The Future of Postal Service in Canada

Report April 2013

The Future of Postal Service in Canada

Technology and innovaTion

PrefaceThe spread of electronic communications has ser-

iously affected the use of postal services by Canadians.

Canada Post was able to cope with the impact of falling

mail volumes through incremental efficiencies and price

increases, but fell into deficit in 2011 after 16 profitable

years. Canadians must consider more fundamental chan-

ges if they wish to prevent Canada Post’s losses from

expanding dramatically in the years ahead. The report

explores possible paths forward through a combination

of econometric analysis, competitor risk assessment, and

interviews; focus groups; and polling of residential and

business customers. It offers a framework for construct-

ive discussion of how Canadians would prefer to shape

a sustainable postal service for their future.


by David Stewart-Patterson, Vijay Gill, and Crystal Hoganson

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For the exclusive use of Tracey Lauriault, [email protected], Carleton University.

conTenTs

executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

chapter 1—Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

chapter 2—Global Trends in Postal Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Liberalization and Privatization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Expansion Into Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Development of Digital Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

E-Commerce and Parcels. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Changes to Service Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

chapter 3—The Competitive Environment in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Transaction Mail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Advertising Mail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Publications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Parcels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Other Trends Affecting the Competitive Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

chapter 4—The Outlook for Canada Post . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Volume and Revenue Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

chapter 5—Expectations and Use of Postal Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24How the Use of Postal Services Is Changing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

What Canadians Expect and Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

The Business Case for Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Ability to Replace Canada Post . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

chapter 6—Sustaining the Postal Service That Canadians Need . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37Option 1: Large Price Increases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Option 2: Wage Restraint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Option 3: Alternate-Day Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Option 4: Elimination of Door-To-Door Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Option 5: Conversion of Corporate Postal Outlets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Option 6: Reduction of Service Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Possible Combinations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

chapter 7—Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

appendix a—Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

© The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material.

www.cboc.ca/ip

acknowledgementsThis report was written and researched by David Stewart-Patterson, Vijay Gill, and Crystal Hoganson. It was made possible with funding from Canada Post Corporation.

Special thanks go to Dave Crapper of Genesis Public Opinion Research Inc., who conducted the focus groups and the residential and small business polling that provided the basis for Chapter 5.

We also thank our internal Conference Board contributors, Ross Prusakowski and Decky Kabongi, for their work on the econometric analysis; and Dan Muzyka and Glen Hodgson for reviewing the report.

We extend our thanks to the three external reviewers of this report: Michael Trebilcock of the University of Toronto, and Frank Graves and Derek Jansen of EKOS Research Associates.

The findings and conclusions of this report are entirely those of The Conference Board of Canada. Any errors and omissions in fact or interpretation remain the sole responsibility of The Conference Board of Canada.


Find this report and other Conference Board research at www.e-library.ca

The spread of advanced communications tech-

nologies is changing the face of postal services

worldwide. Across industrialized economies, mail

volume is declining relentlessly. Postal services in other

countries are pursuing a range of strategies in response

to this trend. The strategies include privatization and

liberalization; growth into new lines of business,

such as financial services; development of digital

products; expansion of parcel delivery; and reduction

of service standards.

Until 2011, Canada Post succeeded in remaining profit-

able for 16 years through steady improvements in effi-

ciency and regular price increases. Canada Post also has

pursued some of the strategies seen internationally—

notably the development of digital products such as

epost and Vault, and improvements in parcel delivery

service to compete within the rapidly growing market

created by e-commerce.

But traditional forms of mail such as bills, statements, and

payments are falling steadily in volume. Major mailers in

Canada, including governments, are making concerted

efforts to reduce their use of postal services by encour-

aging consumers to switch to electronic alternatives.

Advertising mail, like other traditional advertising media,

faces intense pressure from the explosive growth of online

advertising as well as e-mail and mobile options. As

Canadians seek more information online, demand for

hard-copy publications is declining and publishers are

moving toward digital replicas aimed primarily at tablets

and mobile devices. The one area of growth is in parcel

delivery, where e-commerce is driving demand for deliv-

ery of packages from online retailers and distributors to

homes and businesses.


execuTive summary

at a glance � Canadians face a fundamental challenge: they

still rely on postal service but are steadily shift-ing communications from physical to digital. This is driving down the volume of mail even as the number of addresses to be served con-tinues to rise.

� Although Canada Post operated profitably for 16 consecutive years, these current trends are projected to lead to annual operating deficits of close to $1 billion by 2020.

� The postal needs of Canadians are evolving, and Canada Post currently delivers a higher standard of service than Canadians expect or use.

� No single change will suffice to prevent sig-nificant and growing losses on postal operations. But a series of measures that would align ser-vice standards with the actual and future needs of Canadians could enable Canada Post to return to financial self-sustainability.


www.cboc.ca/ip

ii | The Future of Postal Service in Canada—April 2013


Our projection suggests that Canada Post’s transaction

mail, addressed and unaddressed advertising mail, and

publication volumes will decline by about 26 to 27 per

cent by 2020. Parcel volume is projected to buck the

trend and see a 26 per cent increase over the same period,

but this will remain small as a share of total mail traffic.

While the Crown corporation’s Postal Transformation

initiative will have a significant impact on its bottom

line by boosting productivity and improving efficiency,

its annual operating loss is nonetheless projected to

reach about $1 billion by 2020.

By presenting a portfolio of potential responses to the challenge of sustaining postal service, this report offers a framework for discussion of options by canadians .

Polling of small business and residential customers con-

firmed that their habits are changing, with almost half

of households saying they now send two pieces of mail

or less per month. While small businesses, as a group,

also are using mail less frequently, they remain rela-

tively dependent on mail for invoicing and payments.

Both groups of customers confirmed that their demand

for parcel service will continue to rise with the spread

of e-commerce. But residential customers noted grow-

ing frustration over the need to travel to pick up parcels

when no one is home to accept delivery during the day.

Residential and small business customers recognize that

the price of a stamp represents good value, and both

appear willing to accept slower service than they cur-

rently receive. What matters most to these customers is

not speed but certainty of delivery and, on this score,

they express a high degree of confidence in the mail.

Their responses suggest that Canada Post, like postal

services in other developed countries, is now providing

a higher level of service than necessary.

Canadians believe that despite the spread of electronic

communications, they always will need postal service.

They have a high degree of trust in Canada Post; one that

carries over from physical delivery to digital products.

However, neither residential nor small business custom-

ers have fully made the connection between the changes

in their own behaviour and the impact of these changes

on Canada Post’s business model. They recognize that

the status quo is no longer viable, but are not yet fully

convinced of the scale and speed of change that may be

required. Nonetheless, 80 per cent of the household and

small business customers surveyed for our report agreed

with the statement that “Canada Post has to make fun-

damental changes to the way it has operated in the past

in order to be relevant in the future.”

The quantitative analysis done for this report suggests

that Canada Post could reduce its projected losses sig-

nificantly by raising prices faster than inflation, but that it

cannot realistically return to self-sustainability through

price increases alone. Therefore, the report examined five

options for cutting costs: wage restraint; alternate-day

delivery for mail (but not parcels); converting Canadian

households’ receiving door-to-door delivery to commun-

ity mailboxes; further replacement of corporate post

offices with franchised postal outlets; and reduced speed

of delivery. Eliminating delivery to the door for urban

residential customers would be the option with the lar-

gest financial impact, saving a projected $576 million

a year by 2020.

No single change to prices or service standards will be

sufficient to enable self-sustainability as mail volumes

continue to decline. While there will probably be a rela-

tively stable and residual level of demand for mail ser-

vices, it is impossible to determine when and where that

level might be reached. Any given change in service is

likely to have a one-time positive impact on the bottom

line, but cannot change the relentless downward slope

of the mail volume curve. Thus, sustaining a postal ser-

vice that will meet the evolving needs of Canadians will

require a combination of measures, but not necessarily

all at once.

The purpose of this report is not to recommend any one

or particular combination of options. Rather, its goal is to

illustrate both the potential financial impact of a range

of choices and how such changes would be seen by

Canada Post’s business and residential customers. By

presenting a portfolio of potential responses to the chal-

lenge of sustaining postal service, this report offers a

framework for discussion of options by Canadians in

their roles as customers and, through the Government

of Canada, as shareholders and taxpayers.



Canada set up its postal service in an era in

which physical delivery of letters was the pri-

mary means of communication among its far-

flung communities. Given Canada’s geography, postal

service was seen as a public service essential to both the

political unity and economic efficiency of the country.

Postal service, therefore, was set up as a department of

the federal government, with monopoly power to offset

the high cost of delivering letters and goods across a

vast land. In 1981, responsibility for delivering the mail

was moved to a Crown corporation as a means of encour-

aging greater efficiency, but both the monopoly power

and corresponding service obligations remained.

The spread of electronic communications has dramatic-

ally affected the use of postal services by Canadians.

The telephone for voice communication arrived first,

followed by the use of phone lines to transmit docu-

ments via fax. Then the Internet became widespread,

offering easier, cheaper, and faster substitutes for many

forms of communication—from bills and payments to

advertising and publications, personal letters, and even

greeting cards. In this digital age, Canada Post’s mon-

opoly over lettermail has clearly declined in economic

value even though Canada’s growing population and the

demographic trend to smaller households continues to

increase the number of addresses that the post office is

required to serve.

This combination—the rising number of addresses and

the falling volume of mail—presents Canadians with

a fundamental challenge, one that is becoming acute

across advanced economies. (See Chart 1.)

Until recently, Canada Post has been able to cope with

the impact through incremental strategies to improve

efficiency, but it fell into deficit in 2011 after 16 years

of consistent profit. Canadians now must consider more

strategic choices if they wish to prevent Canada Post’s

losses from expanding dramatically in the years ahead.

Therefore, Canada Post engaged The Conference Board

Introduction

chapTer 1

chapter summary � Canadians are changing the ways in which

they communicate, and this is having a dra-matic impact on their use of postal service.

� Canada Post engaged The Conference Board of Canada to conduct an independent assess-ment of the future of postal service in Canada, and to consider potential paths forward.

� The research explored the attitudes and behaviour of Canada Post residential and business customers through a combination of interviews, focus groups, and polling.

� To quantify the impact of economic, techno-logical, and demographic trends on Canada Post’s business, the Conference Board employed econometric analysis and a competitor risk assessment to project future mail volumes, revenues, and operating income.


www.cboc.ca/ip

2 | The Future of Postal Service in Canada—April 2013


of Canada to conduct an independent assessment of

the future of postal service in Canada, and to consider

potential paths forward.

The first step was to assess how technological change is

affecting the expectations of Canadians and the extent

to which they actually use and depend on its services.

To this end, the Conference Board interviewed a range

of Canada Post’s major customers and engaged Genesis

Public Opinion Research Inc. to conduct focus groups

and a telephone poll of small business customers and

a parallel telephone poll of residential customers.

meThodology

To quantify the impact of economic, technological,

and demographic trends on Canada Post’s business, the

Conference Board employed econometric analysis and

a competitor risk assessment to project future mail vol-

umes, revenues, and operating income. This framework,

in turn, was used to test the financial impact of a variety

of potential actions aimed at improving the sustainability

of the postal business.

While Canada Post supplied some of the historical

data used in the analysis, the analytical framework was

developed independently. The resulting observations

and conclusions are those of The Conference Board

of Canada alone.

The econometric analysis was used primarily to provide

price and GDP elasticities, and was augmented with a risk

matrix in order to complete the projection of volumes

by line of business. Data from ZenithOptimedia were

leveraged to estimate the impacts of expected advertis-

ing expenditures on alternate sources such as Internet

search/display, mobile advertising, and digital replicas

of publications. Although demographic factors (such

as the share of population by decade of birth) were

correlated with transaction mail volumes, they were

not statistically significant in terms of providing

explanatory power.

To quantify the impact of economic, technological, and demographic trends, the conference Board employed econometric analysis and a competitor risk assessment .

The research explored the attitudes and behaviour of

Canada Post customers through a combination of inter-

views, focus groups, and polling. The Conference Board

conducted individual interviews with a selection of

Canada Post’s major customers to add qualitative

insight to the quantitative analysis.

Genesis Public Opinion Research Inc. explored the

attitudes of residential customers through a telephone

survey of households across the country. The objectives

of the survey were to:

� understand customers’ current use of both lettermail

and courier/package services;

� determine their service expectations and related

attitudes to those lines of business;

� assess their use and evaluations of corporate and

private retail outlets;

� determine their understanding of the business

challenges Canada Post faces.

The residential survey selected and interviewed corres-

pondents based on the way in which they receive mail.

The target sample included approximately 500 customers

who get mail delivered to their door (DTD), 300 who

use group mailboxes (CMB), 250 who receive mail in

their lobby or common area (LBA), 100 who have mail

chart 1Mail Volume and Number of Addresses (billions of pieces; millions of addresses)

Source: Canada Post; The Conference Board of Canada.

2003 04 05 06 07 08 09 10 11 12f 13f 14f 15f 16f 17f 18f 19f 20f6789

101112

12131415161718

Mail volume (left) Number of addresses (right)

Forecast


The Conference Board of Canada | 3


delivered to the end of their driveways (RMB), and 60 who

have postal boxes in Canada Post or private buildings

(DFLB). This roughly mirrors the current distribution

of customers by delivery category, with an oversample

of rural driveway customers. (See Table 1.)

A total of 1,212 residential customers, 18 years of age or

older, were surveyed by telephone from September 26 to

October 10, 2012. The results are considered accurate

to within +/- 2.8 per cent, 19 times in 20.

Genesis explored the views of small businesses through

a two-stage process. The first stage was a series of five

focus groups, held in Moncton, Montréal, Mississauga,

Brandon, and Calgary. The second stage involved a

telephone survey of individuals in small businesses

who make decisions on postal products and services

within their company.

The interviews were conducted with 800 businesses

selected randomly from among a nationwide pool of

businesses with more than 1 but fewer than 100 employ-

ees. The sample was generated using data from Dunn

and Bradstreet. The source data for the sample were strat-

ified by employee size, region, and Standard Industrial

Classification (SIC). Only businesses with 2 to 100 full-

time employees were eligible for inclusion in the final

sample. The sample was then randomly drawn from

businesses across the full range of over 1,000 SIC codes,

but it excluded Canada Post, print and electronic media,

hospitals, educational institutions, and all three levels

of government.

Respondents were selected if they were identified as

the person in the establishment most involved in the

day-to-day operation of the organization’s incoming and

outgoing mail. All those interviewed claimed their organ-

ization used the postal system for sending “letters and

regular mail.”

The survey covered broadly the same set of issues

as for residential customers and was conducted during

September and October 2012. Results from this survey

are considered accurate to within +/- 3.5 per cent,

19 times in 20.

