Royal Mail PLC (LON:RMG) Faces Threat From the Mighty Amazon Inc (NASDAQ:AMZN)


Royal Mail PLC (LON:RMG) has complained that stiff competition and attempts made by Amazon (NASDAQ:AMZN) to squeeze the company, is hurting its parcel delivery business and disrupting its ability to cater to its universal service obligations. As a consequence, profits and shares are plummeting. Royal Mail PLC (LON:RMG) is a newly registered company and it needs support from other regulators to meet its obligations, including delivering letters to all parts of the UK.

Royal Mail (LON:RMG), till now, is the most profitable letter delivery company in the market. It’s unfair that a giant like Amazon (NASDAQ:AMZN) is hovering above the company, disrupting the company’s market and routes to cities. Royal Mail (LON:RMG) stated that operating profits has dropped to 279 euros after job losses and restructuring of the business. Last year it was 353 euros at the same time. Shares have also fallen by 8.3pc to 430p.

Amazon (NASDAQ:AMZN) has launched its own delivery service and even though it is a longtime client of Royal Mail (LON:RMG), it hasn’t regarded the fact that Royal Mail (LON:RMG) will not be able to withstand such a furious onslaught from Amazon (NASDAQ:AMZN). The profits will be completely licked by Amazon (NASDAQ:AMZN) and there will be nothing left for Royal Mail (LON:RMG) except meager revenue. Royal Mail (LON:RMG) till now has been focusing on the UK market.

The management thinks the UK is growing too challenging hence the company has started searching for other prospective markets. As for Amazon (NASDAQ:AMZN), it is not going to back down from launching its own delivery service. It’s a matter of good customer service for Amazon (NASDAQ:AMZN), upon which Amazon (NASDAQ:AMZN) has never compromised. But Royal Mail (LON:RMG) is getting squashed midway and perhaps Amazon (NASDAQ:AMZN) doesn’t realize that yet.

Amazon (NASDAQ:AMZN) will decrease the growth rate of Royal Mail (LON:RMG) by two percent, and that too just with the launch. Once Amazon (NASDAQ:AMZN) gets started, who knows what it’ll do to Royal Mail (LON:RMG)’s revenue and profit. Amazon (NASDAQ:AMZN) is known to have a ruthless approach in the market, if Royal Mail (LON:RMG) gets in its way, there is no doubt it will be crushed. Alternatively, Royal Mail (LON:RMG) can change routes, offer some sort of additional significance to the customers or increase its sales promotion.

Royal Mail (LON:RMG) doesn’t necessarily have to compete with Amazon (NASDAQ:AMZN) or it’ll barely exist. It has to survive initially and build slowly rather than complain about Amazon (NASDAQ:AMZN) trying to take over its market. Royal Mail (LON:RMG) as compared to Amazon (NASDAQ:AMZN) is quite young, and vulnerable. It cannot handle that sort of competition. Royal Mail (LON:RMG) should look for alternative routes.

Different cities and different promotions in order to completely distinguish itself from Amazon (NASDAQ:AMZN), because Amazon (NASDAQ:AMZN) won’t be stopping its growth barrage. Royal Mail (LON:RMG) also made a foolish mistake by openly accusing Amazon (NASDAQ:AMZN) in the media about moving in on its market, now that Amazon (NASDAQ:AMZN) is aware, who knows what it’ll do to Royal Mail (LON:RMG).