After three years of losses, it’s recently 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’s an important shift for a company that has faced falling demand, rising costs, and drastic reputational hits.

Royal Mail’s shift back into the black includes some great examples of ways to adapt and grow in tough market conditions. Here are five of the best:

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 or decreasing significantly. Shift your focus and your resources towards the growth 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 distracts 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 request proof of posting and tracking of their parcels, making it a more convenient way for customers to send small parcels.

The lesson: Innovation can improve your reputation as a sustainable business as well as help you meet the needs of your customers more effectively. Innovation doesn’t have to be high-tech or complicated. Consistently consider the question: ‘What small changes would make my customers’ lives easier?’

4. Invest in Brand and Trust

Despite foreign ownership, Royal Mail will keep its name, UK headquarters, and tax residency for at least five years. This was an agreed condition of sale, with the government retaining a ‘golden share’ that allows it veto rights on certain changes. This requirement has helped to maintain continuity and trust with customers.

The lesson? In times of change or upheaval, customers are reassured by consistency in the things they rely on most. This could be your level of service, your communication methods 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 its leadership has made difficult and 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 those decisions only increases the time 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 trend within society, with digital communication replacing paper. Royal Mail’s survival depends on accepting this shift and embracing it rather than resisting it.

The lesson? Take time to examine the long-term trends in your industry. It’s hard to do, but to be sure of a thriving future, it’s key that you avoid clinging to a declining business model. 

What’s the key takeaway?

Royal Mail’s modest profit shows that even a 500-year-old organisation can adapt when forced to do so. Focusing on the areas above could help your business continue to grow and thrive.

If you’re unsure how to turn the tide in your business, please get in touch. We have helped many clients change the course of their business over many years, and would be happy to help you too!