernise its business and recalibrate it to the needs of both businesses and consumers," adds Hill.

Mike Lordan, head of operations at the Direct Marketing Association (DMA) adds that increased competition could go some way to helping reverse client spend that has migrated to digital marketing.

"When prices rise, people will look for better ways to use their marketing spend and that has happened in some areas. A more competitive mailing service would combat that," he explains.

Speaking to PrintWeek, Nick Wells, chief executive of TNT Post, argues that competition in the postal market is "good for customers and good for Royal Mail, as it is a catalyst for change. This drives innovation and that can only be a good thing."

One initiative being driven by the mailing firm is a free-of-charge tracking service to mailing houses, which confirms delivery of a particular mailing by scanning a barcode when reaching its destination.  

"However, with a view to expanding the end-to-end service, we have a barrier, with Royal Mail currently exempt from the 20% VAT that they are granted on final-mile deliveries," adds Wells. "It would be unthinkable that a privatised Royal Mail would have that advantage over the competition but at present with the privatised monopoly we have, MPs don’t seem to have the motivation to move that legislation forward."

However one industry source, who is close to both operators, is not convinced that TNT’s offering is all it is cracked up to be.

"TNT aims to cover 40% of UK households by 2016, but only 6.5% of UK landmass. Rural communities and possibly Londoners will end up paying more for their post, one way or another, which is not what the universal service obligation is supposed to be about," he adds.

One major worry is that TNT’s expansion, though still in its infancy, could result in major changes to the postage system, including charges for delivery to non-urban areas, placing a "rural tax" on these localities. 

"It can say what it likes about the supposed savings and benefits of its service, but where is the hard evidence? What about the broader issues such as redirected mails? Who will carry out those and how often will they deliver to addresses?" adds the source.

Downstream access
Meanwhile, Howard Matthews, chief executive of Loricas Solutions, says that downstream access providers (DSAs) have enjoyed being in a unique position to inject into Royal Mail without having to worry about the costly final-mile responsibilities.

4DM’s Hill says that he expects the universal service to change and the UK to become more like continental Europe, where multiple carriers operate and post is only delivered every other day or three times a week.

While change within the postal sector is inevitable, the level of transformation is still an unknown quantity. And possibly of more concern to UK print, is whether this will be for the better.

"Competition is definitely the right thing in all business sectors. Unfortunately, once this is rolled out nationally, the postal system as we know it now will change forever," adds Matthews.

30-second briefing

• TNT Post UK is undertaking a second E2E trial to more than quarter of a million households in west London following a successful trial in Liverpool
• The trial, which has created 400 jobs, is "good news for UK print" according to TNT Post UK chief executive Nick Wells
• TNT Post UK claims that competition is good for the industry and good for Royal Mail, because it encourages innovation
• However, Royal Mail chief executive Moya Greene claims that the operator faces a "spiral of decline" if unregulated competition continues to grow
• The postal operator says that TNT Post will continue to cherry-pick the areas of high population and not serve rural areas
• One industry source claims that this will result in a "rural tax", with deliveries costing more for those areas
• There is industry concern that the universal service will adopt a model whereby post is delivered three or four times a week

Will greater postal competition be good for business?

Martin Lett Junior
Director, Marstan Press
While competition is good, a note of caution should be sounded. Royal Mail has an obligation to deliver to every address in the UK for the same price – the so-called universal service. If downstream access providers like TNT cherry-pick particular zones and take profitable business from Royal Mail, Royal Mail will have to keep increasing prices across the board in order to stay in business. Hence people who aren’t au fait with downstream access companies will end up paying more for small
mailings."

Howard Matthews,
chief executive, Loricas Solutions
"I suspect TNT will not be interested in delivering through letterboxes in rural areas because of the enormous logistical cost. Eventually, those who live in these areas will be collecting their own mail, no matter who their preferred postal provider is. This will lead to a decrease in direct mail, the very thing we are trying to promote for the survival of our industry. Some mail order companies already use petrol stations for customers to collect and return their orders; I don’t think it will be long before we see the same with postal services."

Paul Manning
Customer insight director, Rapidity
"Any competition is good news and Royal Mail has had something of a monopoly until now so it is positive. While others may argue that mailing to rural areas will become expensive, surely that is the way it should be. The idea of paying the same to send a letter down the road or to the Outer Hebrides is madness and an antiquated point of view. If companies don’t agree with that then maybe we will see an increased volume of direct mail targeting areas

To read Direct Marketing Association (UK) chief of operations Mike Lordan's comment on this issue, click here