By Canadian Press

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Outdated rules and mounting losses: Can anything be done to fix Canada Post?

May 24, 2024 | 7:31 AM

Canada Post needs drastic measures to staunch the fiscal bleeding and revamp its operations after a tough decade, experts say.

The Crown corporation lost $748 million before taxes in 2023, its second-worst year on record as Canadians sent fewer letters while competitors gobbled up even more of the parcel market.

Some observers see higher stamp prices, a more efficient delivery network and expansion into new areas — from banking to government services — among the potential routes to profitability.

Households received seven letters a week on average in 2006, but only two per week last year, according to Canada Post’s annual report, which dubs the trend “the Great Mail Decline.”

At the same time, its charter requires daily rounds to every address, locking in an operational model that hasn’t turned a profit since 2017. Over the past 18 years, Canada Post has added more than three million addresses to its delivery network.

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Ninety-six per cent of the 2.2 billion letters received last year were sent by Canadians, according to the annual report. Given those 2.1 billion domestic letters as well as this month’s seven-cent price hike on a stamp purchased in a booklet, some quick math suggests the hike could add roughly $147 million in revenue to Canada Post coffers. That’s as much as a fifth of last year’s loss.

“That helps a bit, but it doesn’t solve it all,” said Marvin Ryder, an associate professor at McMaster University’s DeGroote School of Business.

“I am still one of those odd people that mail 50, 60 Christmas cards. But most people don’t. They’ve gone digital.”

Advertising mail has also declined, as environmental groups put pressure on retailers and digital marketing gains a greater foothold amid rising online orders.

“Companies were getting flack for sending out junk mail,” Ryder said.

Parcel delivery marks Canada Post’s one “bright spot,” he said, though even that segment saw roughly three per cent declines last year.

The postal service’s share of the parcel market eroded from 62 per cent prior to the COVID-19 pandemic to 29 per cent last year, as Amazon and other competitors seized on skyrocketing demand for next-day doorstep deliveries.

“The bottom line is, business is under siege,” Ryder said, pointing to the organization’s $3-billion loss over the past five years.

Jean-Yves Duclos, the federal minister responsible for Canada Post, said this month the government is considering amending legislation that mandates daily mail delivery, among other measures.

A first step could be to switch to mail delivery every other day, said Ian Lee, an associate professor at Carleton University’s Sprott School of Business. But massive layoffs might follow; nearly 23,000 mail carriers worked at the Crown corporation as of 2022.

Moreover, the move would face at least some backlash, analysts say, including from unions and New Democrats.

Lee also recommended franchising the outpost offices currently located at retail chains.

“They’re being used less and less, but Loblaws and Shoppers and those kinds of stores would love to have the post office as a franchise just because it builds traffic into the stores,” Lee said.

Another option is to adopt more community mailboxes — clusters of mail slots on the sidewalk that make drop-offs much quicker.

In 2018, the Trudeau government scrapped a program launched by the Harper Conservatives to end door-to-door mail delivery following public backlash, particularly from seniors and Canadians with disabilities.

The roughly 840,000 households that had already converted to community mailboxes since 2014 did not get the service back.

“I have a ‘super mailbox,’ and I love it. If I go away for a couple weeks, I feel secure,” Ryder said. “The boxes are big enough for small items, so I don’t have to worry about porch pirates.”

Other possible solutions, such as branching out, have been floated.

Elbowing into adjacent areas such as food delivery or partnering with e-commerce companies and rivals like UPS on last-mile package shipments present possible opportunities that could build on Canada Post’s vast network of outposts and employees.

“Maybe Canada Post should consider getting a stake in something like SkipTheDishes or Uber Eats,” Lee said.

Others have suggested government services, such as passport renewal, or banking — like the postal service in France and the Czech Republic — given the disappearance of bank branches from small towns.

Roughly 600 “points of service” from the federal government dot the country, including more than 300 Service Canada centres and some 25 passport offices. That compares to 5,800 Canada Post offices, including in rural communities devoid of other government sites.

Across the Atlantic Ocean, states from Spain to Slovenia assign postal workers to carry out customer transactions — withdrawals and deposits, for example — on behalf of banks.

The possibilities are not without skeptics.

Lee called the banking option “beyond silly.”

“Banking is very sophisticated,” he said. “It’s just a very different business.”

As for taking up various civic services, he asked: “Are we going to get one government agency to take their services and move them over to Canada Post?”

On the other hand, Lee recommended “massive, radical surgery” — ending all home mail delivery in favour of community mailboxes, for example, or rebranding as a parcel courier — to slim down and restore the withering mail body.

Canada Post itself has proposed maintaining its presence in far-flung communities while reforming rules from 1994 that banned the closure of nearly 3,600 post offices in areas that were then rural but have since been swallowed up by urban sprawl.

“Today, these requirements apply to many communities that were once rural, but are now clearly suburban with more service options nearby,” the Crown corporation said in its latest annual report, suggesting consolidation in those areas.

Much hope lies in Purolator Inc., of which Canada Post acquired a majority stake in 1993. The company earned $293 million before taxes last year.

It will need to hoover up a whole lot more to make up for the continued cash burn.

This report by The Canadian Press was first published May 24, 2024.

Christopher Reynolds, The Canadian Press