Royal Mail Inland Letter Post Scheme by Fando Mate

Proposal to amend the Inland Letter Post Scheme in relation to universal service packets and parcels, and compensation levels for loss and damage December 2012 A consultation document Published: Responses required by:

7th December 2012 11th January 2013 â&#x20AC;&#x201C; 6pm

ÂŠ Royal Mail 2012 Royal Mail is a trading name of Royal Mail Group Ltd. Registered number 4138203.

Purpose of consultation 1.

Postal Schemes set out the terms and conditions for postal services for consumers and business customers who use Royal Mail’s services but who do not hold an individual contract with Royal Mail. Customers who use stamps, on-line postage, or franking meters to pay for Royal Mail services do so under a Postal Scheme rather than a contractual arrangement. The Postal Schemes are available on our website.

Royal Mail plans to update its domestic USO parcels services from April 2013, introducing a number of changes to products and services. It will be necessary to amend the Inland Postal Scheme.

Making any amendments to these Postal Schemes has the effect of making new Postal Schemes. Royal Mail makes Postal Schemes under Section 89 of the Postal Services Act 2000 (as amended) – ‘the Act’. Before making changes to the Schemes we formally consult customers and stakeholders.1

These changes affect the following sections of the Inland Postal Scheme:   

The product range definitions and names (Section 2, Section 16, Section 19, Annex A) Size and weight limits (Section 6) How to pay for Postage (Section 8) and How to work out how much to pay (Section 9) Additional Terms and Conditions for Some Services (Section 18)

Royal Mail is seeking feedback on the proposed new scheme. We will evaluate feedback before we finalise the wording and publish (in the London, Edinburgh & Belfast Gazettes) the new postal Scheme, in order for that Scheme to take effect.

Royal Mail is undertaking this consultation exercise in relation to proposed schemes in accordance with the requirements set by our regulator, Ofcom. Royal Mail also is required to notify Ofcom of the changes to the

Background 6.

The postal market is changing. Letters volumes are declining, whereas the UK parcels market continues to grow, as consumers shop and sell online. Royal Mail is responding to these trends by restructuring its core network and modernising and updating its parcel services. Parcels now account for 47 per cent of Royal Mail Group’s revenue and volumes are growing. Parcels are vital to many of our customers; they are equally vital to Royal Mail.

We have already introduced changes to make it easier for customers to receive parcels from Royal Mail. These include:    

introducing ‘delivery to neighbour’ for certain items – if the recipient is not at home extending callers office hours for collection of parcels, and the facility to have an item collected at a local Post Office if more convenient enabling redelivery arrangements to be done online standardising the time items are held at delivery offices for collection to 18 days

However despite the recent growth in parcels, Royal Mail’s non-contract parcel product range has remained unchanged for several years. We have undertaken a review of our universal service parcel products, including consumer research and have determined that we need to change the offering.

Our customers do not find our product range easy to understand 9. Before considering any product changes we carried out customer research and have also considered the findings from both Ofcom and Consumer Focus research to input into our review of our parcel products. 10. Our consumer research indicates customers are often confused by our current product range, particularly the weight variants for different services, the product names and available add-on product features. For example, there are currently up to fifteen different weight bands for parcels. In total there are 23 different prices depending on the weight of an item and the service used. They find the ‘service promise’ unclear, in terms of the level of guarantee of speed and/or security and compensation if things go wrong. 11. This is highlighted by customer comments made during our research:

‘‘I remain almost always thoroughly confused as to the different types of, what the difference between the services are and the different pricing on things.’’ “I get confused with Recorded and Registered…….’’ “The thing that gets me is 2nd Class, it can be tiny little amount, like 2g over, and then you've got to send it standard parcel or 1st Class…”

