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Survival mode: Canada Post to focus on delivering your online purchases

A Canada Post truck is seen on Tuesday, May 1, 2012 in Toronto.

Matthew Sherwood/The Globe and Mail

In Canada, the red mailbox is a brand unto itself – instantly recognizable, part of the everyday streetscape, but also a symbol of Canada Post Corp.'s torrent of red ink.

It's no secret the purveyor of snail mail is under threat in a digital age. So now, the Crown corporation is looking to associate its business with a more modern symbol: the red shopping cart.

On Monday, Canada Post will launch a nationwide advertising campaign – its first in more than five years, aside from a short-term holiday campaign in 2011 – designed to promote itself as a shipping vehicle for Canadians who are shopping on the Web. The post office has bought advertising space on television and online until the end of the year. Ads in the first phase of the campaign will feature a self-propelled red cart ferrying parcels to shoppers. Beginning mid-October, holiday ads also featuring the red cart will begin to appear.

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The shift in focus has never been more urgent. Canada Post is looking at a round of aggressive cost-cutting to compensate for a business in permanent decline. Just last week, the Crown corporation warned it could run out of money by this time next year, unless it can find relief through "additional financing" from the federal government or from payments on its pension deficit.

While traditional letter mail makes up 51 per cent of the agency's revenue, it is in decline. Parcels account for much less, but present an opportunity for growth, given the massive rise in e-commerce in recent years.

"Our transaction mail business is a dying business," said Lise Côté, general manager of consumer and small business marketing at Canada Post. "This is where we're placing our bets."

The marketing challenge Canada Post faces is similar to many other legacy businesses struggling to remain relevant. While its marketing budget has traditionally been very small, the post office is planning to advertise more regularly. Like other marketers in transition, it will need to convert the associations between its brand and a dying business in consumers' minds.

"The cart is symbolic of our extension of the online shopping experience," she said. "We are that cart."

Canada Post says it already delivers more than half of the parcels sent from businesses to consumers each year – including via partnerships with the U.S. Postal Service to carry parcels from the border to Canadian households that make purchases from U.S. websites.

The postal service believes that volume will grow – Canada has thus far lagged other countries when it comes to the growth of e-commerce. The agency's research shows that online purchases accounted for just 3.7 per cent of total retail sales in Canada in 2012, while the U.S. share is estimated at up to 9 per cent.

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"E-commerce really is the growth area," Ms. Côté said.

To hitch its wagon to that growth, however, Canada Post will need to market itself to retailers, not just consumers. The campaign is directed at both. Amazon, Wal-Mart, Hudson's Bay, and Best Buy are all clients – though it is rare for any online store to use one shipping method exclusively. Competitors such as FedEx and UPS advertise regularly, and their brand awareness is much better developed.

According to a study from Forrester Research Inc., the No. 1 concern among Canadians about shopping online is the high cost of delivery, however this campaign does not focus on price.

"We'll hopefully show a bit more of a contemporary Canada Post," Ms. Côté said.

After the introductory phase of the campaign, which introduces the cart, the holiday campaign will attempt to boost the biggest time of the year for the parcel business. Those ads will feature a horde of carts moving Fantasia-like through a mall, replacing the usual crowds of harried holiday shoppers. One of those carts will ferry a teddy bear to a girl from her grandparents in another town.

The ads are the first work Publicis Canada has done for Canada Post since being named the Crown corporation's agency of record late last year.

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After the campaign launches, the post office will also be wrapping some of its trucks and delivery vans to look like the red cart from the ads. It is all a bid to make the more modern image stick in the minds of Canadians who now click on online shopping carts more often than they ever visit the old red box.

Each ad also ends with a new slogan: "Delivering the online world." It acts both as a tagline, and Canada Post's best hope for the future.



The volume decline

Not surprisingly, there is less mail going through Canada Post's system these days. Here is what the decline looks like, by the number of pieces sent:

11.8 billion

Pieces of mail sent in 2008.

9.8 billion

Pieces of mail sent in 2012.

