Six Lessons for Businesses from Royal Mail’s Return to Profit

After three years of losses, it’s been reported that Royal Mail has returned to profit under its new owner, Czech billionaire Daniel Kretinsky.

While the £12m profit (excluding redundancy costs) is modest compared to the £336m loss the year before, it marks an important shift for a company that has faced falling demand, rising costs, and hits to its reputation.

Royal Mail’s story provides food for thought on what it takes to adapt and grow your business in tough market conditions. Here are five lessons.

1. Shift Focus to Growth Areas

Royal Mail recognised that letter volumes are in long-term decline (down 4% in the latest year), but parcel volumes are rising (up 6%). By pivoting investment and strategy towards parcels - where customer demand and profitability lie - the business is working to realign itself with market reality.

The lesson? Analyse your income streams to see if there are any areas where customer demand is increasing. Then focus more resources in that area, even if it means letting go of parts of the business that once seemed core.

2. Streamline Operations

Royal Mail has already stopped second-class letter deliveries on Saturdays to save costs. The Universal Service Obligation (USO) requires Royal Mail to deliver letters six days per week, Monday to Saturday, and parcels Monday to Friday.

However, the USO is currently being reviewed and Royal Mail has argued that reducing second-class deliveries to every other weekday would save up to £300 million a year. It feels this would give it a “fighting chance.”

The lesson? Regularly review the way your business operates to see if you’re doing work that drains resources but adds little value. Small changes in the way you do things could unlock big savings.

3. Innovate for Customer Needs

Royal Mail plans to install 3,500 solar-powered parcel post boxes across the UK. Solar panels on the top of the post boxes will power a digitally-activated drawer allowing for the posting of items as large as a shoebox.

Customers will be able to use the Royal Mail app to use the service and can request proof of posting and tracking of their parcel, making it a more convenient way for customers to send small parcels.

The lesson: Innovation not only can improve your reputation as a sustainable business but also help you better meet the needs of your customers. Innovation doesn’t have to be high-tech or complicated. Ask: ‘What small changes would make my customers’ lives easier?’

4. Invest in Brand and Trust

Despite foreign ownership, Royal Mail kept its name, UK headquarters, and tax residency for at least five years. This was an agreed condition when Royal Mail was bought out, and the government has kept a so-called “golden share” that allows it veto rights on certain changes. However, this requirement has helped to maintain continuity and trust with customers.

The lesson? In times of change, you can reassure your customers by keeping the things they rely on most consistent – whether that’s your level of service, how you communicate with them, or the quality of your products. Familiarity helps build trust and loyalty.

5. Be Willing to Make Tough Calls

Royal Mail has shed staff, absorbed strikes and endured reputational knocks. Yet leadership has made difficult and sometimes unpopular choices to put the company back on a sustainable path.

The lesson? Growth often requires tough decisions, whether on staffing, pricing, or cutting loss-making activities. Avoiding them only delays how long it can take to put the business back on a positive footing.

6. Adapt Business Models to Long-Term Trends

The shift from letters to parcels reflects a deeper societal trend - digital communication replacing paper. Royal Mail’s survival depends on embracing this shift rather than resisting it.

The lesson? Take time to examine what the long-term trends in your industry are. Are you positioned to thrive in five or ten years’ time, or might you be clinging to models that show signs of being in decline?

What’s the key takeaway from all this?

Royal Mail’s modest profit shows that even a 500-year-old organisation can adapt when forced to. Focusing on growth areas, cutting what no longer works, innovating around your customers’ needs, investing in trust, making tough calls and staying in touch with long-term trends can help your business continue to grow and thrive.

If you’d like to talk through how these kinds of lessons could apply to your own business – whether that’s managing costs, adapting services, or keeping customers onside – we’d be happy to help!

See: https://www.bbc.co.uk/news/articles/cger3w129l0o