Royal Mail predicts online sales shift will be permanent

The company said parcel volumes have fallen when compared with the height of the first lockdown but remain ahead of pre-pandemic levels.

Royal Mail vans
Royal Mail vans

Royal Mail believes the online sales boom experienced during the Covid-19 crisis has permanently changed the way people shop as the number of parcels being sent remains above pre-pandemic levels.

The company said volumes of UK parcels fell 7% in the three months to the end of June compared with a year ago – during the first lockdowns when high streets were shut – but remain up by 35% on 2019 levels.

Speaking ahead of the company’s annual shareholder meeting on Wednesday, chairman Keith Williams said: “As expected, parcel volumes decreased and letter volumes increased compared to the exceptional period last year encompassing the UK’s first lockdown, when non-essential retailers closed for the first time.

“We are starting to see evidence that the domestic parcel market is re-basing to a higher level than pre-pandemic, as consumers continue to shop online.”

International parcel sending remains weak due to reduced air freight capacity and increased conveyance costs, and the transition to a new trade deal with the EU, the company added.

Total revenues at Royal Mail increased 12.2% in the three months to June compared with a year ago and, despite the fall in parcel volumes, revenues from the division increased 3.4%.

Letter sending also increased as businesses reopened and started mailing households again – with volumes up 22% compared with a year ago.

However, letter volumes remain down on two years ago – by 18% – and revenues from the division are 6.6% lower than in 2019.

Mr Williams said it is too early to predict how the rest of the year will play out for the business due to continued uncertainty over Covid, but said he remains hopeful.

“As pandemic restrictions continue to ease, there is still uncertainty about levels of Covid transmission, the impact on consumer behaviour and economic factors such as GDP (gross domestic product) growth and inflation, all of which will impact on future performance,” he said.

“We continue to expect fluctuations in volumes as we emerge from Covid restrictions, which we will need to manage accordingly.”

Royal Mail financials
Royal Mail enjoyed a boost in sales during the pandemic (Gareth Fuller/PA)

Royal Mail’s international parcel business, GLS, also performed strongly, the company said.

Volume growth in the three months to June was up 10% – although it has slowed compared with the strong growth seen a year earlier during the lockdowns.

Bosses in the GLS division said the easing of restrictions has helped its business-to-business services as companies start to use them more widely again.

Total revenues for the group – Royal Mail and GLS – were up 12.5% for the three months to June compared with a year ago and 20.2% compared with 2019.

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