Table 1Method of Receiving Mail(per cent)

method percentage of survey respondentsactual percentage of canadian

residential addresses

To your door 41 40

Group mailbox in your neighbourhood 25 29

Lobby or other common area in your building 21 20

Mailbox at the end of your driveway 8 5

A postal box at an actual Canada Post building 4 5

A postal box at an RPO/private business 1 <1

Source: Genesis Public Opinion Research Inc.


www.cboc.ca/ip


The digital revolution has changed the face of

postal service as we know it. No longer is the

post office viewed as the primary means of

connecting people and businesses wherever they are

located. Widespread access to broadband and mobile

technologies is having a fundamental impact on how

people and businesses communicate. People increas-

ingly are communicating by phone, e-mail, text, and

other web-enabled tools. Growing numbers are access-

ing information for work and for pleasure on websites,

e-readers, and tablets. Customers and providers alike

are handling statements, invoices, and payments online.

E-commerce has moved quickly from an add-on means

of browsing for products to a primary sales channel.

Generally, survival in the core business of lettermail has

required taking out costs faster than volume-driven rev-

enue declines. This has meant either additional investment

in technologies such as high-speed sorting equipment

or reductions in service standards. However, there is a

growing recognition around the world that postal services

must develop new strategies to survive. A 2012 study by

the International Post Corporation and Boston Consulting

Group concluded that, by 2020, moving the mail will

no longer be the core business of postal operators.1

Despite differences in the economic and social environ-

ments across countries, it is clear that postal operators

around the world are facing declining lettermail volumes.

The Universal Postal Union reported that between 2006

and 2010, domestic lettermail traffic decreased by 3.5 per

cent, while international mail decreased 13 per cent.2

1 International Post Corporation and The Boston Consulting Group, Focus on the Future, 22.

2 Universal Postal Union, The Global Postal Network—Key Figures.

Global Trends in Postal Service

chapTer 2

chapter summary � Electronic alternatives are changing the face

of postal service around the world.

� Other countries are pursuing the following five major approaches to enable postal services to reduce costs or enhance revenue:– liberalization and privatization;– expansion into new lines of business;– development of digital products;– expansion of parcel delivery; – reduction of service standards.

� Canada Post already is pursuing two of these approaches by developing new digital products—including epost and Vault—and by increasing its efficiency, capacity, and service offerings in the parcel business.




To deal with this decline, postal services are continuing

efforts to reduce costs through greater efficiency and

pursuing alternatives that could enhance revenue beyond

lettermail. This chapter discusses some of the most

notable approaches that other countries have taken

to date. These include:

� liberalization and privatization—as a means of

encouraging efficiency through competition

and market discipline;

� expansion into new lines of business—notably finan-

cial services, to generate profits that can offset the

declining mail business;

� development of digital mail products—to retain postal

customers through improved and value-added postal

services that go beyond physical delivery;

� expansion of parcel delivery services—to make better

use of the mail delivery infrastructure by generating

volume and revenue from the growth of e-commerce;

� reduction of mail service standards—to cut costs through

changes such as reduced frequency of delivery.

liBeralizaTion and privaTizaTion

In many countries, especially in Europe and Australasia,

governments have strengthened the pressure for efficiency

by exposing postal services to increased competition

through liberalization of markets, elimination of mail

monopolies, or privatization of postal operations. Since

1997, Europe’s postal industry, under the direction of

the European Commission (EC), has slowly become

liberalized in response to a wider economic agenda with

a focus on either modernization or commercialization

by the state.3 By January 2013, all 27 members of the

European Union had eliminated postal monopolies.

Some critics may argue that liberalizing or privatizing

postal services could result in a decrease in the quality

of service. But research has indicated that moving to a

liberalized or privatized postal service can create more

benefits than harm. To illustrate, a 2007 study reviewed

the performance impacts of postal deregulation in a

number of countries, including Germany, Australia,

New Zealand, and the United Kingdom. The research

3 Iacobucci, Trebilcock, and Epps, Rerouting the Mail, 11.

found that postal operators who decreased governmental

involvement had increased service quality, became more

innovative, and improved their productivity.4

Countries have taken different approaches to liberalization

and privatization. Germany, for example, opted in 1990 to

gradually reduce the scope of the postal monopoly and

partially privatized its postal operator, Deutsche Post.5

Germany opened its postal services markets to competi-

tors who proved able to compete in several areas of the

market—even those areas believed to be the hardest to

enter. By 2000, Deutsche Post had become fully priva-

tized. Through attrition, the size of the workforce was

reduced by 38 per cent and, by 2010, productivity

increased by 20 per cent.6

Other examples include the Netherlands, which privatized

PTT Post (now TNT Post) and, after 10 years, success-

fully decreased its labour costs from 55 per cent of total

costs to 41 per cent. Productivity rose by 16 per cent.7

Austria’s Österreichische Post began the process of lib-

eralization in 1998. In 2006, Austria sold a minority stake

in the post to private investors and, by 2011, the priva-

tization was complete. Since the liberalization process

began, Österreichische Post has shrunk its workforce by

4 Ibid., 17.

5 Ibid., 13.

6 Geloso and Chassin, Canada Post: Opening Up to Competition, 3.

7 Ibid.

liberalization versus privatization

liberalization is a broad term referring to the reduction or removal of government controls in order to increase competi-tion. Liberalization may involve the introduction of market forces, removal of price controls, lowered tariffs and quotas, and removal of operating restrictions on an industry.

privatization refers specifically to converting government-run entities into private ones. It is possible for a government to privatize a monopoly business—but, in practice, a shift in ownership tends to occur in conjunction with the liberaliza-tion of markets.

Source: Bervoets, The Liberalized Postal Service, 13–14.


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25 per cent, invested in new equipment, decreased

its labour costs by 14 per cent, and nearly doubled

its productivity.8

In New Zealand, postal reform was driven by a “broad

economic policy of commercialization of the state enter-

prise sector.”9 The New Zealand government owns NZ

Post, but the organization is directed to act like a private

sector firm—it needs to generate a profit, repay loans,

self-fund through its earnings, and pay taxes and divi-

dends.10 NZ Post moved from generating a loss to cre-

ating a profit by cutting costs by 30 per cent, speeding

up mail delivery, increasing “on time” delivery by 15 per

cent, and nearly doubling its overall productivity.11,12

as a crown corporation, canada post has both a public service mandate and an obligation to act like a private sector firm—at least to the extent of being self-sufficient .

Neither privatization nor liberalization of markets is,

by itself, a strategy for sustaining postal services in an

environment of decline. They are policies intended to

drive more rapid response to that environment by encour-

aging or enabling postal services to make decisions that

might be more difficult or politically impossible to pursue

as an arm of government.

In 1981, Canada turned its postal service into a Crown

corporation. As such, Canada Post has both a public

service mandate and an obligation to act like a private

sector firm—at least to the extent of being self-sufficient.

Until fiscal year 2011, Canada Post operated consistently

at a profit. And, it had been doing so while its monopoly

lettermail privilege declined in value due to a growing

number of cost-effective substitutes. Put another way,

the proliferation of digital alternatives to mail has, in

effect, liberalized the postal market to a great degree.

8 Ibid., 4.

9 Iacobucci, Trebilcock, and Epps, Rerouting the Mail, 11.

10 Ibid.

11 Geloso and Chassin, Canada Post, 3.

12 Lammam and Karabegovic, “Recent Mail Disruption Strengthens Case to Privatize Canada Post.”

The key decisions with respect to the future of postal

service in Canada are about public policy; that is, about

how postal services could change in order to meet the

evolving needs of Canadians in the digital era. Privatization

has been a means to that end in some other jurisdictions,

but this report focuses on desired outcomes rather than

mechanisms for achieving those outcomes.

expansion inTo Financial services

For international postal operators, the primary new busi-

ness line being entered is financial services. In some

countries, such as Japan and Great Britain, financial

services have been a core element of the post office for

many years. In other countries, financial services have

been gradually introduced to postal services over time.

The addition of financial services through postal outlets

offers many potential benefits. For instance, it can facili-

tate financial inclusion in rural areas while also mitigating

the decline in postal revenues.13 Postal banks serve large

markets, but can be low in incremental cost because they

make shared use of the postal retail network. According

to a discussion paper of the United Nations Department

of Economic and Social Affairs, banking revenues in

many countries are actually essential to generate profits

from their postal networks.14

Postal services are generally accepted as safe, trusted, reli-

able institutions. As such, the public tends to view postal

financial services as a “safe haven.”15 The Universal

Postal Union (UPU) estimates that more than 1 billion

people worldwide conduct banking through postal ser-

vices and, in 2010, 51 postal operators worldwide held

1.6 billion in savings and deposit accounts.16

13 Berthaud and Davico, Global Panorama on Postal Financial Inclusion, 3.

14 Scher, Postal Savings and the Provision of Financial Services, 15.

15 Berthaud and Davico, Global Panorama on Postal Financial Inclusion, 3.

16 Ibid.




Financial services have also been lucrative for postal

operators. For instance, Germany’s Deutsche Postbank

increased its total volume of savings by 21 per cent in the

first half of 2009 alone, and its market share increased

by 10.3 per cent.17

For PostFinance, the financial branch of Swiss Post,

financial services were the main driver of growth, lead-

ing to an 11.5 per cent increase in net profit in 2009. In

the first three quarters of 2009, PostFinance saw a 4 per

cent increase in the number of new customers; a 5 per cent

increase in the number of new accounts; and an excep-

tional year with the first three quarters of 2009 outper-

forming 2008 by 75 per cent.18 This was also true for

Poste Italiane, which recorded a 5.5 per cent drop in its

postal services’ segment revenue. But due to its growth

in the financial and insurance services, Poste Italiane

saw overall revenues increase by 13 per cent.19

Other countries seeking to leverage their extensive

retail presence and customer trust have also moved

into the financial services business. In New Zealand,

the government-owned postal service set up Kiwibank

as a subsidiary in 2002. This action was a means of

competing with the large Australian banks that con-

trolled 80 per cent of the retail banking sector in New

Zealand.20 Within the first five years of its creation,

500,000 customers (or approximately 13 per cent of

New Zealand’s population) transferred their deposits

to Kiwibank. In the second half of 2011, Kiwibank

had a return on equity of 11.7 per cent.21

Canada has a highly developed financial services sec-

tor that extends from large banks to small credit unions.

While there is clearly room for Canada Post to explore

digital products involving financial transactions such as

invoicing and bill payments, the conditions that allowed

17 Universal Postal Union, The Global Economic and Financial Crisis, 17.

18 Ibid.

19 Moran and others, Achieving High Performance in the Postal Industry, 6.

20 Brown, “Saving the Post Office and Postal Banking.”

21 Ibid.

other postal administrations to succeed in banking do

not exist in Canada. Therefore, this report does not

explore financial services as an option in Canada.

developmenT oF digiTal producTs

As lettermail volumes decline, postal operators have

turned to diversifying their products and services in

order to generate additional revenue streams. By inte-

grating digital and physical mail services, international

postal operators have been able to capitalize on their

existing assets and sustain their competitive advantage

in the market.

canada has a highly developed financial services sector, so this report does not explore expansion into financial services as an option for canada post .

As the decline in physical lettermail continues, there

appears to be potential for the development of elec-

tronic products. Success in the development of digital

mail products relies heavily on the degree of trust that

customers have in their postal service.

In 2012, Deutsche Post published a report laying out five

scenarios for the potential development of the logistics

industry to 2050. One of the key issues the report iden-

tified was the extent to which advanced logistics could

encompass the safe transfer of information, as well as the

reliable delivery of goods. Jürgen Gerdes, a member of

the Deutsche Post DHL Board of Management respon-

sible for mail, notes in the report that ensuring its custom-

ers’ trust has always been at the core of the company’s

business model. “Guaranteeing the identity of the sender

and recipient and the inviolability of the contents of the

message is also the rationale behind its E-Postbrief

secure electronic post product. This and other efforts

the company is making to help safeguard the Internet

will likely transform the company by 2050.”22

22 Deutsche Post AG, Delivering Tomorrow.


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Within a rapidly changing global communications market,

postal operators around the world have to adapt quickly

to changes in consumer and business demand. Therefore,

business plans must be modified in order to build parcel

traffic generated by e-commerce and move into digital

services. Postal services generally do not view digital

communications as a separate initiative, but rather as a

means of transforming their business models to incor-

porate e-commerce and e-substitution.

Finland, for instance, is experimenting with the concept

of secure digital mailboxes. This system, called Netposti,

is an alternative to a physical mailbox. Physical mail

is opened, scanned, and sent as a PDF file to a secure

digital mailbox. Citizens are provided with accounts tied

to their social security numbers and e-mail addresses.23

Consumers receive an e-mail or a text message when

their mail is ready to be viewed. Envelopes are analyzed,

and items such as credit cards are filtered out for physical

delivery. Scanned mail is also delivered to physical

addresses, but residential mail services have been

reduced to twice a week.24

digital products are evolving within a highly competitive marketplace, and their potential contribution to the sus-tainability of postal service is uncertain .

Finns are significant users of electronic services, and

once the use of e-commerce began to take off, so too

did concerns about credit card safety. By signing a

cooperation agreement with the leading Finnish online

payment provider, Netposti allows consumers to click

an invoice button and receive a receipt of their online

purchase directly to their secure Netposti account.25

Then there is Polish Post, which recently released a

new line of digital products. Poland’s postal market has

been opened up to full competition and the NeoKartka

23 United States Postal Service, Office of the Inspector General, The Postal Service Role in the Digital Age, 28.

24 Ibid.

25 Ibid., 4.

service was developed in response to customer demand

for more digital mail services.26 This hybrid service

allows customers to send greeting cards and postcards

electronically for conversion to the physical form prior

to delivery.27

In the past 10 years, Italy’s Poste Italiane has invested

heavily in technology to bridge the physical and elec-

tronic worlds. Poste Italiane developed an advanced

technological infrastructure where over 80 per cent of

correspondence is sorted using automated systems.28

In addition, Poste Italiane has been able to expand its

services and offer new products while utilizing various

channels: electronic invoicing for government contractors,

scanning and electronic archiving, and mobile virtual

network operators (e.g., using mobile devices to pay

bills and send mail).29

Canada Post is actively developing digital products. In

2011, it set up a distinct Digital Delivery Network in

parallel with its Physical Delivery Network. Its digital

product line now includes its epost system for the secure

delivery of statements and payment of bills, the Canada

Post Vault service for secure storage of personal and

sensitive information, and Data and Integrated Market

Solutions to support precision target marketing by

Canadian businesses.30

Digital products, however, are evolving within a highly

competitive marketplace. The international experience

suggests that such products cannot replace lost letter-

mail business. But they do have the potential to gener-

ate some revenue for Canada Post that could contribute

to offsetting the costs of maintaining the physical mail

delivery system. Their potential degree of contribution

is uncertain, so future digital revenues are not addressed

within the revenue projections of this report.

