Canada Post’s revelation of plans to end home delivery of mail has business executives scratching their heads over the ramifications for the delivery of parcels, particularly merchandise purchased online.
On 11 December Canada Post announced a five-point action plan to return to financial sustainability by 2019. It had reported a pre-tax loss of $109 million in the third quarter of 2013, with mail volume down 5 percent in the first nine months of the year.
At the core of the plan to achieve cost savings of $900 million is the decision to phase out residential deliveries over the coming five years, alongside a 35 percent rise in the price of stamps and the elimination of 8,000 jobs. Instead of receiving mail at their door, Canadians will have to collect it from community mailboxes. According to Canada Post, at this point two-thirds of Canadians already get their mail through community mailboxes, grouped or lobby mailboxes or rural mailboxes. The changes affect mainly residential areas in urban centres.
Details of the planned roll-out of the new regime, which is slated to commence in the second half of 2014, are yet to be released.
Horst Manner-Romberg, founder and principal of M-R-U, a parcel and letter logistics research and consulting firm based in Hamburg, Germany, noted that no other G8 country has moved towards eliminating residential delivery.
The announcement caused confusion in the business community in how far this would affect the delivery of parcels. Gary Breininger, president of BGR Coaching & Strategic Solutions, remarked that not delivering parcels to the door would be a dangerous decision that could well undermine Canada Post’s competitive position vis-a-vis other parcel delivery companies.
Like other postal organizations, Canada Post has embraced the delivery of merchandise purchased online as a strategic growth area. In September it started same-day delivery projects with Wal-Mart, Best Buy and Indigo and adopted the slogan “Delivering the Online World”.
In 2013 3.7 percent of the total retail sales in Canada were conducted online. In the US online shopping accounted for about 9 percent of total retail volume in that year.
Manner-Romberg said that typically letter mail and parcel are separate delivery streams, so it should be viable for Canada Post to maintain its existing delivery model for parcels while shifting letters to community mailboxes.
Annick Losier, a spokesperson for Canada Post, said that the action plan is aimed at the delivery of letters.
“Parcel delivery will remain essentially the same – but if some parcels are smaller and can fit in the larger compartments of the community mailbox, we will deliver in that box – which is locked and will be conveniently located within the neighborhood. What we know is that about one third of Canadians work during the day and by enabling parcel delivery in secure boxes will further add peace of mind,” she commented.
In an emergency session at the House of Commons Transport Committee, Canada Post CEO Deepak Chopra indicated that parcel streams would go to community mailboxes. The shift to these would free up more quality time for busy families by making it easier for them to receive online purchases at secure locations, he declared.
This has e-tailers wonder how exactly Canada Post will get their merchandise to consumers, and what choices they themselves have to control the process. For most e-tailers it is crucial to offer the consumer a choice of multiple delivery options, Manner-Romberg pointed out. In many cases delivery options are a factor that determines whether a consumer orders a product from a vendor or abandons the purchasing process, he added.
Losier indicates that Canada Post is working on solutions for parcel recipients. “In fact, we have bigger plans for consumers – but they are not quite ready to announce,” she said.
Neither Breininger nor Manner-Romberg sees any cause to worry for consumers or businesses if Canada Post were to drop the ball in the parcel delivery game. Private courier firms would be ready to jump in and fill such a gap, they said.
“I believe that this announcement will remind customers that they do have options, based on their needs, when it comes to choosing a carrier. We are well positioned to absorb additional volumes across Canada,” said Mike Tierney, president of UPS Canada.