Canada Post is selling pieces of itself to save money — the experts say that won’t be enough

Canada Post is selling off its IT and logistics departments, a move business experts say is an essential first step in saving a Crown corporation that lost more than half a billion dollars in 2022.

“Canada Post is disappearing before our eyes,” said Ian Lee, a business professor at Carleton University in Ottawa who has researched the decline of Canada Post.

“They’re starting to restructure because they’re starting to finally face that reality.”

Last week, Canada Post announced it will sell its in-house IT business, Innovapost, to Deloitte Canada. As part of the outsourcing deal, Canada Post will maintain an IT leadership team while most of Innovapost’s 750 person workforce is absorbed by Deloitte.

“It was determined the current shared-service model was not providing the speed and agility needed to compete today and in the future,” said a statement from Canada Post.

That announcement came a week after Canada Post said it would be selling its 3,000 person logistics company.

Canada Post declined CBC’s multiple requests for an interview and instead provided a written statement.

“For the last two years, Canada Post has been executing a comprehensive transformation plan focused on serving the changing needs of Canadians and Canadian businesses,” Canada Post spokesperson Janick Cormier wrote.

“The plan positions the company for growth in Canada’s e-commerce market while delivering on its core mandate of providing reliable delivery of mail, packages and parcels to every Canadian address.”

The lucrative ‘last mile’

Lee said selling off or outsourcing parts of Canada Post’s operations won’t be enough to save it. In the third quarter of 2023, the company lost a whopping $290 million.

“The future of Canada Post is not in pretending that they can deliver letter mail when it’s collapsing by 6 to 8 per cent per year by number of pieces,” Lee said.

Canada Post must move aggressively and quickly into e-commerce, Lee said. Sales of products purchased online and delivered to people’s homes are soaring.

“This future is in reinventing themselves as a partner of e-commerce companies and trying to get back that business that they gave up, and lost competitively, to the Amazons of the world,” he said.

Lee said Canada Post could follow the U.S. Postal Service’s example and work with major logistics companies to cover “the last mile” — the final part of a package’s journey, which accounts for more than half of delivery costs.

Canada Post losses a big problem for small communities

The post office is a community hub for many small towns, but financial losses at Canada Post have forced many rural outlets to close.

“The U.S. Postal Service is partnering with some of these big logistics companies who bring in millions of parcels. They basically sort them down to the local postal code of the local post office,” he said.

“The one area where Canada Post has a competitive advantage is the last mile. It goes to 16 million addresses. That is the last mile.”

But Canada Post would need to bring its costs down to make a plan like that work, Lee added.

“They’re going to have to work with [the union] because their cost structure is not even closely competitive with the independent gig delivery or even … FedEx,” he said.

Expand services to survive, union says

The Canadian Union of Postal Workers (CUPW), which represents 60,000 Canada Post workers, would not provide CBC News with an interview. (CUPW does not represent any of the employees working at the businesses being sold off.)

In a previous statement, CUPW said it wants to see Canada Post offer more services.

“CUPW has been advocating for a comprehensive plan which would work to ensure the future financial sustainability of Canada Post by expanding services,” spokesperson Siân Griffiths wrote in an email.

The union suggests Canada Post could provide more postal banking, or start performing check-in services for seniors.

“This would not only generate new streams of revenue but maintain and create jobs while meeting the growing needs of people across this country,” Griffiths wrote.

E-commerce ambitions might come too late

But Nita Chhinzer, a human resources expert in downsizing and a professor at the University of Guelph, said Canada Post needs to focus on its core services.

Attempts to explore logistics and IT didn’t boost the corporation’s bottom line, she said.

“While it increased revenue, it also increased cost in ways that didn’t increase profitability,” she said.

Canada Post has been trying to be too many things at once, she said.

“You can’t be the unionized company that treats its employees well, that’s got a large geographic scope, that has a social responsibility as a Crown corporation to ensure accessibility to everybody, plus the company that is going to offer the lowest price,” she said.

Chhinzer said she also questions Canada Post’s chances of successfully breaking into the crowded field of e-commerce. In September, the corporation opened a new processing facility in the Greater Toronto Area that it says will be able to process one million packages per day.

“Canada Post … was the last to truly enter the parcel market. They launched their initiatives well after their competitors had cemented themselves,” Chhinzer said.

While the e-commerce sector saw 3.5 per cent growth last year, Canada Post saw no growth in that area.

“There are significant critical flaws right now with how Canada Post is operating,” Chhinzer said.