Can Canada Post survive the digital era?

Even radical reform might not save the post office now

Lost in the mail

Steve Russell/Toronto Star

Update: On Dec. 11, Canada Post announced that it will phase out home delivery in urban centres. This feature by Charlie Gillis from March 2013 considers what the post office is up against: 

As if Canada Post didn’t have enough problems. In the thick of a $2-billion modernization—with the Internet swallowing an ever-greater share of its lunch—came word that counterfeit stamps have been costing the 156-year-old institution an estimated $10 million in revenue each year. The new self-sticking stamps turn out to be a lot easier to fake than the kind you lick, postal officials acknowledged. “Our job is to detect and dismantle the network,” a spokeswoman said, “to really go for the big organizations.” But to anyone outside the postal world, enforcement problems raised by the story took a back seat to socio-cultural questions: who’s still sending letters these days—and so many that they need to forge stamps?

You don’t have to be a futurist to know snail mail is on the decline. Since 2006, the amount of domestic letter mail delivered annually by Canada Post has fallen by more than one billion pieces, a 20 per cent slide that has cast one of the country’s cornerstone institutions into existential crisis. Its once lucrative “direct marketing” business—junk mail—has fallen off by nearly 15 per cent, while its share of the parcel business has flatlined in the face of competition from private courier companies, many of which had partnered with online retailers. (Canada Post’s own parcel service recovered a bit last year; more on that later.)

The reasons are plain enough: like everyone else in the developed world, Canadians have been shifting their lives online, paying bills over the web, emailing loved ones rather than tossing a card into the post. Until recently, this shift was occurring at an orderly pace. In the early 2000s, volumes were holding steady and Canada Post was able to compensate for any losses by raising postage rates and cutting costs. The company remained profitable until 2011, when a 25-day labour disruption, combined with a court decision on pay equity, resulted in its first-ever loss.

But in recent months, the slide has accelerated, reviving long-standing fears about the post office’s ability to survive in the digital era. The company is on track to report another annual loss for 2012, and this time, the shortfall is due entirely to declining business. Letter mail, the bread-and-butter business that generates more than half of Canada Post’s revenue, fell off 6.4 per cent last year—a stomach-churning drop in a service over which it has a government-protected monopoly. The 273-million-letter nosedive accounts for nearly one-third of the post office’s volume losses in the past five years, and has left the company in a state of grim resignation. “There’s no question that mail is in a historic decline,” says Jon Hamilton, Canada Post’s general manager of communications. “We’re well-positioned for growth in e-commerce. But people buying a few things online is not going to make up for the mailbox full of mail we were used to delivering every single day.”

The question is: what will? The answer could determine the shape and size of the Canada Post to come—or whether there will be a Canada Post at all. In 2007, the pro-business C.D. Howe Institute published a study calling for the privatization of the postal service, along with deregulation that would allow competitors to deliver to its mailbox sites. Such a move would have left the post office to fend for itself or perish, possibly surrendering access to its own sorting facilities. But the idea gained little traction: as a self-supporting Crown corporation, Canada Post was returning a modest dividend to Ottawa each year, while costing taxpayers nothing in the form of direct subsidies from the federal government. Neither MPs nor voters saw much point in upsetting the status quo.

A year later, a strategic review commissioned by the federal government rejected privatization in favour of a wholesale modernization of the company. The arm’s-length panel recommended an ambitious upgrade of Canada Post’s decrepit sorting plants, financed by $2 billion in government-backed debt, along with a rethink of the service’s cumbersome logistics regime, which saw several workers handling mail in the same neighbourhood over the course of a single day—some dropping off mail at lock-boxes, others delivering to homes, still others delivering parcels.

The result can be seen in the so-called “transformation” initiative the company now touts at every opportunity. Small, multi-purpose electric vans now allow individual letter carriers to take mail—sorted and sequenced by address—from plant to neighbourhood doorsteps. In many places, the trucks swing through twice a day, says Hamilton, which has allowed the company to better compete with couriers: its parcel-post business grew seven per cent in the first three-quarters of 2012 compared to the same period last year. (Purolator, a courier Canada Post bought in 1993, operates separately and accounts for about 20 of the group’s revenue.)

Meantime, the post office has been amping up its online presence, partnering with retailers like Wal-Mart and Mountain Equipment Co-op to provide parcel delivery, and promoting its ePost service, which allows consumers to organize and pay bills through a secure Internet portal.

