According to a report in The Times, Royal Mail currently delivers three out of every four letters, against four out of five posted last year, losing out to rival companies such as TNT and Business Post.
There are growing concerns for the future of the state-owned group, with Royal Mail said to be facing dire financial problems as customers are being driven away after .
However, competitors still have to use Royal Mail's infrastructure and postal staff for the 'final mile' delivery.
But, if rivals continue to grow, it is feared Royal Mail's business could shrink even further.
One of its two main competitors, TNT, expects to handle 2.4bn items of mail this year and Business Post said it expected to exceed that amount.
Last year, TNT handled 1.8bn items out of a total annual postbag of 20bn and Business Post handled 1.7bn.
Millie Banerjee, chairman of Postwatch, the consumers' watchdog, said: "We are, of course, pleased that business customers in these difficult economic times are continuing to find ways to reduce postage costs by switching to alternative suppliers or by using Royal Mail's access product.
"The good news for Royal Mail is that they continue to deliver 99% of letters. If and when Royal Mail modernises, it should win some of the business back."