Same-day delivery is a way for money-losing Canada Post to build its parcel business.Moe Doiron/The Globe and Mail
Betting that consumers are willing to pay for instant gratification, Canada Post is teaming up with Wal-Mart Canada Corp., Best Buy Canada Ltd., and Indigo Books & Music Inc. in the first major Canadian rollout of same-day online shopping.
The service, being offered starting Tuesday to more than four million people in a Toronto-area pilot project, will allow consumers to order everything from diapers to tablet computers online by midday and take delivery at home in the evening.
For Canada Post, same-day delivery is another way to build its parcel business – one of the money-losing Crown corporation's few remaining growth prospects – while also using its workers, trucks and postal depots more efficiently.
"Mail is going down and that's not going to be the growth engine," Rod Hart, Canada Post's general manager of domestic parcels and e-commerce, acknowledged in an interview. "We are prepared to invest where it makes sense, and parcels make sense for us."
Canada Post, whose core postal service lost $104-million in the second quarter, has trucks and depots that aren't fully used late in the day and in the evening. Mr. Hart said the project is a potential game-changer, offering consumers something that isn't available "on this scale anywhere in Canada." The test will run through the end of the Christmas shopping season, and could be extended to other markets if successful.
Canada Post will charge retailers an undisclosed amount for the service, and retailers will determine how much they will charge consumers, if at all. For retailers, the pilot project offers a chance to test a trend that's already available in many U.S. cities and appeal to consumers who want stuff fast, but don't want to go to a store.
"I don't see this being 50 per cent of orders or 20 per cent of orders, but there is a good percentage of the population that wants this service," insisted Simon Rodrigue, vice-president of e-commerce at Walmart.ca "The key for us is being able to offer it," he said, adding "it will really help us in downtown cores, like Toronto, where you don't have easy access to a Wal-Mart store today."
Wal-Mart already offers free next-day delivery in some areas. For the pilot program, it will randomly upgrade some of those orders to free same-day delivery as a way of gauging consumer appetite.
"We want to see that initial reaction," Mr. Rodrigue said. "Is it something that customers want?"
Roughly 70 per cent of the 100,000 products Wal-Mart sells online will be eligible for same-day delivery, as long as they meet Canada Post's parcel weight and size limits.
Electronics retailer Best Buy, which also owns the Future Shop chain, said it expects laptops, tablet computers and printers to be the most popular targets of same-day purchases. The retailer will charge $13.95 for same-day service. It already offers two-day and next-day delivery in much of the country.
"They want the goods right away, and we're looking for ways to meet the customer on their own terms," said Robert Pearson, vice-president of e-commerce at Best Buy Canada. Taking part in the test is an extension of a continuing effort by Best Buy to get products to customers when, how and where they want them, he said. Mr. Pearson said the company hopes to eventually deliver directly from stores, rather than from its distribution centres.
The challenge for Canada Post and the participating retailers is that Canadians are online shopping laggards compared with Americans and many Europeans. Roughly 4 per cent of purchases are made online in Canada, versus 8 per cent in the United States.
But even a small share of a fast-growing market could mean big business.
Canada Post's Mr. Hart said 10 to 15 per cent of Canadian online shoppers say they want same-day delivery and are willing to pay extra for it, based on a 2012 survey of 4,000 consumers it commissioned.
"It is still going to remain a niche, but what we don't know is how big a niche," he said.
And he acknowledged that none of the U.S. same-day shopping models are "screaming pure success" just yet.