The time-honoured practice of putting the cheque – and virtually everything else – in the mail is vanishing, and with it Canada Post’s already meagre profits.
After 16 years of profitability, Canada Post recorded a pretax loss of $253-million in 2011 – the result of dwindling mail volume, a costly pay equity ruling and June’s strike and lockout.
And the federal Crown corporation isn’t happy with its fading presence in Canadians’ lives. The front cover of its annual report spells out “transformation” in large, block letters, highlighting chief executive officer Deepak Chopra’s desire to shift the post office from a letter carrier into a thriving e-commerce business.
“Transitioning from a stable, predictable and profitable environment to a rapidly changing, unpredictable and competitive environment will take hard work,” Mr. Chopra, the former Pitney Bowes Canada executive who took over as CEO last year, acknowledged in the report.
The fundamental challenge for Canada Post is that it must work harder every year to deliver less mail to a generation hooked on Facebook, Twitter and texting. Canada Post’s core business of delivering letters to Canadians is in steady, and apparently, irreversible decline.
Canada Post’s 2011 loss compares to a $134-million profit in 2010, according to the annual report, released Tuesday. Revenue was $7.5-billion – the same as last year. The loss would have been larger without a small profit from its Purolator courier subsidiary.
But dwindling mail volume isn’t the only reason for the loss. The Supreme Court ordered Canada Post to settle a $150-million pay equity dispute with female employees. A strike and lockout in June cost it $200-million in revenue. Canada Post also paid a $510-million instalment on a massive pension shortfall during the year.
“Deep and enduring” is how the company characterizes its structural problems. It has 69,000 employees, a growing population of retirees and a costly national network of sorting plants and postal stations. Yet, every year, it must serve 200,000 new addresses.
“The brown envelopes are disappearing,” said Canada Post spokesman Jon Hamilton, as the business of paying bills and sending cheques increasingly shifts online. “The 50-year bull run is quickly evaporating. So we need to make structural changes to our business.”
Jihad Abdul-Rahiim, 28, a production engineer at Toyota in Cambridge, Ont., has been paying all his bills online for the past seven years. He rarely checks his physical mail box any more.
“At this point in my life I just trust the Internet, not to lose or steal my stuff, more than I trust the physical world,” he said.
Snail-mail holdouts are being forced online. The federal government will stop delivering pension and other cheques by mail to Canadians by 2016. Major service companies, including Rogers and Bell, are already charging as much as $3 a month to some customers for paper invoices.
The post office delivered 3.6 per cent fewer letters in 2011. On a per address basis, the decline was even steeper at 4.6 per cent as the post office carried fewer letters to an ever-expanding number of home and business addresses. Canadians are also getting fewer magazines and pieces of ad mail.
Letters account for more than half of Canada Post’s business, and Canadians are receiving an average of 20 per cent fewer pieces of mail than they were five years ago. The volume decline is expected to reach 50 per cent within a decade.
Virtually all postal systems are seeing a similar erosion of mail volumes. And as bad as it is for Canada Post, the financial crunch is even worse for other government-run mail services that offer more expansive service.
“It’s the same business everywhere,” pointed out Robert Campbell, president of Mount Allison University in Sackville, N.B., and chairman of a 2008 federal advisory committee on the post office. “Look at what’s going on in the U.S. Volumes are declining.”
The U.S. Postal Service is losing $36-million (U.S.) a day – $25-billion over the past five years. By 2015, the annual flood of red ink is expected to reach $18-billion. Then again, Americans get household mail pickup, near next-day service within major cities and six-day-a-week delivery.
The U.S. Postal Service is threatening to close more than 200 sorting plants, thousands of post offices and cutting as many as 80,000 jobs.
Britain is aiming to sell off the marginally profitable Royal Mail, headed by former Canada Post CEO Moya Greene, in a stock offering next year.
Canada Post is hoping its contract with unionized workers – in the hands of an arbitrator since last year’s lockout – will give it flexibility to adjust to the unkind economics of the mail business. Mr. Campbell said the Harper government is just hoping Canada Post stays near break-even as long as possible so it doesn’t have to cut service to rural areas.
Canada Post’s Mr. Chopra is hitching the future of the company on delivering parcels and replicating online what Canadians once did exclusively through the mail with a revamped e-Post service. Last year, Mr. Chopra hired a Silicon Valley-trained former head of Yahoo Canada, Kerry Munro, to re-launch the business, sign up more businesses and invest millions in new encryption technology.
Mr. Munro envisions a one-stop website that would allow Canadians to pay all their bills, get government services (such as passports, drivers’ licences and parking tickets), be paid, and receive personalized ad pitches from businesses. The service would authenticate and verify the identity of users.
“We want to extend the proposition that Canada Post offers into the digital world – 24/7, 365 days a year – anywhere, on any device,” Mr. Munro said in a recent interview. “You manage transactions, manage financial outlays, budget, manage connections with government – all seamlessly, all securely.”
With files from Jacqueline Nelson in Toronto.