Royal Mail is pricing the letter and itself out of existence

The snail mail industry has experienced a tough couple of decades. And the company is hardly rolling in money. It is expected to report a full-year loss of between £350m and £450m this year, and the share price has fallen by 27pc over the last 12 months. It faces plenty of challenges.

Even so, it is not hard to work out what the Royal Mail is up to, even if it understandably doesn’t want to say it out loud. If it keeps pushing up the price of stamps, fewer and fewer of us will bother to send anything by post, and the easier and easier it will be for the company to argue that its obligation to offer a universal service at the same price is hopelessly obsolete.

Letters can then be turned into a niche, premium product (after all, surely no one minds paying £5 to send a Valentine’s card) delivered to urban addresses two or three times a week at most. The company can get on with the far more lucrative business of delivering all the stuff we order online. Its pricing may not just about covering costs; it is arguably primarily designed to kill the product off. 

On one level that is clever enough. It is hard for any commercial organisation to shift successfully from one business model to another. And yet there is surely an alternative. The most ambitious entrepreneurs slash prices to build new markets, win over new customers, and take out the competition.

Henry Ford pioneered the strategy 100 years ago, cutting the price of the Model T again and again until it was affordable for the ordinary family. The newspaper price war of the early 1990s transformed print circulation. Ryanair turned itself into the largest airline in Europe by ruthlessly cutting prices so that Prague and Barcelona were easy weekend destinations for anyone with thirty quid to spare.

Amazon has built one of the biggest businesses in the world on offering incredible value, while Aldi and Lidl have muscled into the grocery trade, and before that Tesco was built on relentlessly competitive pricing. The list goes on and on. If you are willing to take some risks, and identify ways of charging less instead of more, you can turn a company around or build a completely new one.

It is complacent to assume the letter is finished. Email is instantaneous, but in many ways it has replaced the phone call rather than the written alternative. There are still eight billion letters sent in the UK every year, and while that is way down on the 20 billion sent in 2004, it is still a lot of mail. In a world saturated with meaningless social media, perhaps the letter could be revived?

If vinyl records can make a substantial comeback with the right kind of marketing, chutzpah and enthusiasm, perhaps paper and envelopes could as well.

The TikTok generation could discover the letter’s slower pace for the first time, while older people might well be pleasantly reminded of its sincerity. But that won’t happen if the company simply prices the product into oblivion.

If its current owner can’t see that then surely it is time for Royal Mail to be sold to someone with a vision for its core offering – and who doesn’t just want to run it into the ground.