Canada Post Faces Crisis Amid Declining Mail Demand and Strikes

The future of Canada Post hangs in the balance as the organization grapples with declining mail volumes, competition from private couriers, and ongoing labor disputes. A recent report by William Kaplan revealed that Canada Post is effectively insolvent and needs to implement significant changes to its services to survive. The report, delivered following a nationwide strike by 55,000 Canada Post workers, highlights the urgent need for reform in the face of shifting consumer behavior and government policies.

In the Kaplan report, released in May 2023, the issue of declining demand for traditional mail services was emphasized. Kaplan noted that the average Canadian household received approximately 372 letters in 2006, a number that plummeted to just 113 last year. The report warned that this trend is likely irreversible, predicting a continued decline in letter mail.

Labor costs are a significant burden for Canada Post, accounting for 65% of its total spending. In the fiscal year of 2024, Canada Post reported revenues of $6.1 billion but incurred a loss of $841 million before tax. The corporation has attributed these losses to falling demand for mail services and ongoing labor instability, impacting its ability to remain financially viable.

As part of the proposed reforms, Kaplan suggested ending door-to-door delivery, closing underperforming post offices, and utilizing flexible part-time workers. These recommendations have met fierce resistance from the Canadian Union of Postal Workers (CUPW), which argues that the changes would jeopardize jobs and essential services. The union has called for Canada Post to negotiate a better offer, stating that the proposed cuts are not the solution.

The union’s opposition intensified when Canada Post began implementing some of the service cuts last month, resulting in a second strike. CUPW claims that the corporation is using the labor unrest as a pretext to shift business to Purolator, a private courier company in which Canada Post holds a majority stake. The union accused management of misleading the public regarding parcel volumes and market share.

In addressing its need for reform, Canada Post argues that it must adapt to the realities of a changing market. Kaplan’s report highlighted that while Canada Post once commanded 62% of the parcel market in 2019, that figure has significantly dropped to just 29% by 2023. The report emphasizes the lack of regulatory barriers in the parcel delivery market, allowing competitors to thrive with more flexible service models.

In contrast to Canada Post’s operating hours, competitors such as Intelcom offer delivery services seven days a week, providing a faster and more reliable alternative for consumers. This competitive landscape further complicates Canada Post’s efforts to retain its market share.

As Canada Post considers its future, business experts suggest a strategic pivot towards parcel delivery services, especially in rural areas that private couriers may overlook. Ian Lee, a business professor at Carleton University, believes that Canada Post must downsize and focus on its core competencies to survive. He estimates that the organization could sustainably employ around 20,000 workers, significantly less than its current workforce.

Despite the challenges, CUPW contends that there are viable alternatives to simply cutting services. Union leaders have proposed increasing stamp prices and exploring new revenue streams, such as grocery delivery and public banking services. While the Kaplan report dismissed these ideas as unfeasible, union representatives argue that successful postal services in other countries have embraced similar models.

The union has also emphasized the potential for Canada Post to expand into public banking, akin to successful models in countries like Switzerland and Italy, where postal banking has generated billions in revenue. However, Canadian experts remain skeptical about the feasibility of such initiatives, citing insufficient resources and investment capacity.

As labor negotiations continue, the federal government is expected to conduct a review of Canada Post’s mandate, scheduled to begin this month. CUPW president Kate Holowatiuk urged the government to consider the input of rural and Indigenous communities that rely heavily on postal services.

The future remains uncertain for Canada Post as it navigates these complex challenges. Without significant changes, the iconic institution may struggle to maintain its role in Canada’s postal landscape. As Patty Hajdu, Minister of Jobs and Families, noted, both Canada Post and the union must work collaboratively to reach an agreement that serves the needs of all Canadians.