12. Consumer research shows that our customers are looking for simplicity, clarity, product range and predictability when using our products and services. They want to know what service they are purchasing. They want a range of products that are reliable, reasonable and easy to understand as well as re-assurance that they are getting the service that they really need. 13. Our current product range does not always fulfil these requirements. Currently, there are up to 15 weight bands for parcels and 23 different price points. In addition, our 1st Class service has a 20kg weight limit, but our 2nd Class service is only available up to 1kg. Above this, customers can only use our Standard Parcel product – which has a 3-5 day delivery time - or revert to 1st Class. 14. We will be making a number of changes to our products so that they are clearer and simpler to understand. We will create a better structured and consistent product set that allows customers to make clearer choices about the services they need for their items. 15. One of these changes will halve the 15 weight bands for parcels to seven from April 2013. For the first time, a 2nd class service will also be available to customers when sending parcels between 1kg and 20kg, with the added option to receive a signature on delivery. We believe this is a very meaningful addition to customer choice. As a result of this improvement, our Standard Parcels product will be withdrawn. Size based pricing will bring Royal Mail into line with other postal carriers 16. As the parcels market grows, we need to ensure we reflect the cost impact that size has in relation to handling and delivering parcels with the need to ensure all Royal Mail’s services make a reasonable rate of return, and so ensure the sustainability of the universal service. 17. Parcels are currently priced by weight but the size of a parcel has an impact on the cost of collecting, transporting, sorting and delivering an item. Royal Mail’s proposal is to introduce two broad parcel categories – small parcels and medium parcels. The introduction of sizerelated pricing will bring Royal Mail in line with other major postal operators, for example, in Germany, and Italy. 18. The new parcel formats will supersede the current ‘packet’ format for 1st Class and 2nd Class items. Any resulting price increases introduced as part of our annual tariff review will be within the current 2c price cap and will have to be “fair and reasonable”. We will provide notification of prices as part of usual pricing arrangements. 19. The parcel formats will be called ‘Small Parcel’ and ‘Medium Parcel’ both available on 1st Class and 2nd Class services as well as on 1st Class Recorded Signed For and 2nd Class Recorded Signed For. For the first time, a 2nd Class service will also be available to customers when sending parcels between 1kg and 20kg, with the added option to receive a signature on delivery. We believe this is a very meaningful addition to customer choice. Small Parcels will typically be carried on foot by our postmen and women as they complete their delivery rounds and will be capped at a maximum weight limit of 2kg. Medium Parcels will be available up to a maximum weight of 20kg. These will require a van delivery and therefore attract a higher price than Small Parcel items.

20. In determining the appropriate maximum dimensions for the Small Parcel format we have considered both the customer impact and the effect on our operational delivery methods. Our analysis indicates that seven out of ten of the parcels that we carry will fall into the Small Parcel format. Of those that would fall within the Medium Parcel category, improved packaging for one quarter of those items (26 per cent) would reduce their size to the small parcel format. We will invest extensively to make it easy for customers to understand all of these changes. 21. The size and weight limits for the new Parcel formats will be: Format Small Parcel Medium Parcel

Size (up to) 450mm x 350mm x 80mm 610mm x 460mm x 460mm

Weight (up to) 2kg 20kg

22. There will be no change to the maximum size dimensions for 1st Class and 2nd Class items. However, since the Standard Parcels product is being superseded because of the improvement to the 2nd Class parcel offering, we will no longer accept items greater in size than the dimensions for the Medium Parcel format of 610mmx 460mmx460mm.2 23. Customers using Post Offices to send parcels that exceed the Medium Parcel dimensions will be able to use Parcelforce Worldwide products which include tracking and guaranteed service as standard. The Parcelforce Worldwide network is designed to handle larger dimensions. Customers can also use other parcel providers. Royal Mail’s compensation arrangements 24. Royal Mail is the only major UK delivery company to provide compensation for loss or damage of untracked items. Aside from Special Delivery products, we currently offer a maximum compensation limit for loss and damage up to £46. This applies to the domestic 1st Class and 2nd Class, Recorded Signed For & Standard Parcel products. 25. We will introduce a change that will vary the levels of compensation available for 1st Class and 2nd Class services and for our proof of delivery product, Recorded Signed For. Changes to compensation levels will apply to all 1st Class and 2nd Class formats: Letters, Large Letters, Small & Medium Parcels. This will help highlight the value of each service and help improve customer understanding. We will continue to pay compensation for delayed items. The limits for these will be unchanged. 26. The current customer uncertainty over compensation is highlighted by some example comments from our research included below:

“Why isn’t compensation attached to Recorded?” “But every postal service has a certain level that you can claim against, it’s just that if you have an item that’s worth more than the standard amount then you have to pay extra” 2

These maximum dimensions exceed the maximum dimensions laid down by the Universal Postal Union (UPU). The UPU is an agency of the United Nations that coordinates postal policies among member nations.

27. Royal Mail is proposing to increase the maximum compensation payable for loss or damage of a Recorded Signed For item from £46 to £50. Compensation for loss or damage for Special Delivery is unchanged at £500. 28. Alongside this, it is our intention to alter compensation for loss or damage of items sent using our untracked 1st and 2nd Class letter and parcels from £46 to £20. Royal Mail is the only major UK delivery company to provide compensation for loss or damage of untracked items. 29. The differentiation in compensation levels for loss or damage should help customers distinguish between products and enable them to purchase the service they need. For example, it should be clearer that the Recorded Signed For product should be used if sending items of a greater value than untracked 1st and 2nd Class services, because this service provides for proof of posting and proof of delivery and therefore offers a higher level of compensation. 30. Many countries do not offer any compensation for loss or damage of untracked items, including Germany, the Netherlands and the USA. The change will ensure that Royal Mail provides proportionate and reasonable compensation based on the service used and postage paid. 31. We will continue to pay compensation for delayed items. The limits for these will be unchanged.

How these changes differ from the current product terms and conditions 32. We plan to make the following changes to our products from April 2013: 

We will create a three tier offer to simplify customer choice.

Products Delivery Transit Times

Tracking

Confirmation of Delivery

Signature on delivery Max compensation Max size Max weight

1st Class

2nd Class

RM Signed For 1st Class

RM Signed For 2nd Class

Special Delivery Guaranteed by 1pm

Next Day Delivery (not guaranteed)

Delivery within

Next Day Delivery (not guaranteed)

Delivery within

Guaranteed by 1pm Next Day

3 days

Un-tracked

3 days

Scanned on receipt at post office

End to End tracking

and at delivery only

(scanned at multiple points in network)

Yes

(On-line confirmation of receipt and

(On-line confirmation of delivery &

delivery & signature via rm.com)

signature of recipient via rm.com)

Yes

No £20

£50

£500 as standard

610mm x 460mm x 460mm

20kg

   



the maximum weight limit for 2nd Class items will be increased from 1kg to 20kg. the Standard Parcels product will be withdrawn. the Proof of Delivery product, ‘Recorded Signed For’ will be re-named ‘Royal Mail Signed For’ and will be available with both 1st and 2nd Class items up to 20kg. the registered and insured product, ‘Special Delivery Next Day’, will be re-named as ‘Royal Mail Special Delivery Guaranteed by 1pm’ and the maximum weight limit increased from 10kg to 20kg. the number of weight steps for 1st Class items will be reduced.

33. In terms of new formats we will:  



withdraw the current ‘Packet’ format for 1st Class and 2nd Class items. introduce two new formats which we will call ‘Small Parcel’ & ‘Medium Parcel’ for 1st Class and 2nd Class and Royal Mail Signed For 1st Class and Royal Mail Signed For 2nd Class items. move from pricing both only on weight to pricing for both new parcel formats based on size and weight by applying a higher price to Medium Parcels, having regard to the higher costs of handling Medium Parcels.

