Postal problems cause big challenges for small businesses
Frustrated with parcels going missing or letters arriving late? These issues can have a huge impact for individuals, particularly in the run-up to Christmas — our latest parcels league table reveals widespread problems, with 1 in 3 people experiencing an issue with their last parcel delivery. Yet millions of small businesses across the country also rely on postal services day to day to meet the demands of their customers. For them, delays and missing packages are having a big financial impact, often leading to hundreds of pounds worth of losses.
Small businesses (with 0–49 employees) are a really important part of our economy. They make up 99.2% of UK private sector businesses and have a £1.6 trillion turnover. Yet the past few years have hit them hard. First the Covid pandemic and now the cost-of-living crisis have placed many under more pressure than ever before. As the statutory advocate for postal consumers, at Citizens Advice we’ve been monitoring the changing landscape for businesses. We recently surveyed small businesses across Britain to ask about their experiences with the postal market and the results were striking.
Small businesses depend on reliable postal services
Our findings reveal small businesses remain hugely reliant on postal services of all kinds, even in the digital age. As online retail has grown rapidly since the pandemic, businesses need dependable parcel services to receive orders from suppliers and send deliveries to customers. Over 70% of businesses we surveyed reported sending a parcel in the last 3 months. For the same reason, small businesses are regular users of post offices. Over 1 in 3 use a post office at least weekly and 3 in 5 of those using a post office to send parcels said it was essential to the everyday running of their business.
Ongoing postal problems are leading to financial losses for small businesses, at a time many can least afford them
We know that there have been numerous postal service failures in recent years. Our latest parcels league table reveals no company even receiving a 3 star rating and Royal Mail has failed to meet its service targets for 4 out of the last 5 years. Given the reliance of small businesses on post, these issues can have a big financial impact. Nearly half of businesses had a problem when sending or receiving parcels in the last 3 months and over 30% had lost money as a result, often linked to the loss of valuable goods and the need to refund customers. The average financial hit was £419, but 1 in 10 lost more than £500. Costs at this scale can have a huge impact on the bottom line for a small organisation, potentially even raising the risk of business failure.
At Citizens Advice, we see the impact of these issues for small business owners on our frontline day to day:
Elena* called on behalf of her son who is a self employed maker of musical instruments. This year he sent an instrument to a customer using one of the major parcel companies. The instrument was worth £2,000. The customer informed her son that they hadn’t received the instrument and the courier company admitted they had delivered the instrument to the wrong address. This meant Elena’s son was facing the prospect of having to reimburse the customer the full purchase amount plus failed delivery and the loss of a valuable handmade item.
*Name changed to preserve anonymity
Beyond financial losses, postal service failures can affect all areas of a small business
It’s not just a small business’ bottom line that can suffer through postal problems. Our research highlighted many wider issues. 25% of those who had experienced parcel delivery issues received complaints or a low customer rating. This in turn can lead to reputational damage, loss of repeat custom and ultimately restrict a business’ potential for growth.
There are also consequences for the day to day practicalities of running a business. For example, over 25% of small businesses had experienced a letter delay in the last month. With letters frequently carrying legal, financial or government information, it is not surprising that nearly 2 in 3 of this group also reported direct negative impacts as a result, such as the loss of a customer or payment delays.
Access to postal services was another challenge. Over 1 in 10 small businesses had experienced a post office closure in the last year, with 86% reporting a negative impact, such as spending more time and money to access another branch. And, in the context of the rise of part-time or slimmed down post office services, we found 2 in 3 businesses felt they would be negatively impacted if a local post office was replaced by a part-time alternative.
Ofcom needs to stand up for small businesses
These problems are not going to go away on their own. The damage caused by failed parcel deliveries and letter delays is too much for a small business sector already struggling with huge pressures in recent years. That’s why we’ve been calling for urgent action. In particular, we need the regulator responsible — Ofcom — to step up. We’ve called for:
- Ofcom to use its monitoring data on delivery problems to identify parcel companies that are persistently performing poorly and take decisive enforcement action against the worst offenders
- Consumer representation in Ofcom’s investigations into quality of service failures at Royal Mail, so that the degree of harm to individuals and businesses caused by service failures are fairly assessed.
- Meaningful penalties when minimum service standards are not met. For too long the financial penalties issued by Ofcom have been minimal relative to the scale and ongoing nature of problems in the sector.
Access to affordable and reliable post is essential, not just for individual social and economic participation, but for the functioning of business and the wider economy. If we are to see renewed growth in this vital sector of the economy, we cannot expect small businesses to keep paying the price for postal service failures.
