Canada Post struggles to innovate

Canada's postal service is reinventing itself as it struggles to make up for dwindling demand in the face of a devastating global economic slowdown.
Postal worker Jean-Marc Saucier empties a mailbox in Lachute, Que. Despite the boom in Christmas demand, postal systems worldwide have been hit hard by the recession. ((Paul Chiasson/Canadian Press))

Christmas is often a busy time for Canada Post, but the season is especially key this year as the company struggles to make up for dwindling demand in the face of a devastating global economic slowdown.

The U.S. Postal Service announced Monday that it lost $3.8 billion US this fiscal year that just ended and is looking at drastic changes to turn its business around.

Canada Post's situation is not nearly as dire. The company took in $7.7 billion Cdn in revenue in the last fiscal year, an increase of $255 million, or three per cent, from the previous year.

Canada Post actually made $90 million in profit, although this was before the full brunt of the recession was felt. A lot has changed since the fiscal year ended Dec. 31, 2008.

The agency moved 11.8 billion pieces of mail last year. That's still a fairly robust figure, but it's been falling by a few percentage points a year for several years.

Santa Claus, also known as Patrick Farmer, has some mail to read at Santa Claus House in North Pole, Alaska.

The advent of email took a major dent out of the post office's former raison d'être: first-class mail. First-class mail is anything you put a stamp on and address yourself. Second- and third-class mailings are usually flyers and offers from businesses — junk mail, as it's come to be known.

It's less lucrative, but as letters to grandma and birthday cards are replaced with the quick email, direct advertising is making up more of Canada Post's revenues. And tough economic times have seen businesses cut back on mailings. Advertising mailings are down 12 per cent so far this year, says Jacques Côté, the Canada Post COO.

If you've noticed a lot less credit card offers coming in the mail, it's because advertising from U.S. banks and financial institutions in particular is down, Côté said.

"We anticipated that we're going to see some decline, so we had a fairly aggressive cost reduction this year — and we're in fact going to be able to report another profit, despite the decline … in volume for 2009," Côté  said.

Exacerbating the pinch on revenues is that the carrier must deliver to more and more places — some 200,000 new homes are built every year, and with each comes a new address that needs mail delivery.

"Every day we travel … the equivalent of going 11 times around the planet," Côté said.

To boost its bottom line, Canada Post is looking to reinvent itself. It has already experimented getting into banking, as many European mail carriers already do. But the company hasn't found the right formula to make it work in Canada yet, Côté admits.

"We find it's a puzzling market opportunity," he said. "A lot of posts are running it successfully, but we have not yet found the magic silver bullet to make money at it."

The union representing postal workers also sees the writing on the wall. Denis Lemelin, president of the Canadian Union of Postal Workers, agrees Canada Post needs to diversify — and not just into financial services. He suggests offering hunting licences and passport processing, especially in remote and rural areas.

"It's a brand, Canada Post is a brand, so with that it's possible to be the most important corporation to deliver postal service and all other services linked with that," Lemelin said.