Canada Post made money for a third consecutive year in 2017, but the postal service’s $144-million profit is not the most significant line item in its latest annual report.
The real surprise is that parcel revenue surged 22.7 per cent to $2.1-billion, the first time it has cracked the $2-billion mark in its history. The Crown Corporation has become the No. 1 parcel company in Canada.
“Evolution has brought great results,” former president and chief executive officer Deepak Chopra says in the report. “Canada Post touches the lives of every Canadian. By providing a service that is focused on the needs of our customers, we have not only endured, but are equipped to remain a vital institution for years to come,” said Mr. Chopra, who left Canada Post at the end of March.
Vital, perhaps, but far from uniquely qualified. The Amazon phenomenon is dramatically transforming the main vocation of the post office. Canada Post was created to provide a basic communications between Canadians. Increasingly, however, it is servicing Canadians’ penchant for online shopping – a business that is well served by the private sector.
Delivering packages is still a smaller business for the post office than letters, but not for long. On its current trajectory, Canada Post will generate more revenue from its parcel business by next year.
That raises a fundamental question: What is the federal government doing in the parcel business anyway? The post office has a government-granted monopoly to deliver letters, but that business is shrinking every year as individuals and organizations send fewer letters (5.5 per cent fewer in 2017, compared with 2016).
In parcels, Canada Post has no shortage of competitors, including UPS, Fedex, Canpar, Dynamex, plus Purolator, which Canada Post owns. The other significant line of business for the post office is direct marketing.
E-commerce is transforming Canada Post into an organization that could be easily privatized. Parcel revenue has grown by an average of 12.5 per cent a year over the past three years. If revenue continues to grow at this pace, the post office would generate parcel revenue of more than $2.65-billion in 2019.
The letter business is moving in the opposite direction. Revenue has shrunk an average of 8.9 per cent per year for the past three years. On its current course, Canada Post would generate $2.4-billion in revenue from letters in 2019, or less than parcels.
At some point in the not-too-distant future, Canada Post may have no letters to deliver.
Canada Post is no longer operating a basic essential service for Canadians. It is involved in various businesses in highly competitive industries. That is a long way from its universal-service mandate, which is to “maintain a post system that allows individuals and businesses in Canada to send and receive mail within Canada and between Canada and elsewhere.”
Delivering clothes, books and electronics for Amazon hardly qualifies as an essential public service.
The Canada Post Corp. Act requires the postal service to be financially self-sustaining. Canada Post, like other Crown Corporations, should also be required to show that what it’s doing isn’t being adequately provided by the private sector.
A decade ago, Canada Post was convinced that the demise of the letter would make the post office financially unsustainable without severe reductions in service. That hasn’t happened, largely because e-commerce has been such a runaway success.
Unfortunately, parcels are also making the post office redundant. Few Canadians would notice if they got their parcels from UPS, rather that Canada Post. And most, would learn to live without regular delivery of a few bills and the occasional wedding invitation.
The federal government no longer owns railways, airlines and telephone companies, after concluding that these businesses were better off in private hands. A similar rationale could be invoked for getting out of the parcel delivery business.
The time has come for Mr. Chopra’s successor and the government in Ottawa to rethink what Canada Post is all about.