The maximum size and weight limits for the new Parcel formats are illustrated below:

Small Parcel

max 80mm

max 350mm max 450mm

max weight 2kg Medium Parcel

max 460mm

max 460mm max 610mm

max weight 20kg

Roll or tube shaped items: max 900mm

The length must not be more than 900mm or the length plus twice the diameter must not exceed 1040mm

max 1040mm

max weight 20kg 34. In terms of the compensation for loss and damage3 we plan to make the following changes from April 2013:   

the maximum compensation for loss and damage for all 1st and 2nd Class items will be capped at £20 compensation for loss and damage for Royal Mail Signed For product will be capped at £50 compensation for loss or damage for Special Delivery is unchanged at up to £500 – including options to increase the cap up to £2500 and mitigate against consequential loss.

Subject to existing exclusions – This scheme consultation is not changing these definitions and exclusions.

Customer Impact Changes to Products 35. The changes we are introducing will make our product set simpler, easier to use and give clear choice between products. The revised product set will have consistent weight and size dimensions; product names will aid understanding of key product features; add-on features will be applicable consistently for 1st Class and 2nd Class services. Customers will have clearer choices when posting their items. 36. Our customers will be able to: 

 

continue to post items up to 20kg but will now be able to use the second class, 3 day delivery service as well as our 1st Class, next day service. We believe this is a very meaningful addition to customer choice. use a proof of delivery product for these 2nd Class items by purchasing our Royal Mail Signed For product up to 20kg. post ‘registered and insured’ items up to 20kg by using our Royal Mail Special Delivery Guaranteed by 1pm product.

37. However, they will no longer be able to post items larger than 610mm x 460mm x 460mm via Royal Mail unless these are cylinder or roll shaped items. Customers sending these items will be able to use Parcelforce services. Additionally they will be able to use alternative providers. Changes to Formats 38. We have developed a Small Parcel and Medium Parcel format to reflect the way we handle different sized parcels. As discussed, research has shown that customers value simplicity. We have therefore focused on developing a simple solution, whilst capturing as many items as possible within the Small Parcels format- we estimate this to be 71% of all parcel items that we currently handle. 39. Approximately three out ten of the parcels that we carry will fall into the Medium Parcel format. Of those that would fall within the Medium Parcel category, improved packaging for one quarter of those items (26%) would reduce their size to the small parcel format. 40. We have undertaken research with different customer groups, including those in rural areas, with no broadband or on low income, to understand what larger size items they are sending; the frequency with which they post such items; what products they use; how much they spend and their responses to potential price increases for these items. We also asked them to consider how they might repackage items if the price for posting larger parcels were greater than the price for posting smaller parcels. This research shows that: 

only five per cent of consumers using Royal Mail services send more than three Medium Parcels per year.



one in four customers that send a Medium Parcel currently use more than necessary packaging for the size of the contents and could reduce the overall size of their item to fall within the ‘Small Parcel’ format. This will encourage customers to consider packaging items so they are only as large as they need to be and avoid unnecessary or wasteful packaging.

41. We will invest extensively to make it easy for customers to understand our new formats and our revised pricing structure and will be introducing new format templates into all Post Office branches which will be available for customers to use to identify the correct format for their items. 42. We will provide notification of prices as part of usual pricing arrangements. Changes to Compensation Limits for 1st Class & 2nd Class items 43. Customers will have a range of products from which to choose if the level of compensation cover is important to them when posting an item with Royal Mail. This will range from a basic level of cover of £20 for our standard 1st Class and 2nd Class services, £50 for our proof of Delivery product, Royal Mail Signed For and up to £500 as standard for the Royal Mail Special Delivery Guaranteed by 1pm product. 44. Changes to compensation levels will apply to all 1st Class and 2nd Class formats: Letters, Large Letters, Small & Medium Parcels. 45. The arrangements for delay compensation will be unchanged. We will keep compensation for delay at 6 x 1st Class stamps. 46. The levels of compensation and enhanced compensation for our Special Delivery Guaranteed by 1pm will be the same as those currently for our Special Delivery Next Day service. 47. There will no change to the compensation arrangements for the Articles for the Blind service. 48. Many countries do not offer any compensation for loss or damage of untracked items, including Germany, the Netherlands, and the USA. The change will ensure that Royal Mail provides proportionate and reasonable compensation based on the service used and postage paid. Customer communication 49. We will invest extensively to make it easy for customers to understand all of these changes. All Post Offices will have a template to assess the size of the Parcels. 50. Counter staff at the Post Office will be fully trained to advise customers on the product that best suits their needs.