26 Post & Parcel, “Polish Post Launches Hybrid Postcard Delivery Service.”

27 Ibid.

28 United States Postal Service, Office of the Inspector General, The Postal Service Role in the Digital Age, 29.

29 Ibid., 30.

30 Canada Post Corporation, Transformation, 6–11.




e-commerce and parcels

Parcels are the one postal product that is seeing growth

driven by the digital revolution. People have become

enthusiastic online shoppers. In Europe, e-commerce

sales have doubled since 2005 and are expected to

grow a further 65 per cent by 2015.31 But everything

consumers buy needs to move physically from the pro-

ducer, distributor, or retailer to homes and businesses.

And consumers have developed high expectations in

terms of the speed of delivery of the goods they have

ordered online.

The parcel business, unlike lettermail, is highly com-

petitive, but parcel volumes have been rising world-

wide. Postal services have been aggressively using their

extensive sorting and delivery infrastructure to expand

in this sector. In some cases, they are expanding beyond

their national borders: Spain’s Correos, for instance, is

using a partnership model to enter Asian markets; the

Netherlands is expanding its parcel services into new

geographies through acquisitions; and Poland’s InPost

is installing 100 self-service parcel terminals in

Brazil.32,33

To accommodate the rise in parcel volume, numerous

international postal services are expanding their parcel

centres and investing in new technologies to help with

the rise in parcel demand. Germany plans to build a

new parcel centre that will be 140,000 square metres—

the largest parcel centre in the country. The United

Kingdom’s Royal Mail has announced two new

parcel depots by fall 2013.34

Canada Post has implemented measures to expand its

parcel volume, both through its postal operations and

through its Purolator courier service. It has made con-

certed efforts to enhance parcel services to shippers.

31 Wilson, “Click Thinking,” 20.

32 Barton and Narang, Achieving High Performance in the Postal Industry, 6.

33 Post & Parcel, “InPost Alliance to Bring 24-Hour Parcel Terminals to Brazil.”

34 Barton and Narang, Achieving High Performance in the Postal Industry, 6.

In 2011, it offered on-demand parcel pickup for small

businesses and, in 2012, provided enhanced web services

for online retailers—including seamless management of

returns. With approximately 40 per cent of parcel deliv-

eries to Canadians originating internationally, Canada

Post has negotiated bilateral agreements, notably with

the United States and China, to increase its share of this

inbound traffic. Canada Post also has made extensive

investments in improved sorting equipment for pack-

ages; built new facilities, including a 700,000 square-

foot plant at Vancouver International Airport; increased

real-time tracking through portable scanners for employ-

ees; and added to its capacity for motorized delivery

to handle growing package volumes.35 The potential

growth in parcel business and its impact on overall vol-

ume and revenue is addressed within the quantitative

framework developed for this report.

changes To service sTandards

As lettermail continues to decline, postal operators are

looking for ways to reduce costs by changing their deliv-

ery standards. The most frequently considered option is

to reduce the frequency of delivery. One study suggests

that approximately 20 to 30 per cent of operational costs

can be reduced simply by determining the requirements

of receivers and aligning these requirements with the

business model.36 In particular, the study found that

if delivery was reduced from six days a week to three

days, the resulting labour cost savings could cut their

total costs by between 5 and 10 per cent.37

Several postal operators have moved in this direction.

The U.S. Postal Service announced in February 2013

that plans to stop delivering letters on Saturdays, starting

in August 2013, could cut costs by about US$2 billion

a year. (Parcels would continue to be delivered on

Saturdays and post offices would remain open.)38

Singapore and Italy have already migrated from

35 Canada Post Corporation, Transformation, 7–9.

36 van Heel, Airoldi, and Bos, The Postman Always Brings Twice, 6.

37 Ibid.

38 Nixon, “Trying to Stem Losses, Post Office Seeks to End Saturday Letter Delivery.”


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six to five delivery days a week.39 Post Danmark has

chosen to deliver bulk mail three days a week and alternate

between areas. Meanwhile, Finland has taken a hybrid

approach on a trial basis, reducing delivery frequency

in certain regions to twice a week while also delivering

mail electronically.40 When customers were asked if

this service was meeting their needs, responses indi-

cated a high degree of satisfaction.41

Potential changes to service standards in Canada,

including reduced days of delivery, are examined

in detail later in this report.

conclusion

Canada’s experience is not unique. The situation in the

United States is far more severe: the U.S. Postal Service

reported a loss of US$15.9 billion in the fiscal year ended

39 Singapore Post, SingPost Implements 5-Day Mail Collection and Delivery Service.

40 van Heel, Airoldi, and Bos, The Postman Always Brings Twice, 7.

41 Ibid.

September 30, 2012, more than triple its US$5.1 billion

loss in the previous year.42 Postal operators around the

world are being forced to deal with the same pressures

on traditional mail volumes. Some have dramatically

reshaped their business models, moving their core oper-

ations into new lines of business or new markets. Others

have focused on adding revenue through complementary

digital products and growth sectors such as parcels, while

also exploring ways to sustain their postal networks

through investment in technology and changes in

service standards.

The clear message from the international experience

is that dealing with the technology-driven decline of

lettermail requires significant changes to the traditional

postal business model. In addition, while management

initiatives can drive significant innovation and efficiencies,

the scale of the challenge ultimately requires policy deci-

sions by governments to shape the future course of

postal service within their jurisdictions.

42 United States Postal Service, Postal Service $15.9 Billion Loss Highlights Urgent Need for Legislative Reform.



The overall decline in mail volume is driven by a

variety of factors related to the different ways

that Canadians use the mail. This chapter looks

at the competitive environment for each of the major

segments of mail volume: transactions, advertising,

publications, and parcels.

Canada Post maintains regular contact with its large-

volume customers, and the views of this sector are well

understood by management. However, because many of

these businesses are heavily focused on particular prod-

ucts, their strategic decisions will have a disproportionate

impact on the sustainability of postal service. Therefore,

the research for this report included interviews with a

representative sample of major customers across Canada

Post’s business lines as well as a review of relevant lit-

erature. Both the experience and the intentions of major

customers offer insights into the viability of future

options for postal service.

The overall decline in mail volume is driven by a variety of factors related to the ways that canadians use the mail .

TransacTion mail

Transaction mail is the product that is experiencing

the most rapid decline in use by major mailers. While

Canada Post holds a monopoly on lettermail, this mon-

opoly product is nonetheless subject to growing compe-

tition, primarily in the form of digital substitutes. Specific

threats to transaction mail volumes include transmission

of statements, bills, payments and other documents to

customers; payments by customers; business-to-business

invoicing and payments; and e-mail and instant messaging.

The Competitive Environment in Canada

chapTer 3

chapter summary � Major mailers in Canada, including govern-

ments, are making concerted efforts to reduce their use of postal services by encouraging consumers to switch to electronic alternatives for receiving bills, statements, and payments.

� Advertising mail faces intense pressure from the explosive growth of online advertising as well as e-mail and mobile alternatives.

� As Canadians seek more information online, demand for hard-copy publications is declining, and publishers are moving toward digital replicas aimed primarily at tablets and mobile devices.

� E-commerce is creating a rapidly growing demand for parcel delivery services, and while Canada Post must compete in this business, it is seen as having a significant convenience advantage.


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Transmission oF Bills and sTaTemenTs To cusTomersMany Canadians still receive paper bills by mail. From

the customer’s point of view, receiving bills has no cost

and is convenient. For companies sending statements

and bills, however, postal service is a major expense

and digital alternatives offer large cost savings.

An executive at a major bank said the bank began

encouraging customers to convert to electronic delivery

five years ago, and intensified its efforts two years ago.

Customers are currently converting at about 1 per cent

per month, and more than half now receive their state-

ments electronically. A major publishing firm said that

its web-based transactions in the first three quarters of

2012 were up 20 per cent from the same period in 2011.

The firm also said that the electronic share of the com-

pany’s transactions has grown more than tenfold in the

past five years—from 2 per cent to more than 25 per cent.

conversion to electronic delivery is being positioned as offering greater convenience to the customer, as well as cost savings to the mailer .

A growing number of major mailers have begun charging

customers who want to continue receiving paper bills. This

has prompted an advocacy campaign by the Canadian

Association of Retired Persons, which has focused on

the $2 per month fees now being levied by companies

that include Bell Media, Rogers, TELUS, and TD Bank.1

It is becoming common for newer entrants into the tele-

com sector to default to online bills and charge a fee for

paper bill service, adding pressure for incumbent pro-

viders to do the same. 2 Imposing a cost on customers

for paper delivery can only accelerate the conversion

to electronic transmission.

Not all major customers are cutting transaction mail to

the same extent. But conversion to electronic delivery is

being positioned as offering greater convenience to the

1 Canadian Association of Retired Persons (CARP), Paper Bill Surcharge Advocacy Update.

2 Roseman, Bell Wants to Charge Web Clients $2 for Paper Bills.

customer, as well as cost savings to the mailer. The

2011 postal labour disruption provided a huge incentive

for both sender and receiver to convert. Those who made

the change at that time generally have not reverted.

Mailers still find physical mail more effective for cer-

tain kinds of transactions such as subscription renewals,

but they will continue to encourage conversion to elec-

tronic transactions for cost reasons. As one mailer we

interviewed put it, “We would love to do all electronic,

but that’s certainly not realistic.”

The current pace of conversions may level off, but the

ultimate share of customers who will refuse conversion

is not clear. Mailers who are still heavily dependent on

physical mail confirmed that this is linked to the older

demographics of their customer base. One publisher said

subscribers to titles geared to older, rural, and female

readers show little interest in electronic transactions—

but for those aimed at younger male readers, web

transactions are “off the charts.”

governmenT mailThe Government of Canada is both Canada Post’s owner

and one of its biggest customers. Like other major mailers,

the federal government is seeking to cut costs by reducing

its use of postal services. In April 2012, for instance, the

government announced that it would phase out the use

of paper cheques by April 2016 and instead make pay-

ments to Canadians by direct deposit. Public Works and

Government Services Canada (PWGSC) has set the cost

of producing a cheque at $0.82, compared with only

$0.13 for making the same payment by direct deposit.

This initiative is expected to save the government about

$17.4 million a year, starting in fiscal 2014–15.

Once the process is complete, PWGSC said that “cheques

will only be issued under exceptional circumstances; for

example, when Canadians do not have access to a finan-

cial institution because they live in a remote location.” 3

This means that by 2016, the federal government, as a

Canada Post customer, will use its wholly owned postal

service to deliver only a tiny fraction of its 300 million

3 Public Works and Government Services Canada, Government of Canada Increasing the Use of Direct Deposit.




annual payments: the recipients will be those people

living in the most remote and therefore costliest loca-

tions for Canada Post to serve.

Similarly, the Canada Revenue Agency (CRA) has

decided to stop mailing out the traditional printed income

tax package in 2013, telling taxpayers who want to do

their taxes on paper either to download the forms from

the CRA website or pick them up at their nearest post

office. The CRA said that only 35 per cent of taxpayers

still use paper forms and that, in 2011, 1.3 million printed

packages went unused. The agency estimates that pro-

cessing paper returns also costs about four times more

than an electronic return.4

paymenTs By residenTial cusTomersFinancial institutions have steadily increased the number

of options for consumers to pay their bills. Automated

teller machines created more locations that consumers

could access to pay their bills at any time. And then

telephone and online banking enabled the convenience

of payment from home or office. Canadian consumers

appear to have been enthusiastic adopters of electronic

bill payment, moving even more quickly than their

counterparts in the United States.5

One positive source of demand for transaction mail

has been “evidence mail” such as credit cards, driver’s

licenses, and loyalty cards. However, some retailers are

beginning to allow the printing of loyalty cards—at least

for temporary means (prior to receiving the official card

in the mail). This suggests that a shift toward a complete

replacement is possible. In the slightly longer term, efforts

by Google, PayPal, and others to replace the physical

wallet with a “digital wallet” using a smartphone could

further undermine the mail volume that is generated by

evidence mail.

So far, take-up has been slow to take advantage of the

digital wallet—partly due to relatively few smartphones

housing the required near field communication (NFC).

4 Dubinski, “The Canada Revenue Agency’s Move Angers Seniors’ Advocates.”

5 The Canadian Press, “Mobile Banking.”

However, many popular recently released smartphone

models do include NFC chips. On the other hand, it is

not entirely clear if these technologies ultimately will

lead to the replacement of physical cards altogether or

just dispense with the need to carry them (which is the

initial objective).

Business-To-Business invoicing and paymenTsMany businesses still prefer paper invoices and payments

in order to maintain records for tax and audit purposes,

which generates demand for lettermail. Data from our

mailer interviews have suggested that some businesses

will continue to shift away from this practice, although

the shift may not occur as quickly as it will for residen-

tial customers. Business use of the mail for invoicing

and payments was explored in more detail through the

focus groups and polling conducted for this report and

is discussed in a later chapter.

e-mail/insTanT messaging For TWo-Way communicaTionsWhile there are still nearly one-fifth of households

without Internet access in Canada, the use of e-mail

or other electronic means as a substitute for two-way

lettermail communications has largely taken its course.

adverTising mail

Addressed and unaddressed Admail offer different levels

of service at different price points. Addressed Admail

can be considered a premium service that allows for

better targeting of individuals and greater certainty of

being read. Unaddressed Admail allows less targeting,

but at a lower price point. Both types of Admail face

competition from the same broad range of advertising

alternatives, albeit to different degrees.

Advertising is an intensely competitive business, with

customers constantly looking at alternatives that either

can deliver better responses at the same cost or similar

outcomes at lower cost. Organizations also are seeking

to reduce some of their environmental impact by using

less paper. Scotiabank, for instance, reported that its use


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of paper for marketing direct mail plummeted from

165 tonnes in 2010 to 92 tonnes in 2011—a drop of

44 per cent in a single year.6

In the advertising business, Canada Post has some

unique attributes that enable it to charge premium rates

for specific markets. One major retailer, for example,

said in an interview that it heavily uses flyers, but chooses

Canada Post for only about 10 per cent of its total volume.

Canada Post’s universal delivery network enables the

retailer to connect with certain customers that it would

otherwise be unable to reach or target, but Canada

Post’s costs are more than triple that of distribution

via newspaper.

Another mailer we interviewed cited Canada Post’s

ability to target customers down to the route level as key,

but noted that newspapers are beginning to improve ser-

vice in this area. Another praised Canada Post’s unique

degree of access to customers in apartment buildings

and condominiums. For large firms, mail is but one

channel among many marketing options, and cost is

critical. One mailer told us: “If I can find a distributor

who can do 80 per cent of what we can do with Canada

Post, I’ll move.”

As sources of competition for Admail in the future,

magazines, TV, radio, and newspapers (for ad place-

ment) are not considered to be increasing threats. In

fact, the difficulties that magazine and newspapers have

had in terms of their own physical distribution may present

a mild opportunity. Meanwhile, the decline in newspaper

distribution also provides a particular opportunity for

unaddressed Admail, which competes almost directly

with newspapers in distribution.