Yet even when it’s done, the transformation might not be enough to stave off wrenching change faced by post offices around the world. Last year, the U.S. Postal Service lost a record $16 billion and eliminated its time-honoured Saturday delivery service. The Netherlands and Germany have experimented with full or partial privatization of mail service, while New Zealand restructured its publicly owned post office to function like a private company, meaning it must cover its own losses and underwrite its own debt.

Robert Campbell, the author of a 2002 book on fixing postal services, led the review panel that recommended against the privatization of Canada Post. He says he suggested the reprieve, not as a permanent state of affairs, but as a temporary measure allowing the postal service to restructure to a new world of competition. “You’ve got what is basically a smokestack industry here that’s trying to modernize,” says Campbell, currently the president of Mount Allison University in Sackville, N.B. “It has huge legacy costs.”

Chief among its burdens: a $4-billion pension liability owed to current and retired employees that could hobble it in the face of leaner, private-sector competitors. Ottawa owes Canada Post the time—and possibly the financial assistance—to deal with that overhead before opening the field to its rivals, Campbell argues.

But if current trends hold, the pressure will rise, he acknowledges. This year’s loss reflects the gravity of Canada Post’s dilemma, and a few more like it could lose the company its prized status as a “self-sufficient” Crown corporation, meaning the government would have greater oversight of its managers and its board. Alternatively, Ottawa might simply proceed with deregulation, in the hope the market would provide cost-efficient substitutes to perform the same service. And that, in turn, would unleash a packet of new problems. What would happen to Canada Post’s obligation, enshrined in law, to provide universal service? Who would bring mail to rural and remote communities? Who would pay for it?

How close Canada Post is to that day is hard to say. Steven Fletcher, the minister of transport with responsibility for the postal service, said in an emailed response that the government will “work with Canada Post to ensure they are able to continue providing service to Canadians in a way that is sustainable in the long term without becoming a burden on the taxpayer.” But he didn’t say whether that might mean privatization or deregulation. And if Fletcher doesn’t see a more crowded playing field on the company’s horizon, he’s the only one. Even the head of the Canadian Union of Postal Workers, which represents 54,000 employees, believes the future of the post office lies in robust competitiveness. The “exclusive privilege” to deliver letters is going down, says Denis Lemelin, noting that his members have accepted a lower wage for new hires in its most recent settlements. “You have to go into competition with private companies like FedEx and United Parcel Service. ”

Still, change may prove painful, for mail customers as well as postal workers. Even as Lemelin talks up the need to compete, his union is waging a court battle over allegations the current restructuring has placed unacceptable physical demands on workers. And Campbell wonders whether a reformed Canada Post might someday be forced to introduce differentiated pricing to reflect the high cost of getting mail to rural communities—a political land mine if ever there was one. Either way, he says, the chance of a publicly owned post service, modernized and maintaining the current level of service, is a long shot, at best. “I believe that’s what Canadians want, and Canada Post is giving it the old college try,” he says. “But it’s going to be an extraordinary struggle.”




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Can Canada Post survive the digital era?

  1. I have to say that receiving a package from Canada Post is so much simpler, hassle-free and just easier than any of the private-sector competitors that I find it hard to fathom that they’d be losing money. UPS and Purolator seem incapable of hiring people who understand how to use an apartment/condo buzzer system and I’m always having to drive to some depot in an obscure section of the city with horribly inconvenient hours to pick-up my packages. On the other hand, with Canada Post, I’ve rarely to never had issues receiving packages, and with so many locations it’s never a long drive to pick up my package when it goes to a post office instead of at home delivery. And it’s usually cheaper to send with Canada Post as well. Maybe superior service and lower fees is what’s driving them into the ground, but if so, that’s a sad statement on the industry as a whole.

    • The problem is short-sightedness on the part of the management. The Modern Post system, it seems, has been set up by individuals who have never had to go out and actually deliver the mail. Because of this lack of experience, the powers-that-be have decided to implement a new way in delivery which turns it workers into pack-mules, as opposed to employees. This has caused issues with repetitive strain injuries because now not only does your postman/woman have to carry a long stack of mail on his/her arm, but also have the approximately 65 lbs of mail strapped to their backs they normally carry out as well. The bundle that is carried on the arm may not be as heavy as the bags strapped to the backs, but try carrying 10 lbs for ten minutes or so. Gets pretty darn heavy right? Now try doing that continously for hours WITH the bonus of the extra 65 lbs in your satchel. Now naysayers may cry out: Yes but the mail gets reduced in load as you deliver it. True. But then you are forgetting those nice grey boxes in our neighbourhoods; they are filled with even more mail, so the whole process starts again. This scenario I’ve described doesn’t even include the stairs, dogs, irrate customers, or foul weather that is encountered on the job as well.

