Mark Kleinman on marketing and the City: One strike and Royal Mail's out

Mark Kleinman
Mark Kleinman

The ongoing industrial dispute at the postal service is causing grave and irreversible damage to the brand.

Of all the companies upon which marketing directors across Britain depend, Royal Mail has a strong claim to being the one that matters most.

Its latest tussle with the trades unions is much more than a narrow industrial dispute, confined to the employees and union activists, who believe that the company's attempts to modernise are a euphemism for a brutal attempt to sweep aside their concerns about working practices and cost-cutting plans.

This week, the first of a series of 24-hour staff walkouts is expected, and Billy Hayes, leader of the Communication Workers Union, has threatened to con-tinue the strikes until Christmas.

This matters to the vast majority of British businesses, whether they are listed or private, big or small, consumer-facing or SME-focused.

Both sides are in obdurate mood. The longer the dispute goes on, however, the more Royal Mail's long-term value must be diminishing. As one person close to the company put it to me last week, the commercial customers who walk out of the door - taking vital business with them - are unlikely ever to walk back in, no matter what incentives they may be offered. So far, Amazon's UK operation and several bricks-and-mortar retailers including WH Smith and Argos have indicated that they are making plans to do business with rival postal operators.

Already, there is a backlog of several million items of mail, and estimates suggest that this number could rise to a staggering 200m by the time the dispute is resolved. If you are a marketing director who deploys direct mail as part of your communication strategy, you are likely to be affected, and unlikely to be happy.

Estimates suggest that the latest industrial action will cost the economy at least £1.5bn. The damage to Royal Mail's long-term business relationships and reputation may be far higher.

Of equal importance are the implications for the Post Office's expansion of its retail banking operations. Announced by Gordon Brown at the Labour Party Conference last month, the creation of a 'People's Bank', at a time when public mistrust of high-street banking brands has never been higher offered a real opportunity to cement the future of the business.

However, the public is not stupid. Most people know that Royal Mail and the Post Office are part of the same organisation. The chaos at Royal Mail can therefore only be detrimental to the government's hopes that the Post Office can step into a vacuum created by the banking crisis of the past two years.

Then there are the proposals, likely to be revived by the Conservatives if they win the general election next year, to privatise Royal Mail.

Negotiations led by Lord Mandelson were abandoned earlier this year under a storm of protest from the unions and the Parliamentary Labour Party; the official reason for doing so was that the economic downturn had made it unfeasible to attract a desirable price for a one-third stake in the company.

TNT, the Dutch postal operator, wanted to get its hands on Royal Mail's GLS parcels business, while venture capitalist CVC proposed paying nearly £2bn for a significant shareholding.

Once this dispute has subsided from a raging inferno to leave a pile of smouldering embers, the business is likely to be far less valuable.

In the hands of marketing experts Allan Leighton, the now-departed chairman, and Adam Crozier, the chief executive, Royal Mail became profitable and gained a glimpse of a potentially prosperous future. It will take much more than that now to view the long-term prognosis with optimism.
 
Mark Kleinman is City editor at Sky News and a columnist for The Times

 

30 seconds on strike action at Royal Mail

  • The Communication Workers Union (CWU) is planning a national strike of two days from tomorrow (Thursday).
  • Almost 120,000 of Royal Mail's 140,000 workers are expected to walk out on one of the two days.
  • Billy Hayes, general secretary of the CWU, said of the activity's timing: 'Mail volumes increase by three times in the run-up to Christmas, and mail is not something you can stockpile. Royal Mail is a key sector of the economy.'
  • Royal Mail plans to take on 30,000 temporary workers
  • to deal with the backlog of post, which the CWU has suggested is illegal strike-breaking. However, Royal Mail asserts that it hires extra temporary staff every year.
  • Royal Mail and the CWU are said to be seeking assistance from a third-party mediation agency to help resolve the dispute. Hayes said he intends to discuss issues of bullying and high workloads.
  • The most recent national postal strike, which occurred over eight days in 2007, resulted in a backlog of more than 200m items.

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