The total amount of advertising spending in Canada (on

sources other than Admail) is forecast to grow from just

under $11 billion in 2011 to over $12 billion in 2014.7

What is striking is the rise of Internet advertising spend-

ing as a share of the total, which is forecast to increase

from 25 to 35 per cent over the same period, overtaking

TV for the top spot. (See Chart 2.)

6 Scotiabank, Paper—Measuring and Reducing Paper Consumption.

7 Barnard, ZenithOptimedia Releases September 2012 Advertising Expenditure Forecasts, 47.

Like all forms of traditional advertising, Admail (both

addressed and unaddressed) faces competition from the

various forms of Internet advertising, more specifically:

� online display . Advertising spending on online dis-

play (such as web banners) reached $800 million in

2011 and is expected to exceed $1.1 billion in 2014.

Online display advertising has grown significantly

more sophisticated in its ability to target individuals

according to demographics, location, search history,

etc.—contributing to its ongoing growth. And while

display ads may not have the “staying power” of

physical flyers (which can sit on a coffee table as a

reminder), they are increasingly able to perform this

role by appearing on websites that are visited by

individuals multiple times per day. Moreover, the

lower visibility is offset by low cost per ad relative to

Admail (roughly $20 to $50 per thousand visitors).8

� online video . The ad spend on online video is rela-

tively small, sitting at $80 million in 2011. But this

is expected to quadruple by 2014 due to increasing

use of streaming video. This is considered to be a

direct threat for TV advertising spending.

� internet classified . One of the “oldest” forms of

Internet advertising spending, Internet classified hit

$600 million in 2011. But as a result of its maturity,

8 ZenithOptimedia, Americas Market & MediaFact, 62.

chart 2Canadian Advertising Expenditure Share of Total(per cent)

Source: ZenithOptimedia.

2000 02 04 06 08 10 12f 14f0

10

20

30

40

Newspapers

Magazines

TV

Radio

Outdoor

Internet

Forecast




it is considered to have more or less peaked as it

has captured most of the market from newspapers

and other traditional sources.

� online search . The largest share of Internet ad spend

goes to online search, reaching $1.1 billion in 2011.

The spending is expected to grow at an accelerating

pace, eventually exceeding $1.8 billion in 2014. This

is partly due to the growing sophistication of online

search as a tool to target individuals according to a

range of characteristics. (See Chart 3.)

� e-mail . Spending on e-mail advertising has declined

from its modest peak of $20 million in 2006. Despite

its superficial similarities to addressed Admail, e-mail

is, for the most part, not an effective substitute due

to spam filters and generally low open rates. It is

much cheaper, but also seen as less reliable because

of the risk of fake or mistaken addresses. As well,

there is uncertainty over whether a customer has

received a message and when, if ever, the e-mail

gets opened and read. One marketing executive we

interviewed said that experiments showed that the

optimal approach involved a combination of

physical and electronic messages.

� mobile . Mobile advertising spending (targeting smart-

phones and tablets largely through applications that

users install) is currently small. But it is expected to

become the fastest-growing segment of advertising

spending (both within Internet spending and other-

wise). This is due to the rapid adoption of mobile

devices, the increasing amount of time that consum-

ers spend using the devices, and the growing number

of applications that consumers install for “free.” In

many ways, mobile advertising is a direct competitor

for both addressed and unaddressed Admail. That’s

because consumers can be targeted not only by resi-

dential location but also by their physical location

at a particular time of day for alerts regarding cou-

pons, special promotions, entertainment events, etc.

Moreover, like addressed Admail, mobile advertising

can target individuals within a household better than

most other forms of Internet advertising spending (due

to the usually exclusive use of mobile devices).

puBlicaTions

Canada Post generates revenue through the distribution of

publications such as magazines, newspapers, and news-

letters. All are facing intense pressure from electronic

alternatives, which will affect the expected revenue

associated with their physical distribution. Growing

competitive threats to the physical distribution of publi-

cations can be categorized in two general categories:

� general electronic content . As individuals spend more

time consuming information online, their appetite for

traditional physical periodicals has waned. The decline

in physical newspaper and magazine circulation is a

direct result of this. Canada Post has already felt the

effects of this decline as its publication distribution

volumes have fallen from a peak of 536 million in

2006 to 431 million in 2011.This trend is expected

to continue.

� digital replicas . To combat the decline in physical

distribution, publishers have attempted to steer readers

to corporate websites offering the same or similar

content. More recently, the trend has been toward

“digital replicas,” which offer not only the same

content but the exact look and layout of the physical

chart 3Canadian Internet Advertising Expenditure ($ millions)

f = forecastSource: ZenithOptimedia.

04 05 06 07 08 09 10 11 12f 13f 14f0

500

1,000

1,500

2,000

Display

Video

Classified

Search

E−mail

Mobile

Forecast


www.cboc.ca/ip



periodicals. These replicas are mainly intended for

tablets, but can also be read on smartphones and per-

sonal computers. Digital replicas (as well as general

electronic content consumed through tablets, e-readers,

and smartphones) add potential for an even more rapid

shift away from physical distribution of periodicals.

While data for Canadian digital replica distribution are

not available, the trend in the U.S. is indicative of what is

to come. For example, 7 of the top 25 consumer maga-

zines (rated by circulation) in the U.S. had digital replicas

as of June 2012. Of the seven, two—Game Informer

magazine and Maxim— have seen their digital replica

distribution exceed 10 per cent of their total circula-

tion.9 Other magazines, such as Reader’s Digest and

O (the Oprah magazine), that do not necessarily target

younger demographics have also released digital rep-

licas, suggesting that this will likely be more than a

niche phenomenon.

Canada Post’s publication volume also is being affected by

a shift in federal policy. The government used to subsid-

ize postal rates for publications. Instead, it now offers a

general subsidy to magazines. This has given publishers

a strong incentive to encourage newsstand sales rather

than mailed subscriptions—especially for magazines

using high-quality glossy paper and inserts. On this

subject, one publisher we interviewed pointed to what

he called a “penalty box” (much higher rates for publi-

cations that weigh more than 200 grams) in Canada Post’s

9 Lulofs, The Top 25 U.S. Consumer Magazines.

rate structure. Another was blunter: “The way the rates

are structured in Canada motivates me to do everything

in my power not to use Canada Post.”

parcels

In Canada, as elsewhere, the parcel business is the

exception to the downward trend. E-commerce is having

a major upward impact on parcel volume. One e-commerce

firm said its parcel volume is doubling every year, and

it expects that growth trend to continue for at least the

next five years. For e-commerce fulfillment, both the

speed and frequency of delivery are important for cus-

tomer satisfaction. That said, customers have shown lit-

tle interest in paying extra for faster delivery options.

Despite the fact that Canada Post’s monopoly does not

cover parcel service, it has been sharing in this rising

overall market. The Canada Post group actually competes

for parcels through two vehicles, its postal segment and

its Purolator courier business. On this score, Purolator

has, to date, been more successful. (See Table 2.)

in canada, as elsewhere, the parcel business is the exception to the downward trend—e-commerce is having a major upward impact on parcel volume .

One major shipper mentioned having moved from

exclusive reliance on Canada Post to heavy reliance on

a private sector competitor and then back to the Canada

Post group. The factors in returning to Canada Post were

its stronger on-time performance, reduction in the pro-

portion of damaged shipments, and initiation of improve-

ments such as signature service and the ability to track

and trace shipments.

As with other major mailers, the 2011 labour disruption

was highly damaging, leading to lost sales as well as

delayed shipments. Shippers, however, do have both

short- and long-term alternatives and can factor the risk of

labour disruption into their choice of delivery company.

One Canada Post customer mentioned hedging its bets

by signing a combination agreement with both Canada

Post and Purolator.

Table 2Canada Post Segment and Purolator Parcel Volumes and Revenues

canada post purolator

2003 2010 2003 2010

Volume (millions) 162 143 129 143

Revenue ($ millions) 991 1,275 1,079 1,493

Yield ($/parcel) 6.12 8.92 8.36 10.44

Source: Canada Post Corporation.




Canada Post is seen as having an important convenience

advantage in parcel delivery. There is a strong desire for

even better delivery options, including weekend delivery,

more secure lockboxes, and a “guaranteed leave at door”

option for low-value shipments. But shippers see Canada

Post as providing much more convenient pickup loca-

tions than other parcel or courier companies for recipi-

ents who are not at home when a parcel is delivered.

oTher Trends aFFecTing The compeTiTive ouTlook

The rapid change in adoption of new technologies high-

lights the difficulty in projecting the change in mail vol-

umes in even the near term. For example, global tablet

sales are expected to have nearly doubled in 2012 to a

total of 119 million units.10 In Canada, the trend is sim-

ilar, with tablet sales up by 79 per cent in 2012.11 And

most or all of this growth has come in addition to (not

at the expense of) PC sales,12 indicating that tablets are

substitutes for other consumer goods (such as news-

papers and magazines) more than they are for PCs.

Meanwhile, smartphones are becoming ubiquitous, and

Canadians are changing the way in which they use their

smartphones. Smartphone penetration in Canada reached

54 per cent of the mobile market in May 2012, up from

36 per cent in 2011.13 And among those smartphone

owners, the average user is accessing mobile content

more often.14 In other words, more people are buying

smartphones and those who own them are using them

more intensively.

Despite the rapid rise in tablet and smartphone penetration,

Canada is actually behind the curve in terms of wireless

adoption and smartphone penetration. For example, the

overall wireless penetration rate (the number of wireless

10 ITBusiness Staff, Global Tablet Sales Will Double to 119M.

11 NPD Group, Tablet Makers Climbing Apple’s Tree.

12 NPD Group, Optimistic Start to 2012 for Canadian PC Market.

13 J.D. Power and Associates, 2012 Canadian Wireless Total Ownership Experience Study.

14 Hardy, comScore; “Smartphone Penetration Has Reached 45 Per Cent of the Canadian Mobile Market.”

subscribers, including smartphones and “dumbphones,”

relative to the total population) is expected to hit 100 per

cent in Canada within the next three years. However,

this rate was already achieved in the United States in

2010. And the rate of smartphone penetration is signifi-

cantly higher in countries such as Sweden, Hong Kong,

and Singapore.15

What does this all mean for other forms of communi-

cation? These new technologies will inevitably attract

a greater share of the total advertising spending as

Canadians adopt and spend more of their time using

them. Furthermore, they open the door for more sophis-

ticated and targeted forms of advertising. For example,

display advertising (both on traditional PCs and tablets/

smartphones) are becoming more “social” in that they

are able to cater directly to users’ interests and current

situations. This has, in part, allowed coupon sites to

make big gains, as they are able to target their intended

audience more precisely.

mobile technologies will inevitably attract a greater share of the total advertising spending as canadians adopt and spend more of their time using them .

Other highlights of the disruptive impact of mobile

technology on all forms of print and other advertising

include16 the following:

� Canadians aged 55+ are the largest growth segment

of online users by age.

� The hours per visitor on social networking sites is

up across the board (diverting attention from trad-

itional media).

� YouTube videos per viewer were up 170 per cent in

2011, which is significant given the relative infancy

of online video advertising.

� About 1.4 million Canadians scanned QR codes

(a type of bar code) with mobile devices at least

once a month in 2012, primarily for product info,

but also for “clipping” coupons.

15 Knowlton, Canada to Surpass 100 Per Cent Wireless Penetration Rate.

16 comScore, comScore Releases the “2012 Canada Digital Future in Focus” Report.


www.cboc.ca/ip



Traditional print media and retailers are attempting to

make use of these technologies to avoid being left behind.

The trend of subsidizing digital devices in exchange

for an ongoing subscription commitment is an example.

Barnes and Noble now discounts its Nook e-readers and

tablets when the customer commits to a digital New

York Times subscription.17 The Times (U.K.) is making

a similar offer to customers who purchase Google’s

Nexus 7 tablet.18

17 Melanson, Barnes & Noble Offers Discounted Nooks.

18 Smith, The Times UK Offers Digital Newspaper Subscriptions.



The Conference Board has combined competi-

tive threat assessment with an econometric

approach to project mail volumes and revenues

by line of business. The econometric approach used

time series data and tested a range of socio-economic

indicators as explanatory variables. In addition, a panel

set of international data was also tested.

While there were correlations between demographic

data (such as population shares by date of birth) and

mail volumes, they were not significant as explanatory

variables. This was, in large part, due to the rapid

change in technologies and market dynamics—the

overwhelming factors that have contributed to the change

in mail volumes. However, the impact of changing prices

and overall economic activity (that is, GDP) were deter-

mined to be significant. As such, our projections make

use of price projections and GDP in order to project

mail volumes. The rest are explained by our analysis

of competitive threats (as well as opportunities). This

is similar to the approach that was taken by the Boston

Consulting Group for the purpose of projecting U.S.

Postal Service mail volumes.

The Conference Board has a long-term forecast for

NAICS industry classifications 491 and 492 from its

national macroeconomic model. This forecast combines

postal and courier GDP, so is of limited use for the pur-

pose of projecting mail volumes by line of business.

However, it is worth noting that the overall outlook for

the combined industry is mildly positive, with real GDP

expected to grow by approximately 1 per cent per year

through 2017. This is primarily the result of the grow-

ing courier segment, which is expected to more than

offset the overall decline in transaction and Admail.

Although it became clear from the econometric analysis

that growth in mail volumes has been decoupled from

general economic growth, this is not to say that mail

demand no longer depends on economic growth.

The Outlook for Canada Post

chapTer 4

chapter summary � Our projection suggests that Canada Post’s

advertising mail and publication volumes will decline 26 per cent, and transaction mail 27 per cent, between 2012 and 2020.

� Parcel volume will buck the downward trend and is projected to increase by 26 per cent by 2020.

� While the Crown corporation’s Postal Transformation initiative will have a significant positive impact, the annual operating loss for its Canada Post segment is projected to reach about $1 billion by 2020.


www.cboc.ca/ip



Rather, the rapidly evolving competitive factors have

come to dominate, but mail volumes will still be posi-

tively affected by economic growth.

The Conference Board was able to estimate elasticities

with respect to economic growth and price for trans-

action mail, addressed Admail, unaddressed Admail,

and publications. This was done through econometric

modelling using historical price and volume data. A

trend variable was introduced in order to account for

the combined impact of the various external factors that

have contributed to flat or declining mail volumes. In

other words, the trend variable helped to normalize the

data in order to help isolate the influence of GDP and

price on mail volumes.

Table 3 shows the coefficients that were estimated

with the modelling. A coefficient of 1 indicates that

volumes are expected to grow in equal proportion rela-

tive to the corresponding explanatory variable (all things

being equal). A coefficient of less than 1 indicates less

than proportional growth, while a negative coefficient

indicates that volumes would decline with growth in

the explanatory variable. The coefficients for parcel

volumes were not derived from the econometric model-

ling, as the estimated coefficients were rarely shown to

be significant. This is likely due to the fact that Canada

Post is one of many competitors in the parcel business.

In addition, the coefficients for publications were only

borderline significant, as was the price elasticity coeffi-

cient for unaddressed Admail.

Throughout the estimation process, price elasticities

for transaction mail were consistently between –1 and 0

(inelastic). This is consistent with the evidence from the

mailer surveys: the price of mail delivery was generally

not a significant factor when determining mail volumes,

and transaction mail service was considered to be good

value for money. Meanwhile, addressed Admail customers

were estimated to be a bit more price-sensitive, while

unaddressed Admail customers were less so (partly due to

the lower per unit price), with the caveat that the results

from the modelling were only borderline-significant.

The volumes for all lines of business were generally

estimated to be influenced by economic growth in

roughly equal proportion (with unaddressed Admail

responding most significantly to economic growth).

Note that a stronger response to GDP growth also

means that volumes are expected to fall more quickly

in recessionary periods.

volume and revenue projecTions

The above coefficients were combined with a qualita-

tive assessment of the impact of the competitive threats

discussed earlier in order to project volumes and rev-

enues by line of business to 2020 (with the exception

of the 2012 projection, as explained below).

The Conference Board’s Canadian Outlook Long-Term

Economic Forecast was the source of GDP and the con-

sumer price index (CPI) (for deflating nominal price

increases) forecasts. Transaction mail prices were pro-

jected to increase by the rate of CPI (approximately 2 per

cent per year) after the year 2014 and beyond. Prior to

that, the rate increases by $0.02 per year, on the basis of

the $0.02 per year increase in the basic letter rate that

has been approved through 2014. In addition, the quan-

titative and qualitative evidence suggests that while the

basic letter rate has increased at a pace slower than infla-

tion over the past two decades (or perhaps because of

that), there is room for the price to grow without nega-

tively affecting transaction mail revenues.

Table 3Mail Volume Coefficients With Respect to Real GDP Growth and Real Price Changes

real gdp real price

Transaction mail 0.82 –0.80

Parcels 1.25 –0.75

Addressed Admail 0.80 –1.00

Unaddressed Admail 1.18 –0.46

Publications 0.85 –1.00

Source: The Conference Board of Canada.




Other lines of business were projected to see price

increases of approximately 2 per cent per year in nom-

inal terms, roughly in line with the long-term outlook

for CPI growth.

The projection for 2012 was based solely on the volume

and price trends through 2012 Q3. Through the first three

quarters in 2012, domestic transaction mail volumes had

declined by 6.3 per cent relative to the same period in

2011. However, the rate of decline worsened in Q3, with

year-on-year volumes declining by 9.5 per cent relative

to Q3 of 2011. In order to complete the projection for

2012, 2012 Q4 volumes were projected to change at the

same rate as 2012 Q3 volumes had over the same quarter

the previous year. This approach was taken in order to

control for the fact that 2011 Q2 volumes were negatively

affected by the strike. The same approach was taken for

projecting volumes for the other lines of business.

Transaction mail is projected to decline by 27 per cent

between 2012 and 2020. Addressed and unaddressed

Admail and publications are projected to decline by a

similar 26 per cent. Only parcel volume bucks the trend,

with projected volume up by 26 per cent over the same

period. Given the low base of parcel volume relative to

other products, this is not enough to change the overall

downward trend in volume. (See Table 4.)

The most recent volume figures in 2012 indicate an

even more rapid decline than in previous years. There

are too few data points to determine if this represents

an acceleration of the trend. But this does suggest that

some of the newer technological factors may be taking

hold even more quickly than anticipated. Therefore,

the rate of decline projected here may be conservative.

(See Chart 4.)

The Canada Post Group includes businesses such as

Purolator that compete in an open market. The Canada

Post segment includes transaction mail, Admail, publi-

cations, and the Canada Post parcel business. As shown

in Table 5, the Canada Post segment accounted in 2011

for 78 per cent of the group’s total revenue and 80 per

cent of its costs.

One-time factors, including a labour disruption that

shut down the postal system for 25 days and a pay

equity decision from the Supreme Court of Canada,

Table 4Projected Mail Volume to 2020, by Product(millions of pieces)

2012 2013 2014 2015 2016 2017 2018 2019 2020

Domestic transaction mail 4,070 3,888 3,725 3,596 3,460 3,324 3,204 3,082 2,966

Domestic parcels 110 113 117 121 124 128 131 134 139

Addressed Admail 1,229 1,186 1,148 1,108 1,065 1,023 986 948 912

Unaddressed Admail 3,320 3,202 3,094 2,984 2,870 2,756 2,654 2,552 2,455

Publications 414 400 387 374 359 345 332 320 307

Source: The Conference Board of Canada.

chart 4Projected Mail Volume to 2020(millions of pieces)

p = projectionSource: The Conference Board of Canada.

2012p 13p 14p 15p 16p 17p 18p 19p 20p0

1,0002,0003,0004,0005,000

Domestic transaction mail

Domestic parcels

Addressed Admail

Unaddressed Admail

Publications

Projection


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contributed heavily to the operating loss in 2011.1

Operating income includes the expense portion of pen-

sion and other employee future benefits, but excludes the

longer-term impact of the significant deficit in Canada

Post’s pension plan. This report and its scenarios focus

exclusively on the Canada Post segment, because this is

the business that is constrained by public policy.

This projection of mail volumes leads to a very negative

outlook for Canada Post revenues and for its bottom line.

The start of our projection period includes the anticipated

negative impact of a planned change in the accounting for

current costs associated with providing future employee

benefits. From this base, the Conference Board projected

two scenarios.

The first is a “business as usual” outlook that does not

include the impact of the Postal Transformation initia-

tive, either in terms of savings realized through 2012 or

those that are expected through 2017. This first scenario

effectively maintains the labour force at its current level,

meaning that retirees and other leavers are replaced on

an ongoing basis.

The second scenario includes both the realized and

expected impact of the Postal Transformation (PT)

initiative. This recognizes the impact of the actions that

Canada Post management already has launched, with

the objective of significantly improving efficiency and

reducing costs through the application of leading-edge

technologies. This scenario is the one used as the base-

line against which all additional options are measured.

(See Chart 5.)

1 Canada Post Corporation, Transformation, 5.

The Postal Transformation initiative will have a signifi-

cant impact in improving financial performance, but the

Conference Board projects that the annual operating

loss still will reach about $1 billion by 2020.

It is possible that Canada Post could offset some of

these losses in its current core business lines through

increased profits in other activities. These activities

include growth of its existing Purolator courier service,

development of electronic postal products, or entry into

new lines of business that could leverage its expertise

and physical assets.

despite its major investments in technology to cut costs and improve efficiency, canada post’s annual operating loss is projected to reach $1 billion by 2020 .

However, Canadians should be careful not to rely on

competitive, profit-oriented activities within the broader

Canada Post group as a means of financially sustaining

postal services. First, there is no way to guarantee sus-

tained profitability in rapidly evolving markets. Second,

any Canada Post-owned businesses participating in open

markets must generate competitive financial returns. If

these operations are required to siphon capital into sub-

sidies for postal services, they are more likely to under-

invest and fall behind. Third, there is no public policy

rationale for a government-owned business to engage

Table 52011 Operating Results($ millions)

canada post segment Total

Revenue 5,861 7,484

Costs 6,189 7,710

Operating income –328 –226

Source: The Conference Board of Canada; Canada Post Corporation.

chart 5Projected Net Loss From Operations to 2020($ millions)


2012p 13p 14p 15p 16p 17p 18p 19p 20p−1,500

−1,000

−500

0

Baseline with PT plan savings included

Baseline without PT plan savingsProjection




in a competitive sector solely to generate profits to sub-

sidize public services. Whether subsidies are delivered

by having governments forego dividends on investments

or by handing over cash from general tax revenues, the

net effect on the public purse is the same.

Until 2011, Canada Post was able to deliver on its service

obligations to Canadian residential and business custom-

ers while also meeting its legislated mandate to operate

at a profit. This financial performance has required steady

increases in stamp prices and relentless efforts to improve

efficiency. The projections developed by the Conference

Board suggest that incremental improvements are no

longer sufficient to sustain the existing postal network

and level of service in the face of growing competitive

pressures from electronic technologies.

Instead, addressing the looming financial shortfall

requires a fundamental examination of which kind of

postal services Canadians still need, and which changes

to the postal business model could enable those services

to sustain themselves over time.


www.cboc.ca/ip


This chapter describes the responses of Canadian

residential and small business customers to ques-

tions about their expectations and actual use of

postal service, about their perceptions of the challenges

facing Canada Post, and about how they might react to

various potential avenues for addressing those challenges.

hoW The use oF posTal services is changing

The surveys confirm that traditional forms of paper-

based communications are increasingly being overtaken

by electronic forms of communication. Almost half of

households surveyed (47 per cent) said they are sending

less mail today than three to four years ago. Slightly

more (49 per cent) said they are sending about the

same amount of mail. Only 3 per cent claimed to

be sending more mail.

As for incoming mail, just over half of those surveyed

(51 per cent) said that their household currently receives

about the same amount of lettermail that it used to “three

to four years ago.” However, one-third claimed that their

household receives less mail than it used to, while half

that number (17 per cent) said they receive more.

Expectations and Use of Postal Service

chapTer 5

chapter summary � Household and small business customers

are using mail less frequently. Almost half of households send two pieces of mail or less each month.

� Both groups of customers see the current price of a stamp as good value, and are willing to tolerate slower service than they now receive. What matters most is the certainty that mail will be delivered to its intended destination.

� E-commerce is increasing the demand for parcel delivery. However, having to travel to pick up parcels when no one is home to accept delivery is a growing source of frustration.

� Many customers, especially in rural areas, would be significantly inconvenienced if the distance to the nearest postal outlet was doubled. But most are highly satisfied with the retail service they receive, whether from a corporate or franchised outlet.

� Most Canadians believe that despite the spread of electronic communications, they always will need postal service and recognize the need for some degree of change.




When asked to estimate how many letters, cards, bill

payments, or other regular mail their household would

send out in an average month, 17 per cent of respondents

said “none”; and 30 per cent said their household sent

an average of either 1 piece (16 per cent of respondents)

or 2 pieces (14 per cent) through the system. Taken

together, these results suggest that almost half of all

Canadian households send no more than two pieces of

mail through the postal system each month, with close

to one in five households claiming they don’t send any.

At the other extreme, 9 per cent indicated they sent

more than 10 pieces each month, and 4 per cent said

they sent 20 or more pieces. (See Chart 6.)

Not surprisingly, businesses on average send consider-

ably more mail than households, and the larger the

company, the more mail it sends. (See Table 6.)

Like households, businesses’ use of the system seems to

be declining. Just over one-third of businesses surveyed

claimed their business was sending out less mail than

they were three to four years ago. Almost half (46 per

cent) claimed their business was sending the same amount,

while 14 per cent claimed they were sending more mail.

Looking ahead over the next three to five years, a major-

ity (73 per cent) expect their business to use Canada

Post’s regular mail service “about the same” as they do

now. However, the number that expects use of the system

to decline is double the number of those who believe

their use of regular mail is likely to increase.

Declining use is also evident in terms of the amount of

mail received by small businesses. Forty-six per cent

claimed they were receiving the same amount of mail

today as they had in the last three to four years. However,

40 per cent said they were receiving less, and only 13 per

cent said they were receiving more.

Financial TransacTions Patterns of mail use are connected with how businesses

and households handle financial transactions. The resi-

dential segment’s relatively low and declining use of the

postal system for Canada Post’s traditional lettermail

product is evidenced by answers to questions asking

respondents how they typically pay for monthly house-

hold expenses, such as credit card and utility bills. This

was followed up by a question asking how many of those

kinds of monthly household expenses they pay online.

Fully three-quarters of those surveyed claimed they

don’t pay any of those monthly household expenses

using the mail system. (See Chart 7.)

chart 6Estimated Monthly Lettermail Volume, Residential (number of pieces per household; percentage of respondents)

Note: Respondents were asked “Approximately how many letters, cards, bill payments, or other regular mail do you think your household would send out through the postal system in an average month?”Source: Genesis Public Opinion Research Inc.

None 1 2 3 4 5 6−10 11−19 200

5

10

15

20

Table 6Business Lettermail Volume(number of pieces; number of employees; per cent)

number of full-time employees

number of pieces 2–5 6–10 11–24 25–50 51–100

<25 47 29 20 12 10

25–50 30 25 27 16 9

51–100 12 22 15 23 14

100+ 11 24 38 50 67



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For small businesses, lettermail is used primarily for

communicating with clients or customers. Over 40 per

cent of the small businesses surveyed said that “all” of

the letters they send in a given month are sent to their

customers or clients.

As for what they are sending to their customers and

clients, the results make it clear that the postal system

remains an integral part of how small businesses send

invoices and collect payments. Fully 70 per cent of the

small businesses interviewed claimed to use the mail

for the purposes of billing clients. Of that number, 29 per

cent said they send “all” their invoices through the mail.

At the other extreme, just over one-quarter (26 per cent)

claim to send no more than half of their invoices through

the mail. (See Chart 8.)

While 70 per cent say they use the postal system to send

client invoices, more than that claim that the postal sys-

tem delivers client payments to their business. Eighty-

two per cent of respondents said they received client

payments through the mail, suggesting that even though

some clients may get an invoice by another means, they

nonetheless pay it by mail. Almost two-thirds of small

businesses surveyed indicated that a minimum of half

of all their client and customer payments come through

the mail, including almost 1 in 10 respondents who

indicated that “all” their company receivables come via

the mail.

More important than the volume of payments received by

businesses is the value of those payments. Respondents

were asked to estimate the percentage of their company’s

total monthly income that comes via the mail, and 40 per

cent estimated that their company receives at least half of

its total monthly income through the mail. This includes

22 per cent of companies that claim they receive at least

three-quarters of their income via the mail and another

4 per cent that claim all their monthly income is received

via the postal system. One-quarter of those surveyed

didn’t know what percentage of monthly income came

that way.

Over 80 per cent of those surveyed claim to receive

payment through the mail from clients and customers.

Almost two-thirds claimed that a minimum of half or

more of their total number of payments are received

chart 7Method of Paying Monthly Household Bills(percentage of respondents)

Note: In the chart on the left, respondents were asked, “How many of your monthly household bills (e.g., credit cards, phone, electricity) do you pay by mail?” In the chart on the right, respondents were asked, “How many of those monthly household bills do you pay online?” Source: Genesis Public Opinion Research Inc.

All Most Only some None

0

20

40

60

80

All Only some None

01020304050

Payment by Mail Payment Online

chart 8Estimated Customer Invoices Sent Via Lettermail(number of invoices; percentage of respondents)

Note: Respondents were asked “Approximately what percentage of all your customer invoices would be sent out through the mail?” Source: Genesis Public Opinion Research Inc.

18

8

13

28

29

4 1−24

25−49

50−74

75−99

100

Don’t know




through the mail, and 40 per cent claimed that a min-

imum of half their firm’s monthly income comes to them

via the mail. These findings suggest that the postal sys-

tem remains an important aspect of the commercial

operations of small business.

WhaT canadians expecT and value

Both the residential and small business surveys probed

what Canadians expect from their postal service and

how satisfied they are with the quality and value of the

services they now receive.

sTamp prices Only 5 per cent of residential customers surveyed cor-

rectly identified the 2012 price of a stamp as $0.61. Almost

half of those surveyed (47 per cent) guessed the price

was $0.60 or less; 15 per cent guessed a stamp was

$0.62 or more, while fully one-third of all those sur-

veyed said they didn’t know the present day cost of

a stamp.

The results suggest that for many canadians, the value derived from what a stamp enables its purchaser to do is comparatively well understood and widely endorsed .

These guesses did not vary in any meaningful way

based on how many pieces of lettermail respondents

claimed their household sent. Nor did they vary much

based on how many monthly household bills are paid

using the mail or paid online. However, there was almost

universal agreement with the following statement: “When

you think about it, being able to send a piece of mail

across the country for $0.61 is an incredible bargain.”

Twenty-three per cent said they “strongly agree” with

that statement; another 64 per cent claimed to “agree.”

These results suggest that for many Canadians, the cost

or price of a stamp is not top-of-mind, but the value

derived from what a stamp enables its purchaser to do

is comparatively well understood and widely endorsed.

Small businesses were more likely to have an accurate

sense of stamp prices, but only 38 per cent of those sur-

veyed correctly volunteered $0.61 when asked to identify

the cost of a 2012 stamp. That number was only slightly

above the number who said they “don’t know” what a

stamp costs.

Among business customers, the ability to correctly identify

the cost of a stamp is related to the number of letters sent

in an average month. Among those respondents whose

company sends 100 or more letters a month, 59 per cent

correctly identified the cost of a stamp. Among those

whose company sends less than 25 letters per month, only

14 per cent correctly identified the cost. The same pattern

was observed based on the employee size of the company.

Almost two-thirds (63 per cent) of those from companies

employing between 51–100 people correctly identified

the price of a stamp, almost three times the number

whose company employed 2–5 full-time employees.

Regardless of the variability in estimates of the cost of a

stamp, business respondents overwhelmingly conceded

the value associated with lettermail. Just over 80 per cent

of those interviewed agreed with the proposition, “When

you think about it, being able to send a piece of mail

across the country for $0.61 is an incredible bargain.”

delivery sTandardsRespondents to both the household and small business

surveys were asked what they believed would be “an

acceptable length of time” for Canada Post to deliver

lettermail across town, across the province, and across

the country. They were then asked, “How long would

you be prepared to give Canada Post to deliver a letter”

across each of those three distances “before you would

seriously consider sending it another way?” In each

case, the results suggest that Canadians are prepared to

give Canada Post more time than they think it currently

takes to deliver a letter.

Only 17 per cent of residential respondents volunteered

“one day” or “next day” when asked what they considered

to be “an acceptable length of time for Canada Post to

deliver a regular letter from one side of a large city to

the other side.” A further 43 per cent volunteered “two

days.” The average response was 2.4 days. (See Chart 9.)


www.cboc.ca/ip



When asked how long they would be prepared to give

Canada Post to deliver before looking for an alternative,

fully 56 per cent of residential customers claimed they

would be prepared to give Canada Post three days or

more to deliver a letter across a large city. The average

response was 3.7 days, more than a day longer than

answers to the original question probing the length of

time considered to be acceptable in the first place.

Respondents were asked similar questions for lettermail

delivery across the province, and from one end of the

country to the other. The pattern observed from “cross-

town” delivery repeated itself for “cross-country” deliv-

ery. (See Chart 10.)

There were no appreciable behavioural variations in

response to these questions. It didn’t matter how many

letters respondents sent, or whether or not they paid

their household expenses online. There were, however,

demographic differences. The biggest difference related

to age. Generally, the younger the respondents, the more

generous they were prepared to be with their timeline

expectations. Conversely, the older the respondents, the

more likely they were to say that longer time frames

were less acceptable.

Similarly, there is considerable evidence that small

business customers may be willing to see the time it

takes to deliver lettermail extended, particularly for

delivery over longer distances. Some 87 per cent of

those surveyed believe Canada Post should be able to

deliver a standard letter “across a large city” within

three days or less. The average number of days con-

sidered to be “acceptable” to deliver a letter across a

large city was 2.2 days.

When asked what delivery time they are prepared to

tolerate, small businesses said, on average, that they

could live with a cross-town delivery time of 3.4 days.

As for households, this is more than a full day longer

than answers to the original question probing the length

of time considered to be “acceptable” in the first place.

Again, the pattern was similar for both cross-province

and cross-country delivery. (See Chart 11.)

The results from the series of questions about the speed

of lettermail delivery suggest that there is a gap between

what small business and residential customers consider

to be an “acceptable” delivery time and what they are

nonetheless prepared to accept before they look else-

where for alternatives.

chart 9Lettermail Performance vs. Expectations: Cross-Town Delivery, Residential (number of days; percentage of respondents)


Next day 2 days 3 days 4−5 days 6+ days DK/NO

01020304050

Percentage of residential respondents who consider the length of time acceptable for CPC to deliver lettermail across a large city

Percentage of residential respondents who consider the length of time acceptable for CPC to deliver lettermail across a large city before considering other alternatives

chart 10Lettermail Performance vs. Expectations: Cross-Country Delivery, Residential (number of days; percentage of respondents)


2 days 3 days 4 days 5 days 6−7 days 8 days or more

DK05

101520253035

Percentage of residential respondents who consider the length of time acceptable for CPC to deliver lettermail across the country

Percentage of residential respondents who consider the length of time acceptable for CPC to deliver lettermail across the country before considering other alternatives




cosT, speed, and reliaBiliTyNine in ten residential respondents agreed with the

proposition, “I’m confident that the things I put in the

mail are going to arrive at their destination,” including

just over one-quarter (27 per cent) who “strongly agreed.”

Quebecers, residents of small town/rural areas, franco-

phones, and those between the ages of 50–64 were more

likely than average to strongly agree with that state-

ment. Those who send more letters than average on a

monthly basis are also more inclined to strongly agree

with that statement.

Just over half those surveyed (53 per cent) agreed with

the proposition, “If something is time sensitive, I don’t

put it in the mail.” Younger Canadians are more likely

to agree with this sentiment than older Canadians, and

those mailing the most letters are more likely to dis-

agree with it. Given that older Canadians report mailing

more letters and paying more household bills via the

mail, this difference is not surprising.

Responses from small businesses were similar. Nine in

ten respondents agreed with the following statement: “I’m

confident that the things I put in the mail are going to

arrive at their destination,” and two-thirds agreed with

the statement, “If something is time sensitive, I don’t

put it in the mail.”

In the context of responses that suggest residential cus-

tomers are prepared to be relatively generous in terms

of their expectations for speed of lettermail delivery,

these results suggest that certainty of delivery—faith

and confidence that a mailed letter will actually arrive

at its destination—is a significant consideration at play

in determining use of the system.

For business customers, the cost, speed, and reliability

of lettermail delivery are important and interrelated. To

see which of those three service features small business

respondents valued most, a series of questions pitted each

pair of these three features against one another and

asked respondents to pick which of them they considered

to be most important. When the cost of the stamp was

pitted against either the letter’s speed of delivery, or con-

fidence that the letter mailed would reach its intended

destination, cost was far and away the lesser of the con-

cerns. And when speed of delivery was pitted against

confidence that the letter would reach its destination,

confidence was picked almost three times for every one

instance that speed was chosen. (See Table 7.)

parcel serviceIn contrast to lettermail, Canadians report making

increasing numbers of Internet-based purchases that

need to be shipped to their home. More than one in

four respondents claim that members of their household

made seven or more Internet purchases in the 12 months

prior to the survey. (See Chart 12.)

chart 11Lettermail Performance vs. Expectations: Cross-Town Delivery, Small Business (percentage of respondents)


Same day Next day 2 days 3 days 4−5 days 6 daysor more

DK/NO0

1020304050

Percentage of small business customers who consider thelength of time acceptable for CPC to deliver lettermailacross a large city

Percentage of small business customers who consider thelength of time acceptable for CPC to deliver lettermail acrossa large city before considering other alternatives

Table 7 Factors Influencing the Mailing of a Letter: Small Business Respondents(percentage of responses)

The cost of the stamp OR 17

How quickly it reaches its destination 76

The cost of the stamp OR 10

How confident you are that it will actually reach its destination 87

How quickly it reaches its destination OR 25

How confident you are that it will actually reach its destination 69

Note: Respondents were asked, “I’d like you to think about mailing a letter….which one of the following things is most important to you when you mail that letter?” Source: Genesis Public Opinion Research Inc.


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As might be expected, geography, age/life stage, and

socio-economics are demographic factors that influence

Internet purchasing. Those more likely to report that

members of their household have made over six pur-

chases in the last 12 months include:

� household income of $100k+ (46 per cent);

� those with university education (39 per cent);

� children under the age of 6 in the home (38 per cent);

� three or more people in the household (38 per cent);

� those under 50 years of age (36 per cent).

In addition to a significant amount of Internet-based pur-

chasing in the last 12 months, 39 per cent of respondents

indicated that their household Internet purchases have been

“increasing” over the last three to four years. Looking

ahead, 35 per cent of respondents said their household

is likely to “increase” its Internet-based purchasing in

the next three to four years with another 45 per cent

saying it’s likely to “stay the same.”

Those more likely to say Internet-based purchases

are likely to increase include:

� households with children under 6 years old

(55 per cent);

� household income of $100k+ (53 per cent);

� three or more people in household (52 per cent );

� 18–34 year olds (51 per cent);

� 35–49 year olds (47 per cent );

� college educated (44 per cent).

� those living in cities of 1 million+ people (40 per cent).

Worth noting is the fact that among those who claim

their household’s Internet-based purchases are likely to

increase in the years ahead are many of the same people

who claim to be making more of those purchases now.

Taken at face value, this means that that their estimates

of future behaviour are reasonably dependable, given

that they at least appear to be consistent with reported

current practice.

When packages are delivered to a residential address,

it is common practice for the receiver to be required to

sign a receipt for it. With two-income households now the

norm, a home delivery often goes undelivered because

no one was home to sign for it. Several questions in the

study were designed to examine the issues and potential

for consumer frustration around the successful delivery

of Internet purchases.

When asked how often courier packages were undeliv-

ered because no one was home to sign for them, 10 per

cent of respondents said that it happened “all the time.”

Another 14 per cent said it happened “most of the time,”

while 17 per cent said it happened “about half the time.”

Only 22 per cent said it has “never” happened.

Respondents who indicated packages were not delivered

to their home because no one was there to sign for them

were subsequently asked if they had ever travelled to

the courier offices or post office to pick up an undeliv-

ered parcel. Eighty-four per cent of them indicated that

they had. Those answering “yes” were asked a series of

follow-up questions in an attempt to quantify the anec-

dotes of “hit and miss” aggravation that often accom-

pany such episodes. (See Table 8.)

As a possible remedy for the inconvenience associated

with missed home deliveries, respondents were asked to

choose between two options. (See Chart 13.)

chart 12Estimated Number of Internet Purchases Shipped to Purchaser’s Home(number of purchases; percentage of respondents)

Note: Respondents were asked, “Thinking back over the last 12 months, which would include the lead-up to last Christmas, how many items did members of your household purchase over the Internet that had to be shipped to your home?”Source: Genesis Public Opinion Research Inc.

None 1−6 7−12 13+0

10

20

30

40




The results of this line of questioning indicate that

respondents are evenly split on these options, with half

expressing a preference for travelling to the courier or

post office; and the other half preferring a community

drop box in the neighbourhood. Further analysis reveals,

however, that as the number of courier deliveries that

respondents receive increases, the more they express a

preference for the neighbourhood lock box option. Those

more likely than average to prefer the neighbourhood

lock box option include:

� household is making more Internet purchases

than three to four years ago (63 per cent);

� Internet purchases are likely to increase in the

next three to four years (62 per cent);

� members of their household have made seven

or more Internet-based purchases in the last

12 months (64 per cent);

� mail is delivered to a community mailbox

(74 per cent);

� those under the age of 50 (55 per cent);

� $100k+ household income (60 per cent);

� four or more people in the household (60 per cent);

� children under 18 in the home (60 per cent).

Shipping and delivery considerations are a factor when

consumers consider Internet-based purchases. Forty-one

per cent of respondents indicated these considerations are

“very” important when considering online purchases;

another 28 per cent said they are “somewhat” import-

ant. Further, 27 per cent said that it’s “very likely” that

either they or someone else in their household would

make more purchases over the Internet “if shipping and

delivery were easier to deal with.”

As might be expected, these two sentiments are highly

correlated with each other. Eighty per cent of those who

say “shipping and delivery considerations are very import-

ant when considering Internet-based purchases” also say

that it’s either “very” or “somewhat likely” they or another

member of their household would make more Internet-

based purchases “if shipping and delivery were easier

to deal with.” In a similar vein, 42 per cent agreed with

the following statement: “I would buy more goods over

the Internet if shipping and delivery were more reliable.”

Taken together, these data suggest that there is a large

and growing market for residential parcel delivery as a

result of online commerce. The results also suggest that

there is roughly a 50/50 chance that parcels destined for

residential address won’t get delivered because there is

no one home during the day to accept that delivery.

This, in turn, suggests that the market is ripe for better

solutions that make the final hand-off of Internet pur-

chases more convenient and consumer-friendly.

Among small business customers, 59 per cent of those

surveyed claim they have used Canada Post to send a

parcel or courier package in the last 12 months. Those

who claimed to have used the services were asked to

evaluate them compared with the available alternatives

in their market.

Table 8 Potential Challenges When Picking Up a Parcel(percentage responding "yes")

"… only to discover that their office was closed?" 24

"… only to find that the package you came for was in another location?" 19

"… only to find that there was no convenient place to park?" 11

"… only to find out that it's been shipped back to the original sender because you didn't go to pick it up quickly enough?" 10

Note: Respondents were asked, “Have you ever travelled to the courier outlet or post office to pick up a package or parcel …” Source: Genesis Public Opinion Research Inc.

chart 13Preferences for Parcel Delivery, Residential(percentage of respondents)


4648Travel to post office or courieroffice to pick up yourself

Have parcels dropped inneighbourhood lock box


www.cboc.ca/ip



The responses suggest that Canada Post is competitive

on each of the eight service attributes typically invoked

to define the category. It fares best on perceptions of

price/cost and the number of domestic locations it

delivers to. Its one significant weakness would appear

to be perceptions of speed of delivery. While a majority

of customers think it’s the same as its rivals on that ser-

vice attribute, there are over three customers who think

it’s slower for every one customer who thinks it’s faster.

(See Chart 14.)

Just over 50 per cent of all those surveyed claimed

their company uses Canada Post for some portion of

their courier and parcel needs. As for why they do busi-

ness with the corporation, 27 per cent of the volunteered

answers suggested that Canada Post was cheaper/less

expensive than the alternatives; 22 per cent said the postal

outlet they use for the service was conveniently located/

close to their business; and another 22 per cent said the

service was reliable or secure. All other responses were

well behind in single digits. They included answers

such as the speed of delivery; Canada Post delivers to

places others don’t (6 per cent); good tracking system

(4 per cent); and the receiver prefers Canada Post’s

service (3 per cent).

There is a widespread recognition that the Internet has

created more parcel business for the corporation. Over

8 in 10 small business customers (84 per cent) agreed

with the statement: “Buying things over the Internet

has really increased the number of parcels and pack-

ages moving through the postal system.”

disTance To posTal ouTleTsJust over one in five residential customers (21 per cent)

claimed to live within 1 kilometre of the postal outlet

where they “usually buy” postal products and services.

Fifty-six per cent of respondents indicated that it was a

privately owned postal outlet, while 39 per cent claimed

it was owned and operated by Canada Post. Almost 4 in

10 small businesses surveyed are located within 1 kilo-

metre of the postal outlet where they “usually buy”

postal products and services.

over 8 in 10 small business customers agreed that internet purchases have increased the number of parcels and packages moving through the postal system .

Residential respondents were asked to characterize their

possible reaction to a scenario where they lived twice as

far from their current location to the nearest postal out-

let. (See Chart 15.) Answers to this question varied on

the basis of how far the respondent claimed to live from

the nearest postal outlet. For all those claiming to live

within 5 kilometres of the nearest outlet, there was no

appreciable difference in their responses compared with

the overall average. However, among those living 6 kilo-

metres or further from the nearest outlet, 44 per cent

responded that a doubling of the distance they currently

travel to purchase postal products and services would

be “a major inconvenience (they’d) strongly object to”

while only 23 per cent said it would be “no real issue

at all.”

There were no variations in responses based on letter-

mail volumes sent by households, or by courier use.

Nor were there variations based on the size of the com-

munity where respondents lived. However, there were

variations based on age. Among those over 50, 34 per

cent indicated that if the distance to the nearest postal

chart 14Competitive Assessments of Various CPC Parcel and Courier Service Attributes, Small Business(percentage of respondents)

Note: Respondents were asked, “Compared with the available alternatives you could use, would you say that Canada Post’s parcel and courier services are … ?”Source: Genesis Public Opinion Research Inc.

PriceNumber of delivery locations

Value for moneyDelivery speed options

Number of pricing optionsReliability

TrackingDelivery speed

0 20 40 60 80 100

Cheaper/faster/more/better

Same

Costlier/slower/less/worse




outlet doubled, it would be a “major inconvenience”

and they’d “strongly object.” The comparable number

for those younger than 50 was only 23 per cent.

Small business respondents also were asked to charac-

terize their possible reaction to a scenario where their

business was located twice as far from its current loca-

tion to the nearest postal outlet. The respondents were

equally split on the three options. However, two-thirds

indicated they’d either quickly adjust or considered the

prospect “no real issue.” (See Chart 16.)

Questions about distance to nearest post office did not

distinguish between corporate or franchised retail outlets,

but the survey also probed relative rates of satisfaction. In

terms of overall residential customer satisfaction, 83 per

cent of respondents gave the corporate and private outlets

a score of 8 or better on a 0–10 scale. Similarly, 85 per

cent of small business customers gave both corporate

and private outlets a score of 8 or better.

The Business case For change

Responses to a series of questions about the broad

business environment in which Canada Post currently

operates suggest that Canadians have a reasonable under-

standing of the challenges—though not necessarily their

magnitude—that the corporation currently faces.

By way of example, virtually half (49 per cent) of those

surveyed in the residential study thought there was “less”

mail moving through the postal system today compared

with three to four years ago. One-quarter (24 per cent)

said they thought the amount of mail moving through the

system was about the same, while one in five thought

there was more today compared with three to four

years ago.

As for addresses served, 47 per cent of respondents

believed there were more compared with the number

the corporation served three to four years ago. Twenty

per cent believed there were “less,” and 24 per cent

believed there were the same number.

In short, about half of Canadians understand that less

mail is moving through the system. Half also understand

that the number of addresses is growing. But only one

in five household respondents recognized both parts of

Canada’s postal challenge: less mail and more addresses.

Results were similar in the business survey. Over half

(55 per cent) of those surveyed thought there was “less”

mail moving through the postal system today compared

with three to four years ago. One in five (20 per cent)

said they thought the amount of mail moving through

the system was about the same, while only 16 per cent

said they thought there was more mail moving through

the system.

chart 15Reaction to Potential Changes in Distance to Nearest Postal Outlet, Residential (percentage of respondents)

Note: Respondents were asked, “If the nearest place where you could buy postal products and services was twice as far away, would that be …”Source: Genesis Public Opinion Research Inc.

28

35

36 A major inconvenience you’d strongly object to

An inconvenience compared with now, but you would quickly adjust

No real issue at all

chart 16Reaction to Potential Changes in Distance to Nearest Postal Outlet, Small Business (percentage of respondents)

Note: Respondents were asked, “If the nearest place where you could buy postal products and services was twice as far away, would that be …”Source: Genesis Public Opinion Research Inc.

33

32

32A major inconvenience you’d strongly object to

An inconvenience compared with now, but you would quickly adjust

No real issue at all


www.cboc.ca/ip



However, only 43 per cent of business respondents

believed that Canada Post is serving more addresses

than three to four years ago; 20 per cent believed there

are “less,” and 24 per cent believed there are the “same”

number as before. Only 15 per cent of business respondents

accurately identified both the decline in mail volume and

the growth in the number of addresses as challenges.

Knowledge of Canada Post’s financial performance is

equally vague. When asked about Canada Post’s financial

performance in the last three to four years, residential

customers surveyed broke into near-perfect quartiles:

23 per cent believed they “made a profit”; 26 per cent

said they “broke even”; 28 per cent said they operated

at “a loss”; and 24 per cent didn’t know what to think.

Among business respondents, only 25 per cent believed

they “made a profit”; 16 per cent said they “broke even”;

and 20 per cent said they operated at “a loss.” The lar-

gest answer category was “don’t know” at 39 per cent.

These tentative and uncertain assessments of the cur-

rent state of the business partly explain how respondents

characterize the current challenges the corporation faces.

Only 9 per cent of residential customers think the cor-

poration “is healthy and its future is bright.” At the

other extreme, the same number believes it has “serious

problems that require a fundamental reorganization of

the business.” (See Chart 17.)

Among business respondents, only 11 per cent think the

corporation “is healthy and its future is bright.” At the

other extreme, only 6 per cent believe it has “serious

problems that require a fundamental reorganization

of the business.” (See Chart 18.)

These results indicate that Canadians understand it is

not business as usual at Canada Post. But in roughly

equal numbers, they’re split between thinking those

issues can be “easily fixed” and thinking Canada Post

has “significant challenges that will require some changes

to the way it operates.”

canadians are almost evenly split between thinking canada post’s issues can be “easily fixed” and thinking there are “significant challenges requiring operational changes .”

The way respondents characterize the corporation’s

challenge is influenced by their understanding of the

business trends and corporate finances. The residential

and business respondents who think volumes are down

are also more likely than average to believe Canada

Post has “significant challenges” that will require

“changes to the way it operates.” And those who

believe the corporation has been losing money are

more likely than average to believe that Canada

Post has both “significant challenges” and “serious

problems that require a fundamental reorganization

of the business.”

Notwithstanding these differences in understanding related

to the precise nature of the challenges, there is a broad-

based consensus on the need for change. Eighty per cent

of residential and 67 per cent of small business custom-

ers agreed with the statement that “Canada Post has to

make fundamental changes to the way it has operated in

the past in order to be relevant in the future.”

chart 17Characterizations of CPC Business Challenges, Residential (percentage of respondents)

Note: Respondents were asked, “Looking ahead over the next number of years, would you say that CPC … ?”Source: Genesis Public Opinion Research Inc.

9

3541

9Is healthy; its future is bright

Has issues, but nothing it can’t easily fix

Has significant challenges requiring some operational changes

Has serious problems requiring fundamentalreorganization of its business




aBiliTy To replace canada posT

As discussed earlier in this report, Canadians see a role for

Canada Post in the future, notwithstanding their declining

use of some of its traditional services. That said, there

is a significant minority who believe they would be able

to replace most, if not all, of the services Canada Post

currently provides. (See Chart 19.)

The data suggest that respondents make a distinction

between the prospect of replacing the services they cur-

rently receive from Canada Post and the ability to do so

in a cost-effective manner. Seventy-two per cent of all

those who thought they could replace at least “some”

of the services they currently receive from Canada Post

also believe it would cost them more than they pay now

to do so. Only 5 per cent of those who thought Canada

Post’s services could be replaced believed that could

happen for less money than they currently spend on

Canada Post.

Small business respondents appear somewhat more bull-

ish on the idea of being able to cope without Canada Post

in the future. Fully one-quarter thought that if the cor-

poration no longer existed, they could replace “all” of

the services they currently count on the corporation to

provide, while a slightly larger number believed they

would be able to replace “most” of those services. (See

Chart 20.)

Not surprisingly, companies that send fewer letters,

those that report declining use of the system, and firms

with five or fewer full-time employees were most likely

to believe they could replace “all” of the services they

currently receive from Canada Post.

Businesses, like households, recognized that replacing

the services currently received from Canada Post likely

would cost them more money. Fully 27 per cent estimated

it would cost their business “much more” than what they

currently spend on Canada Post’s services. Another 42 per

cent estimated it would cost “more” than what they cur-

rently spend. Only 5 per cent thought the cost of replacing

Canada Post’s services would be less than what they

currently spend.

chart 18Characterizations of CPC Business Challenges, Small Business (percentage of respondents)

Note: Respondents were asked, “Looking ahead over the next number of years, would you say that CPC … ?”Source: Genesis Public Opinion Research Inc.

11

3937

68

Don’t know

Is healthy; its future is bright

Has issues, but nothing it can’t easily fix

Has significant challenges requiring some operational changes

Has serious problems requiring fundamentalreorganization of its business

chart 19Perceived Ability to Replace CPC Services, Residential(percentage of respondents)

Note: Respondents were asked, “Suppose Canada Post no longer existed. Do you think you’d be able to replace all/most/only some/or none of the services you currently receive from Canada Post?”Source: Genesis Public Opinion Research Inc.

19

2343

12

All

Most

Only some

None

chart 20Perceived Ability to Replace CPC Services, Small Business(percentage of respondents)

Note: Respondents were asked, “Suppose Canada Post no longer existed. Do you think you’d be able to replace all/most/only some/or none of the services you currently receive from Canada Post?”Source: Genesis Public Opinion Research Inc.

25

29

39

5

All

Most

Only some

None


www.cboc.ca/ip


Our projection of mail volume and revenue

makes it clear that in the absence of signifi-

cant changes to its business model, Canadians

face large and growing operating losses at Canada Post.

The surveys of residential and business customers show

that Canada Post is actually delivering a higher level of

service than Canadians expect or need. Therefore, there

is room to explore significant changes in the corpora-

tion’s business model that could contribute to long-

term sustainability.

Canadians can aim to close the financial gap at Canada

Post by enabling it either to increase revenue or to cut

costs. On the revenue side, Canada Post historically has

raised its prices at an average rate lower than inflation.

Given the relentless pressure on mail volume, the ques-

tion is whether price increases that significantly exceed

inflation could raise enough incremental revenue to

reduce or eliminate the looming operating deficits.

There is a wider range of options when it comes to

cutting costs. Canada Post already has launched major

efforts to improve efficiency and cut costs through invest-

ment in new technologies—substituting capital for labour.

As discussed, these investments will have a significant

impact in reducing the operating deficit, but will fall

well short of the savings that would be needed to return

to self-sustainability.

The Conference Board has modelled the impact of five

potential approaches to cost reduction. The first considers

what degree of wage restraint would be needed to reach

break-even without reducing the size of the labour force.

The remainder would require labour force reductions

greater than expected attrition and include:

� alternate-day delivery;

� elimination of door-to-door delivery;

� conversion of corporate post offices to

franchised retail outlets;

� reduced standards for speed of delivery.

Sustaining the Postal Service That Canadians Need

chapTer 6

chapter summary � Canada Post could significantly reduce its

projected loss by raising prices, but cannot realistically return to self-sustainability through price increases alone.

� Five options for cutting costs—wage restraint, alternate-day delivery, elimination of door-to-door delivery, a further shift of corporate post offices to franchised retail outlets, and reduced speed of delivery—could reduce projected operating losses.

� Eliminating delivery to the door for urban residential customers would be the option with the largest financial impact, saving $576 million a year by 2020.




The Postal Transformation initiative already being

implemented will take advantage of expected attrition

to reduce the number of full-time employees. Since

labour accounts for roughly 70 per cent of Canada

Post’s costs, any significant change in the delivery

model likely will reduce the requirement for labour

by more than could be achieved through attrition.

Our financial projections assume that Canada Post will

be able to reduce its labour force as required, and the

following scenarios show the full resulting savings

being achieved very quickly. The practical reality is

that, barring successful collective bargaining or legis-

lated terms, the costs savings projected in the scenarios

probably would be reduced or delayed. In addition, the

operational complexity of some changes means that

implementing them across the system might take several

years rather than a single year as suggested in our charts.

The scenarios presented here were developed and selected

by The Conference Board of Canada to test the possible

impact of a wide range of potential approaches to the

challenges facing postal service. These scenarios do not

reflect the views of either Canada Post or the Government

of Canada. Similarly, the financial impacts projected here

flow solely from the econometric and risk assessment

framework developed by the Conference Board for

this project.

opTion 1: large price increases

The Conference Board modelled two approaches to

increasing prices faster than the rate of inflation.

1. The first price scenario sees prices for transaction

mail rise by 5 per cent a year after 2014. Admail

and publications prices would rise by 5 per cent a

year after 2013. Parcel prices increase by 2 per cent

a year after 2013. This would reduce the projected

operating loss in 2020 by just $110 million.

2. The second price scenario has transaction mail

prices increasing by 10 per cent per year after 2014.

Unaddressed Admail would rise by 10 per cent and

addressed Admail, publications, and parcel prices by

5 per cent after 2013. The 2020 reduction in operat-

ing loss would be $318 million. (See Chart 21.)

Customer attitudes from the focus groups and polling

suggest that Canadians recognize the current price of a

stamp as providing good value, and that residential and

small business customers would be prepared to accept

some degree of higher pricing.