51. We will be mindful of possible customer confusion after launch and will adopt a sensible approach managing occurrences of incorrect postage. As most parcels are sent through the Post Office, we expect a very low potential for incorrect postage. 52. Royal Mail considers these changes are fully consistent with Royal Mail’s requirements under its universal service obligations in terms of:  

range of services offered fairness and reasonableness of the terms and conditions associated with it.

Consultation question Question 53. Please comment on whether you think Royal Mail’s proposals regarding the changes to its product and services as outlined in this document are fair and reasonable? If the proposals are not considered to be fair and reasonable please explain why. 54. Please comment on whether the proposed new Scheme wording (Annex B) that sets out all of the changes to Royal Mail’s products and services is sufficiently clear, fair & reasonable. If the proposed new Scheme wording is not considered to be clear, fair and reasonable please explain why.

Timescales and next steps 55. Stakeholders are asked to submit answers to the questions set out above as soon as possible and in any event before the deadline of 6pm on 11th January 2013. 56. Responses should be made by post or by email to: John Rowley Royal Mail 4th Floor 148 Old Street London EC1V 9HQ john.rowley@royalmail.com 57. Please provide a completed cover sheet with the response that you wish us to consider. This cover sheet can be found in Annex B. We may publish responses, in full, on our website. If you would like your response or parts of your response to remain confidential please indicate this on the cover sheet. 58. Subject to concerns arising out of responses to this consultation, we propose to give at least one month’s notice such that the new postal Scheme would take effect on 18th

February 2013. This would take the form of a formal notification4 to Ofcom and Consumer Focus and publication of that notification on our website. 59. We will also publish details of the new postal Scheme in the London, Edinburgh & Belfast Gazettes before they take effect. 60. We will make changes to our other literature and websites in order to give as much publicity to these changes as we consider necessary.

Made under Designated Universal Service Provider (DUSP) Regulatory Condition 1.10

ÂŠ Royal Mail 2012 â&#x20AC;&#x201C; Page 12 of 14

Annex A

Proposed new wording of the Royal Mail United Kingdom Post Scheme December 2012. 5

See separate document: The Royal Mail United Kingdom Post Scheme consultation

Royal Mail reserves the right to make small drafting changes if required from to text that is set out in this Annex. ÂŠ Royal Mail 2012 â&#x20AC;&#x201C; Page 13 of 14

Annex B

Cover sheet for response to a Royal Mail consultation

BASIC DETAILS Consultation title: To (Royal Mail contact):

John Rowley

Name of respondent: Representing (self or organisation/s): Address (if not received by email):

CONFIDENTIALITY Please tick below what part of your response you consider is confidential, giving your reasons why Name/contact details/job title

Organisation

Whole response

Part of the response

If there is no separate confidential annex, which parts? ……………………………………………………………………………………………………………………………………………. If you want part of your response, your name or your organisation not to be published, can Royal Mail still publish a reference to the contents of your response (including, for any confidential parts, a general summary that does not disclose the specific information or enable you to be identified)? YES/NO (please delete as appropriate) DECLARATION I confirm that the correspondence supplied with this cover sheet is a formal consultation response that Royal Mail can publish, subject to any declaration in the confidentiality section. If I have sent my response by email, Royal Mail can disregard any standard e-mail text about not disclosing email contents and attachments. Royal Mail may like to publish responses for the purposes of transparency. If your response is non-confidential (in whole or in part) and you are happy for us to publish your response once the consultation has ended, please tick here. Name

Signed (if hard copy)

Date: