Canada Post continues to bleed money amid fundamental changes to mail delivery, prompting the Crown corporation to signal that something will have to change if it wants to right the ship.
Canada Post on Friday reported an annual pre-tax loss of $748 million for 2023, the postal service’s sixth straight year in the red.
In a statement accompanying the result, the organization was forthright about the challenges facing a modern-day mail carrier.
Canada Post noted that in 2006, the average Canadian household received about seven letters per week; that will drop to just two in 2023, following the rapid rise of email and other forms of Internet communication.
In addition to a decline in this transactional mail segment, Canada Post also reported revenue declines in its parcel and direct marketing services in 2023.
Package delivery had been a lifeline for the mail service in recent years amid a boom in online shopping by Canadians, particularly during the pandemic.
But Canada Post’s share of that market is also eroding: where it once delivered almost two-thirds of packages before the pandemic, the rise of new competitors in the space meant the Crown corporation handled less than a third of all packages last year.
In a bid to increase revenue streams flowing into the postal service’s coffers, Canada Post confirmed an earlier announcement Monday that the cost of a single stamp would increase by seven cents to just under a dollar when purchased in a booklet.
But that move — the third stamp price increase in about a decade — won’t be enough to stave off the need for structural changes to keep Canada Post’s operations viable, according to experts who spoke to Global News and the postman himself.
“Canadians understand that our business model must change. They can see it in their mailbox,” President and CEO Doug Ettinger said in a statement Friday.
“An operating model designed to deliver nearly 5.5 billion letters in 2006 cannot be sustained with the 2.2 billion letters we delivered last year.”
Canada Post needs ‘flexibility’ to remain viable, spokesperson says
Despite the advances of other package delivery services, Canada Post spokesperson Jon Hamilton told Global News that the Crown corporation continues to see packages as a growing market for mail.
“We expect e-commerce in Canada to double in the next 10 years. We just need to be better positioned to achieve as much of that growth as possible,” Hamilton says.
Canada Post has a sizable network of letter carriers and post offices to compete with companies like Amazon, Purolator and FedEx, but Hamilton notes the Crown corporation’s mandate needs an update.
He says the legislation governing Canada Post needs greater “flexibility” so the provider can better manage its flow of operations. That could mean prioritizing some mail, but also putting less urgent deliveries on a “slower path,” he says.
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“A lot of that is covered by rules that were put in place in 2009, when Netflix was still delivering DVDs by mail,” Hamilton says.
Another challenge Canada Post faces is the rapid growth of the Canadian population. Hamilton says the mail service adds about 200,000 independent addresses to its network in a given year, increasing delivery costs without significantly increasing revenue.
Canada Post sees a “real estate boom” amid efforts by all levels of government to accelerate the pace of housing construction in the country, a challenge Hamilton reiterates will require greater “flexibility” for the corporation to address.
Marvin Ryder, associate professor at McMaster University’s DeGroote School of Business, agrees that mail delivery frequency may need to change as mail volume declines.
He tells Global News that an every-other-day delivery system could see Canada Post’s costs almost cut in half, with a modest decrease in service.
Maintaining daily delivery service to all addresses in Canada is an expensive undertaking, and increasing the cost of shipping is a short-term fix that could end up hurting business even more in the long term as people turn to electronic options. cheaper, Ryder maintains. .
“In more urban or suburban areas, introducing more super mailboxes or every other day delivery would be the least painful way to maintain service while reducing the costs of your operations.” he says.
Could Canada Post be more than a postal service?
Jean-Yves Duclos, the federal minister responsible for Canada Post, was asked Tuesday in Ottawa whether the government would amend legislation to remove the daily mail delivery mandate.
While Duclos said it was an “option” being considered by Canada Post, he did not give an opinion on whether the Liberal government would make that change. He acknowledged the changing landscape of mail delivery in Canada, but said the government is waiting to see a new model from the Crown corporation to increase revenue and save costs.
Global News asked Hamilton if proposals such as an expansion of community mailboxes were on the table in Canada Post’s recovery strategy, but he said it was premature to mention “very specific measures.”
Canada Post is also negotiating a new contract with the Canadian Postal Workers Union. Global News contacted CUPW to ask if there are fears of layoffs in response to Canada Post’s financial concerns, but was instead directed to a statement released Tuesday by the union.
In that statement, the CUPW acknowledged that “the path Canada Post is currently on is not working.”
The union pushed for Canada Post’s mandate to evolve beyond mail delivery, as postal services have done in other parts of the world to remain relevant amid the decline of transactional mail.
Some examples included a service offered by Japan that monitors older adults and informs family members for a small monthly fee., or other parts of the world like France where the postal service also operates as a bank.
Ryder says Canada Post, with its numerous post offices in centralized locations, could take on services like passport renewal or banking or insurance operations, particularly in remote or rural areas that struggle to attract private service providers.
But he points out that such a move by a Crown corporation would immediately scare off the private market, which would complain about a state entity competing in established markets.
Canada Post may require subsidies
Canada Post currently does not receive direct funding from the Canadian government, and is mandated to manage and finance its operations independently.
But with the clock ticking on Canada Post’s coffers, Hamilton says the corporation has been in talks with Ottawa about how to ensure service delivery is not disrupted.
“We are working with the government on some short-term measures to give us some breathing room in terms of funding,” he says.
The 2024 federal budget, tabled last month, said the federal government would consider Canada Post’s portfolio of more than 1,700 post offices as housing redevelopment prospects in the coming years.
Ryder says he would prefer to see the federal government expand Canada Post’s mandate and allow it to remain a viable, independent company that provides critical services to Canadians rather than providing direct subsidies to the organization.
Glen Hodgson, a senior fellow at the CD Howe Institute who analyzed Canada’s Crown corporations in a 2021 report, tells Global News that Canada Post is likely going through an “existential period” of trying to determine what its role will be in the future. .
Hodgson says he wouldn’t expect a newly created post-enforcement banking service from Canada, for example, to gain much traction in Canada’s already well-established financial system.
But Canada Post wouldn’t be the first or only Crown corporation to receive a government subsidy to continue doing work with the costs of providing that service, he notes.
Via Rail, for example, periodically receives state subsidies so it can offer relatively affordable train travel across the country, he says.
If Canada Post can’t save its mail delivery business, “we may be entering a world where a subsidy model becomes a real option,” he says.
“I think that in the end you have to think about the basics, how to contain costs, to what extent prices can be raised and the market will absorb it. And at the end of the day, you may have to reach out and ask the taxpayer for support like we do with the railway,” Hodgson says.
“It is a very Canadian model. You try everything and then ask for a grant.”