*Source: Canada Post 2012 annual report

How it breaks down

Where Canada Post's revenues come from:

"Transaction mail" (mostly old-fashioned physical mail): 51 per cent

Direct marketing (also known as junk mail, though this segment also includes delivery of periodicals such as newspapers and magazines): 22 per cent

Parcels: 22 per cent

Other: 5 per cent

*Source: Canada Post 2012 annual report

Letter mail

The decline is mostly driven by the erosion in domestic letter mail, which fell by 255 million pieces last year. The pace of decline is increasing.

2008: Down 2.9 per cent

2009: Down 6.7 per cent

2010: Down 4.9 per cent

2011: Down 4.6 per cent

2012: Down 7 per cent

*Source: Canada Post 2012 annual report

The recent financials

Revenue from operations:

Q4 2011: $1.98-billion

Q1 2012: $1.94-billion

Q2 2012: $1.85-billion

Q3 2012: $1.75-billion

Q4 2012: $1.99-billion

Q1 2013: $1.90-billion

Q2 2013: $1.86-billion

Net profit/loss:

Q4 2011: $78-million loss

Q1 2012: $59-million loss

Q2 2012: $57-million loss

Q3 2012: $103-million loss

Q4 2012: $135-million profit

Q1 2013: $35-million profit

Q2 2013: $50-million loss

*Source: Canada Post Q2 2013 Quarterly report


The growth opportunity

$21.45-billion E-commerce spending in Canada in 2012, up from $15.3-billion in 2010.

$35-billion Expected level of e-commerce spending in Canada by 2016.

*Source: Canada Post research -- "Online buyers and shoppers" white paper, Feb. 2013

What we buy online

Based on a survey of 4,000 Canadians who shop online, asked what they bought in the last 3 months:

Apparel: 37 per cent (Needs physical shipping: yes)

Books/music/movies: 35 per cent (Needs shipping: sometimes)

Health/beauty products: 26 per cent (Needs shipping: yes)

Consumer electronics: 23 per cent (Needs shipping: yes)

Computer hardware: 19 per cent (Needs shipping: yes)

Toys and hobbies: 19 per cent (Needs shipping: sometimes)

Other general merchandise: 16 per cent (Needs shipping: sometimes)

Tourism/travel/leisure: 12 per cent (Needs shipping: rarely)

Home hardware/furnishing/decoration: 11 per cent (Needs shipping: yes)

Sporting goods: 10 per cent (Needs shipping: yes)

Telecommunications supplies: 10 per cent (Needs shipping: sometimes)

Quick service restaurants: 10 per cent (Needs shipping: yes, but not through parcel service)

Automobiles: 6 per cent (Needs shipping: most likely a dealer pick-up)

Financial services products: 6 per cent (Needs shipping: no)

*Source: Canada Post research -- "Online buyers and shoppers" white paper, Feb. 2013 -- detail on whether each needs shipping are reporter's assessment)

The opportunity

While the high cost of shipping is a major barrier to online shopping for Canadians, according to a survey of 1,103 Canadian online shoppers by Forrester Research Inc., at the same time shoppers are willing to pay more for certain delivery services. Here are a few examples:

Next-day shipping:

19 per cent would not pay more

32 per cent would pay $1 to $2 more

21 per cent would pay $2 to $5 more

9 per cent would pay $6 to $10 more

Same-day shipping (if order in by noon):

7 per cent would not pay more

24 per cent would pay $1 to $2 more

17 per cent would pay $2 to $5 more

33 per cent would pay $6 to $10 more

The ability to choose a weekend delivery option:

15 per cent would not pay more

31 per cent would pay $1 to $2 more

17 per cent would pay $2 to $5 more

9 per cent would pay $6 to $10 more

The ability to choose a preferred delivery date and time slot:

15 per cent would not pay more

30 per cent would pay $1 to $2 more

17 per cent would pay $2 to $5 more

6 per cent would pay $6 to $10 more

*Source: "The State of Canadian Online Retail - 2013" Forrester Research, April 2013

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