      The other thing that stinks about the Modern Post system is that now your Letter Carriers have had a restructure that has imposed a new routing system making each delivery area a third larger than before at the cost of other employees jobs and sacrifice of health and safety. And finally we have the Community Mail Boxes. Eventually the Corp wants to replace door to door delivery with these aluminum monstrosities that people out in rural and new developments already know about, and have to walk or drive to themselves, rain, shine, or snow. Plus, if you order a parcel that is too big (which most are) for the metal box, the customers have to go to a postal office/outlet to pick it up… If you can even find an outlet as those are starting to be cut back as well. In turn, the people who really depend on the old system, like Grandma and Grandpa who may both be suffering from ill health, will have to make other arrangements on how to receive their mail if they do not have the ability to go to the CMB or outlets themselves.

      It really is all about the money now folks and not the service, much to the disdain of the Posties.

    • You realize the majority owner of Purolator is Canada Post.

      Allowing the monopoly provider of regular mail to own one of the major players in package delivery undermines the ability of the markets to provide competent private parcel service delivery.

      • Evidently, I did not realize that. I was merely commenting on my personal experiences with the service of major delivery companies.

        I wonder if the management of Purolator and Canada Post is integrated or still separate?

        • Purolator is an only investment of Canada Post.
          Profit earned by Purolator is to the benefit of Canada Post, and the Government of Canada.

        • Purolator is an investment of Canada Post.
          Profits go to Canada Post, and the Government of Canada

          • So then it’s fair to describe them as separate entities for the purpose of service provision and customer experience.

        • Let Purolator bid on the mail service.

  2. I don’t disagree with you that receiving a parcel from Canada Post is often simpler, with the pick-up spot at the local postal service counter often at the local drug-mart in your neighborhood. However, not that it changes things, but Purolator is owned by Canada Post. You’d think they could work together and leave a parcel at your local postal service counter.

    • You can’t get your parcels through the “internet” someone has to deliver them to your door.

  3. Canada Post advertises to it’s customers, “Go Digital” Yup, they shoot themselves in the foot. Canada Post does nothing but complain about declining mail volumes, yet they’re spending literally billions on new machines to sort that declining volume. then suggest that their customers subscribe to a digital mail box that has no revenue value.
    They should be partnering with schools and promoting the age old form of communication called letter writing. Maybe encourage “Pen Pals”. I don’t care what anyone says, everybody I know, loves to get a letter or card in the mail, that physical item still stirs emotions in a whole lot of people…

    • Yeh, but once you step outside of the institution opinions differ.

  4. They are not losing money, profits are down. This means that they are still making money, paying employees and paying the government thier little piece of the pie.

    • Wrong. Loss reported last year and another loss this year.

    • And paying bonussssss

  5. Reduce mail delivery for residences to twice per week. I don’t need the junk-mail more often that that anyways….

  6. Drop the monopoly on mail delivery and let Canada Post naturally die out. All Canada Post does now is wreck the environment by delivering countless amounts of junk mail. Postal employees will have to find new work that contributes a value to society, but thats better than taxing the public to pay the postal employees to do something people don’t want or need.

    • Where do you think junk mail comes from? Do you think Canada Post creates flyers. Business do, to sell their products. Key word Business!!

  7. Who in their right mind invest $2 billion on letter sorting machines ( mismanagement at its finest) when it is the parcel business that is growing due in part to the inernet.

    • The sorting machines can handle letters as well as parcels.

  8. The

  9. Maybe the future for delivery is on Monday CPC delivers to the right side of the street and on Tuesday, CPC delivers to the left side of the the street.

    Mail delivery every other day!

    If the delivery agent has an express or priority item for the other side of the street that day; they simply cross the street and deliver it.

    Reducing the work force can happen gradually through retirement.

    Areas like downtown Toronto that generate a profit would remain a one day service and geographic areas need to be assessed as profitable or not.

    Business in a two day delivery zone that needs one day service can pay a little extra for delivery.

    Two day delivery can follow the same schedule as civic garbage pick does. So if there’s a holiday, your delivery day would change as well.

    Moneys saved through this two day delivery method would pay back pension deficit and CPC would once again make a profit.

