Time for Canada Post to become a private, for-profit business
On Wednesday, Canada Post confirmed what most of us already know: that door-to-door mail delivery is out-dated, expensive, and unsustainable. Like the slow and painful demise of tape cassettes and movie rentals from Blockbuster, Canada Post is learning it will either need to adapt its business to the new marketplace or go out of business completely.
In fact, I believe the federal government should have used the June 2011 strike to privatize the crown corporation, completely severing it from the federal government’s books.
To attempt to reverse their slide into extinction, they announced a five-point action plan:
- Converting the remaining one-third of households that receive door-to-door delivery to community mailboxes.
- Introducing a “tiered” approach to lettermail: as of March 31, 2014, stamps will be sold in bulk at 85 cents per roll, or individually for $1 each. Stamps are currently 63 cents each, whether bought individually or in bulk.
- Opening more franchise postal outlets.
- “Streamlining operations:” changing “internal operations” to create “a more efficient flow of parcels and mail through the network and to the customers.” They note most of their streamlining will be driven by technology, consolidation, equipping the delivery fleet with fuel efficient vehicles, and having employees deliver both parcels and lettermail.
- Addressing the cost of labour. Canada Post estimates its work force — average age: 48 — will see 15,000 employees leave or retire within the next five years. This is more than enough, Canada Post says, to reduce its workforce by 6,000-8,000 positions, mostly through attrition.
The shift to which Canada Post is responding is clear. Between 2006 and 2012 there were one billion fewer pieces of mail being processed. That’s a 20 percent drop in just six years. Canada Post also noted between 2008 and 2012 they were processing 23.6 percent less mail per address.
Unfortunately, Canada Post’s five-point action plan will not address the enormous market shift away from lettermail. I probably get about five letters per month. Four of those are bills; maybe one is a letter from a charity or non-profit community association asking for a donation. Maybe twice per year I’ll also receive a letter from a family member. Other than that, my mailbox either sits empty or stuffed with junk mail which I may or may not read.
This is the tectonic shift Canada Post is only beginning to realize: no longer do paper bills need to be paid by mailing a return cheque — my hydro bill can be emailed to me and paid electronically, without ever using a stamp, envelope, or piece of paper.
No longer do I need to write my grandma a letter — I can send her an instant message on Facebook.
I don’t even need paper junk mail anymore — most retailers have electronic flyers or will email you with their weekly deals.
Canada Post also has to deal with increased market competition. When they were created in 1867 they did not have to worry about competing with UPS, Federal Express, or Purolator. Now they do, and the four companies are all competing for market share (Purolator is a subsidiary of Canada Post.)
In fact, it was precisely this shift in communications that the Conference Board of Canada noted would have a “dramatic impact” on Canada Post. They estimated Canada Post would lose $1 billion by 2020 if it did not undertake fundamental changes to its business.
To be clear, as a crown corporation, Canada Post continues to be profitable: in 2012 the Canada Post Group of Companies posted before-tax profits of $127 million (the “Canada Post segment:” $98 million). But the Group would have ended up losing $25 million if it were not for “non-recurring, non-cash adjustments” in reducing sick leave and post-retirement health benefits for its employees.
In other words, tomorrow’s Canada Post is desperately trying to fund yesterday’s employees. They have already predicted “a substantial financial loss” in 2013.
Now is the time to protect Canadian taxpayers by privatizing Canada Post before they cost taxpayer money.
As a private company Canada Post will have to compete in the market by offering the best prices and the best services compared to its competitors.
They aren’t short on potentially successful ideas: their 2012 report offers “a new approach” to direct marketing services for businesses.
They have also recognized Canadian consumers’ growing affinity for shopping online. While this reduces the need for paper bills and mailbox flyers, it also creates new opportunities. What if the privatized Canada Post became the exclusive delivery service for online companies like eBay or Amazon?
Canadians are also growing fond of online grocery shopping, although the concept currently remains limited to a few large cities. What if Canada Post entered this market, offering an incredibly cheap grocery delivery service? They already have the infrastructure and knowledge required.
Canada Post may have a future, but that future exists as a private corporation competing in the market to offer the best products and services to its customers.