Canada Post strike: Will the postal service survive?

Canada Post is at “death’s door” and won’t survive if it doesn’t dramatically transform its business, a professor who has studied the Crown corporation is warning as the postal workers’ national strike drags on.

“Canada Post is losing money now. Canada Post is going to lose more money next year and even more money the following year. And what they don’t understand is they are on the edge of going out of business,” Ian Lee, associate professor at Carleton University’s Sprott School of Business, said in a video interview with CTVNews.ca on Monday.

Canada Post has no choice but to transform into a parcel post courier service, Lee said, noting he’s on board with the Crown corporation’s recently announced proposal to deliver parcels seven days a week.

While rural residents and small businesses rely more on Canada Post, most Canadians live in cities and use electronic means to communicate rather than written letters, Lee said. As well, a growing number of businesses are going digital, he added.

Canada Post CEO Doug Ettinger suggested during the Crown corporation’s annual general meeting in August that the current operation isn’t sustainable. Over nearly two decades, it went from delivering 5.5 billion letters a year to about two billion today, Ettinger said.

Amid Canada Post’s mounting financial struggles and concerns about its future, a postal strike has shut down services nationwide since Friday as negotiations continue between the Crown corporation and the Canadian Union of Postal Workers (CUPW) for new collective agreements.

Pivot to parcels

Lee, who wrote a 2015 report about the Crown corporation, said mail volumes have declined dramatically amid the digitization of the economy.

In his report for the non-partisan think tank Macdonald-Laurier Institute, he argued that Canada Post would need to pivot from its core business of letter mail and become a parcel post service that teams up with e-commerce in order to survive.

He made that recommendation to the government and Canada Post, he said, but they rejected his advice.

“They said, ‘no, no, no, everything’s fine, everything’s fine. We’re going to be OK with letter mail,'” he said, noting the digitization of society has only accelerated since then. “So the letter mail continued to decline. And now Canada Post finally realizes that they are facing death’s door.”

Canada Post had a parcel courier business, but it isn’t serious about making it more successful, he suggested.

“They squandered 10 years of opportunity from 2015 until now,” Lee said.

Through his research, Lee said he found that e-commerce companies are shifting from doing business with Canada Post to working with gig players, or small contractors.

“The only way they can survive is to become competitive, which includes working on the weekends and delivering parcels,” Lee said. “If they don’t, then their revenues will continue to decline.”

Need for change

Canada Post’s proposals, including the wage hikes and new delivery model, sound “reasonable” because the Crown corporation is losing a lot of money, according to Bruce Winder, a business expert on retail trends and industry best practices. Winder is also an analyst and adviser who serves clients from the retail, services and manufacturing industries.

“It’s like a ship in the wrong direction. How do you turn the ship and head it towards profitability?” Winder said during a phone interview with CTVNews.ca on Tuesday. “They have to try something different (and) have to ask the union to come along with them. If they don’t change, they might not be around in three to five years.”

By expanding deliveries to seven days a week, Canada Post can be more competitive with courier companies, he said.

The Crown corporation can try lowering costs, increasing revenues by increasing its services, raising prices in some cases and potentially automating certain facilities, he suggested.

But making any or a combination of these changes may have an unintended effect, such as altering the schedules of workers and seeing small businesses abandon it for competitors that may have lower prices, Winder said.

Canada Post proposals

During the national strike, Canada Post has offered proposals to address its financial woes and employees’ concerns.

Even with losses exceeding $3 billion since 2018, Canada Post said it is proposing offers to protect and enhance what’s important to its employees. The company pitched wage increases of 11.5 per cent over four years and additional paid leave while protecting defined benefit pension and job security provisions, according to Canada Post spokesperson Lisa Liu in an email to CTVNews.ca on Monday.

But Lee said employees’ demands for better working conditions, pensions and wages will make Canada Post’s deficit bigger and accelerate the company’s decline.

The Crown corporation acknowledged the need to position itself better for the future with a new delivery model and by growing its parcel business. It proposes seven-day-a-week parcel delivery, more competitive pricing and “other important improvements.”

“This new delivery model is essential for the future of the company, and critical to our ability to afford the offers,” Liu said in an email to CTVNews.ca.

Canada Post declined to provide more information on its proposals.

“We’ve outlined our proposals to CUPW at the table, but we won’t be able to go into further details out of respect for the negotiations process,” Liu added.

CUPW says it has concerns about Canada Post’s proposed seven-day-a-week parcel delivery model.

“We are concerned that the creation of more part-time, low-wage jobs will further the gigification of Canada Post workers,” the union said in an email to CTVNews.ca on Wednesday. “Canada Post says it’s in a fight for its life and needs flexibility to survive but what it really wants is the flexibility to create a second-class workforce with unpredictable hours, benefits, and pensions, and fewer rights.”

The union says it wants to ensure workers’ rights are included in weekend work if Canada Post plans to expand services.

“We all know that once a right is taken away, it’s incredibly hard to get it back,” CUPW wrote. “This is why we are fighting so hard for the right kind of weekend work that doesn’t compromise the rights of all postal workers.”

Lee predicts that the next government, regardless of who wins the next federal election, will impose drastic changes at Canada Post.

“I am predicting there will be very large downsizing, very large layoffs,” Lee said. “Canada Post is unsustainable as it’s now presently structured.”