  10. CPC has invested billions of dollars in sorting equipment to eliminate jobs that will affect their bottom line. CPC in December 2012 delivered 1million parcels on one particular day. That must have helped their financial bottom line. I think the idea of delivery every second day is absurd. People and businesses deserve mail everyday in this country.

  11. They are not electric vans, they’re gas powered. The USPS is still mandated to do Saturday delivery. And certainly borrowing $2 billions might have something to do with the debt in addition to the work stoppage (which, in the end, was primarily a lockout) and the pay equity settlement (which could have been settled much earlier, if not for managerial intransigence).

  12. like my land line!

  13. Canada’s E-commerce is not strong enough to compensate Canada Post’s lost businesses. They are in an awkward position of the digital world where people are paying every bill online but shop in stores.

  14. I like our CP carriers for straight envelope mail delivery. UPS, FED-Ex et al offer trouble free delivery of parcels ordered online, often if a parcel goes through the Canada Post there is a delay if you don’t race to the door or are out they will not make an attempt to leave it even if you jave a big mailbox and you will need to wait 24 hours and pick it up at a substation after waiting in a line up for fifteen minutes. It is not the delivery people at fault here it is the silly rules set out by CPost. The management cannot even copy the good service practices of the private couriers. Far easier to send it by the couriers not connected to this blundering dinosaur of an organisation.

    • I agree. I work from home but I never get to the door in time to get a parcel delivered br CP, but witj Fed Ex or UPS they eitherwait or leave the parcel inside the screen door with no problem.

  15. More ads, flyers and bills please.

  16. They will continue to exist, unless you figure Canadian eBay selling, and all Canadian based packages will also cease to exist.

    • Ever hear of Fed Ex, UPS or DHL? All ship eBay shipments. For less than CP I might add.

  17. Since the start of the postal transformation Canada Post has been losing money. This should be a surprise to no one as every single item in the postal transformation is copied from the US post office. Canada Post WAS the most profitable public post office in the world and the US Post Office is quite possibly the biggest money losing corporation in the world. They should be copying us, not the other way around. And those new sorting machines they are investing in? The USPS is already tossing some of theirs out. Why invest in new sorting machines when there is less mail? IT MAKES NO SENSE!!!!!!!!!

    The Postal Transformation: transforming Canada Post from a company that makes money into a company that loses money.

  18. What Canada Post needs is an independent and public audit of it’s finances. There’s some fuzzy thinking going on at the top. How else to justify a 30% bonus for the ceo after claiming a quarter million in losses? While they’re at it, they might as well audit the unions books as well.

  19. Canada Post could go a long way to improve their customer service. I am from a small town and on a first-name basis with my Postmaster. She consistently sends my mail back even when she knows where it is supposed to go because of any small issue. Even if all the info is on the letter but in the wrong order she will send it back. I called Canada Post to complain and they said she is doing a good job! They do not even take your name into consideration just your address. This absolutely flies in the face of a well run business. You don’t make money if you have no interest in knowing your customer of serving their needs. My Aunts won’t send me birthday cards anymore because they are older and might make a mistake.

  20. Letter mail is decreasing but online shopping is increasing so they’re still in business.

  21. Aren’t they transforming into a new system. They should probably catch up with the technology.
    Aztec Storage Containers

  22. Wow – it was a dream job to sell stamps behind a Canada Post counter and getting Union wages and benefits. Maybe they should shut down the TTC ticket booths too!

  23. WTF? – This story is 8 months old now! What gives?

  24. No. And nor should it survive. It is a money sucking dinosaur with ever lessening levels of service staffed by over paid workers many of which work part time for full time pay with full pensions. All I get in the mail is junk. Day in and day out. Bye bye CP. You had your chance to be competitive but the unions made sure that would never happen.

  25. A country’s mail delivery system is an essential service the same as highways are. It’s part of the cost of running a country.

  26. Well it might be a money sucking dinosaur in some cases… Can’t justify why some at the top are getting these huge 30% bonuses and so on and they wonder why they are in debt?….that aside there are people who will still need door-to-door service like the disabled with mobility issues or elderly. Its not like they will lose all the business especially where delivering packages are used widely like with online shopping etc. So they might want to come up with an alternative like cut back on delivery of mail to 2 or 3 times a week instead.
    Maybe they should of looked ahead financially too before deciding to build that huge fancy main headquarters building in Ottawa several years ago!

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