The projection reflects the price elasticity observed

for each product category and assumes a uniform price

increase across each category. In reality, Canada Post

likely would take a more nuanced approach to raising

prices. Some products likely would see price increases

greater than the benchmark; others would rise more

slowly. In particular, Canada Post could be expected to

work with its major customers to reduce the pricing

impact in return for greater customer efforts to reduce

sorting and delivery costs. Interviews with major mail-

ers made it clear that these customers would welcome

such efforts, even if overall prices do not rise faster

than inflation.

However, while the desire to cut costs is the primary

driver of mail-reduction strategies being pursued by

major mailers, the cost issues for these customers go

well beyond the price of a stamp. Sending hard-copy

statements to customers costs much more than the post-

age, as demonstrated by the companies that have started

charging customers $2 a month or more for mail service.

Such developments suggest that major mailers already are

doing as much as they can to reduce their mail volumes.

chart 21Impact of a Major Increase in Postal Pricing($ millions)


2012p 13p 14p 15p 16p 17p 18p 19p 20p−1,000

−800−600−400−200

0


5 per cent price increase scenario

10 per cent price increase scenarioProjection


www.cboc.ca/ip



Price increases by Canada Post, even on the scale sug-

gested here, likely would have little incremental impact

in accelerating the trend.

The net impact of price increases on the bottom line

would be positive, and a more aggressive pricing policy

could contribute significantly to sustainability. However,

no realistic scenario for increasing prices could bring

Canada Post anywhere close to self-sustainability by 2020.

opTion 2: Wage resTrainT

When organizations face a budget crunch and wish to

avoid layoffs, they often consider wage restraint as an

alternative. Canadians can see this approach playing out

in the public sector as provincial governments do their

best to deal with large deficits by reining in their big-

gest costs: education and health care.

In considering this option for Canada Post, two observa-

tions are important. The first is that wage restraint typ-

ically is suitable only as a response to relatively short-term

pressures; for instance, as a means of enabling a com-

pany to get through a recession without resorting to lay-

offs. Freezing or reducing wages generally is not a policy

that can be applied indefinitely. The second is that even

temporary wage restraint has significant risks. It can be

damaging to morale within an organization, and may

lead to public protests when applied broadly. Given

Canada Post’s visibility in Canadian communities and

its labour relations history, wage restraint in the post

office could lead to major labour disruptions, even if

pursued as an alternative to an equivalent cut in the

number of workers.

The Conference Board, nonetheless, used its model to

consider what degree of wage restraint would be neces-

sary to sustain postal operations without labour force

reduction in light of the relentless downward trend in

mail volumes. (See Chart 22.)

The first wage restraint scenario freezes wages for

seven years starting in 2013. This would stabilize the

annual operating loss at around $300 million. The second

scenario assumes a nominal wage decrease of 1 per cent

per year over the same period—in effect, a real wage cut

of 3 per cent a year. This would bring operating results

close to break-even without any other changes in Canada

Post’s business model. While wage restraint on this

scale is consistent with the impact of Canada Post’s

declining volume, it cannot be considered realistic.

The broad issue of compensation cannot be excluded

from any discussion about Canada Post’s future. But,

the most critical issue regarding compensation is likely

to be Canada Post’s pension plan. Like all employers

offering defined-benefit plans, Canada Post has been

severely affected by a combination of two factors: the

way that steadily falling interest rates have affected the

returns on financial assets; and the fact that Canadians

are living longer and healthier lives, and therefore col-

lecting pensions for many more years than expected

when the plans were designed.

The size of Canada Post’s pension plan has more than

doubled since 2000, reaching more than $15 billion.

However, by the end of fiscal 2011, it had a going concern

deficit of $423 million and a solvency deficit of $4.7 bil-

lion. This required current and special contributions during

2011—totalling $510 million—despite relief provided

by the Government of Canada in the form of a letter of

credit facility.

chart 22Impact of Severe Wage Restraint($ millions)


2012p 13p 14p 15p 16p 17p 18p 19p 20p−1,000

−800−600−400−200

0


Wage freeze scenario

1 per cent wage decrease scenarioProjection




Canada Post has, like other corporations in similar cir-

cumstances, taken a range of steps to address its pension

challenge. These include introducing a new defined con-

tribution plan for new management employees, moving

to a 50/50 cost sharing of contributions with employees,

and negotiating new pension plan provisions for new

unionized employees. However, management does not

expect these steps to be sufficient to cover ongoing pen-

sion plan deficits if today’s historically low discount rates

continue. Without further relief from the government,

Canada Post will need to fund additional billions of

dollars in contributions starting in 2014. This would

have an impact on the future compensation of employ-

ees beyond any degree of wage restraint that might be

considered as a response to declining mail volumes.

opTion 3: alTernaTe-day delivery

One of the most common approaches to reducing the

cost of postal service internationally is to cut the num-

ber of days each week on which mail is delivered.

Savings from moving to alternate-day delivery would

flow primarily from a reduction in the number of letter

carriers. As the remaining delivery days would result in

more addresses receiving one or more pieces of mail on

a given delivery day, savings would not be directly pro-

portional to the number of delivery days eliminated. Every

route would be affected, making this option complex to

implement. There also would be additional warehousing

requirements for mail being stored prior to delivery. The

Conference Board’s projection assumes that cutting the

number of delivery days in half results in approximately

44 per cent cost savings. This approach would have a

major impact on the bottom line, eliminating about half

of the projected 2020 operating loss. (See Chart 23.)

Survey responses suggest that there would be only

modest resistance from residential customers, and this

scenario assumes that business addresses would con-

tinue to receive mail on a daily basis. Canada Post

could mitigate customer resistance to reduced physical

delivery through the addition of digital service, such as

the scan/e-mail approach used in Finland. The incre-

mental cost of such digital service would, of course,

reduce the potential savings.

However, there likely would be serious pushback from

major mailers. A high-profile change in service would

give an additional incentive to transaction mailers to push

their customers to convert to electronic alternatives.

Marketing mail business could be severely affected,

especially in segments such as retail where customers

count on delivery on different specific days of the week.

As one mailer put it, “There is no good day to cut.” For

these major customers, Canada Post already faces com-

petition from lower-cost alternatives such as Publisac in

Quebec and newspapers that would continue to offer

daily delivery.

At the same time, Canada Post will face competitive

pressure to maintain daily delivery in the growing par-

cel business. In this context, a switch to alternate-day

delivery for lettermail would add to operational com-

plexity and could create confusion among residential

and business customers.

opTion 4: eliminaTion oF door-To-door service

The image of the mail carrier bringing letters to the

door is enduring, but this actually reflects reality for

only one-third of the addresses now served by Canada

Post. Door-to-door delivery is still the largest single

category of delivery method, but more than 10 million

chart 23Impact of Alternate-Day Delivery($ millions)


2012p 13p 14p 15p 16p 17p 18p 19p 20p−1,000

−800−600−400−200

0200

Baseline with PT plan savings includedAlternate-day service scenarioProjection


www.cboc.ca/ip



addresses are now served by delivery to centralized

points, group mailboxes, delivery facilities, and rural

mailboxes. (See Table 9.)

Door-to-door delivery is, by far, the most expensive

delivery method, with an annual cost more than twice

as high as for the community mailboxes that have been

the norm for many years in new subdivisions.

Door-to-door delivery is, by far, the most expensive deliv-ery method, with an annual cost more than twice as high as for community mailboxes.

The scenario modelled here assumes elimination of all

remaining door-to-door delivery to urban residential

customers. Delivery would be replaced by community

mailboxes. As with the alternate-day delivery scenario,

business addresses would not be affected, and rural deliv-

ery would continue to be carried out by current methods.

The projected savings do not include upfront capital

costs for increasing the number of community mail-

boxes, but the potential impact on Canada Post’s bot-

tom line is significant— reducing the expected 2020

operating deficit by $576 million, or more than half.

(See Chart 24.)

There also is potential for this option to enable increased

revenue from direct marketing mail. Under this option,

all delivery would be by motorized carriers. This could

allow Canada Post to offer marketers opportunities to

deliver direct mail items and samples that are too large

for letter carriers working on foot.

The following three factors could ease Canadians’

acceptance of the elimination of door-to-door delivery:

� First, it is consistent with the evolution of other ser-

vices: consumers no longer expect milk delivered to

their door. Why should mail be different?

� Second, it could be defended on the basis of

fairness—sustaining an equitable level of service

to all Canadians.

� Third, installation of community mailboxes for all

residential addresses would support universal access

to secure parcel delivery boxes. Given the rise in

importance of parcel delivery within the mix of

Table 9Costs by Delivery Method(number; per cent; cost)

Number of addresses Percentage of total addresses Average annual cost per address ($)

Door-to-door 5,094,694 0.336 269

Centralized point 3,726,366 0.245 124

Group mailbox 3,804,574 0.251 117

Delivery facility 1,797,668 0.118 53

Rural mailbox 757,843 0.050 182

All methods 15,181,145 165

Source: Canada Post Corporation.

Chart 24Impact of Eliminating Door-to-Door Delivery($ millions)


2012p 13p 14p 15p 16p 17p 18p 19p 20p−1,000

−800−600−400−200

0200

Baseline with PT plan savings includedElimination of door-to-door delivery scenarioProjection




postal products, any loss of convenience in receipt

of letters would be offset by increased convenience

on the parcel side. The response of community mail-

box users to the convenience trade-off question in

the residential survey is notable in this regard: they

are satisfied with their level of service on letters and

see access to equally convenient and secure parcel

delivery as a benefit.

Therefore, conversion of the minority of Canadian house-

holds now receiving door-to-door delivery to community

mailboxes might be the most acceptable of the service

change options, while also being the one that would

have the largest impact on Canada Post’s bottom line.

opTion 5: conversion oF corporaTe posTal ouTleTs

The survey data suggest that Canadians are somewhat

open to longer distances between post offices. Practical

experience, however, shows strong resistance to the clos-

ure of postal outlets, especially in smaller communities.

And, there is currently a moratorium on closing rural

post offices.

Canada Post has demonstrated its ability over many

years to shift postal service to franchised retail outlets.

Such shifts create cost savings. In urban areas, Canada

Post’s average cost per dollar of retail sales using a dealer

is about one-third of that using a corporate outlet. The

residential and small business surveys both suggest a

high degree of satisfaction with retail service whether

provided directly by Canada Post or a franchised retail

outlet. In addition, the provision of services through the

Internet has become widely accepted. The canadapost.ca

website is open 24/7, and Canada Post notes that about

one in five Canadians now use this channel for trans-

actions such as notification of change of address.

This scenario is based on closing all urban corporate

postal outlets and replacing them with franchised outlets.

There should be opportunities for additional savings

through conversion of corporate postal outlets in smaller

communities where suitable businesses exist. But even

without the moratorium on closing rural post offices,

there may be fewer options for rural franchise outlets

than there are in urban areas. It also would be possible

in some communities, where the density of outlets is

sufficient, to reduce the number of outlets while still

allowing Canada Post to meet its current distance-

based standard.

This scenario, however, assumes no closing or conversion

of corporate outlets in rural Canada. It doesn’t change the

overall number of postal outlets, and therefore would

have no impact on accessibility. Even so, the result could

be annual savings of about $100 million by 2020. (See

Chart 25.)

opTion 6: reducTion oF service sTandards

The survey responses suggest that residential and small

business customers are prepared to accept a lower ser-

vice standard than Canada Post currently delivers. And

whether or not Canadians choose to make an explicit

change in the standard, optimizing Canada Post’s logis-

tical network is likely to be a continuing priority for

management as density of traffic declines and the mix

of products evolves. (See Chart 26.)

chart 25Impact of Converting Urban Corporate Outlets($ millions)


2012p 13p 14p 15p 16p 17p 18p 19p 20p−1,000

−800−600−400−200

0


Conversion of corporate outlets to dealer outlets

Projection


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Reducing the service standard by one day would pro-

duce savings of $164 million per year by 2020. Savings

would come primarily from consolidation of sorting

plants, with some contribution from intermodal shifts

from air to ground transportation.

possiBle comBinaTions

The scenarios described here project the financial impact

of individual changes in service or policy. They should

not be taken as additive: the savings from alternate-day

delivery combined with those from eliminating door-to-

door service would not be as high in combination as the

individual impacts projected in each scenario.

At the same time, choices on one front may support

further change. For instance, Canadians who get mail

delivered to their door are much more likely to check

their mailbox daily than those who receive mail through

a community mailbox or at a postal outlet. More than

60 per cent of community mailbox users check for mail

only every second day or less; half of those with post

office boxes check only twice a week or less. Conversion

of door-to-door delivery to community mailboxes might

reduce the typical frequency at which residential cus-

tomers check for mail, and pave the way for easier

acceptance down the road of alternate-day delivery.

(See Table 10.)

chart 26Impact of Slowing the Delivery Standard ($ millions)


2012p 13p 14p 15p 16p 17p 18p 19p 20p−1,000

−800−600−400−200

0


Relaxation of the delivery standard by one day

Projection

Table 10Method of Mail Delivery(per cent)

Frequency of checking door-to-doorlobby in building

mailbox at driveway

community mailbox

po box at cpc outlet

Every day 93 73 80 39 28

Every 2nd day 3 10 16 29 22

Twice/week 2 6 2 16 24

Once per week 1 8 1 13 22

Less than 1/week 1 2 1 3 2




The steady and perhaps accelerating decline in

the volume of mail in Canada speaks for itself.

Canadians no longer depend on their postal ser-

vice to the extent they once did. Broadband and mobile

communications technologies have given most Canadians

alternatives to mail that are faster, cheaper, and more

convenient for many traditional uses. Households and

businesses alike are changing their habits at a rapid pace.

The need for a postal service, however, has not dis-

appeared. Some communities are still poorly served by

telecommunications infrastructure by reason of size and

distance. Some Canadians, especially older ones, are

less comfortable with new technologies and prefer the

familiarity and reliability of communications on paper.

Many small businesses, especially those that operate

primarily within a community, continue to deal with

customers and suppliers primarily through the mail.

And the rapid expansion of e-commerce is creating a

growing demand for physically moving purchased goods

from retailers and distributors to homes and businesses.

The result is that Canadians still need a postal service.

What has changed is how and why they need it. The post

office was once an essential sinew of nation-building,

the primary means of enabling Canadians to communi-

cate with one another from coast to coast to coast. The

core demand for postal service now flows from its abil-

ity to move physical goods rather than information. And

this has important implications for the universal service

obligations embedded in Canada Post’s mandate.

The residential and small business polling conducted

for this report suggests that Canadians understand that

their own behaviour is changing, but have not yet fully

made the connection to the impact of these changes on

Canada Post’s business model. At the same time, their

responses on issues such as speed, frequency of delivery,

convenience, and price, suggest that Canada Post—like

postal services in other developed countries—is now

providing a higher level of service than necessary.

Conclusion

chapTer 7

chapter summary � Canadians still need a postal service, but what

they expect and use continues to change.

� Canadians understand how technology is changing their own use of the mail system, but don’t yet fully appreciate the impact of these changes on Canada Post.

� Sustaining a postal service that will meet the evolving needs of Canadians will require a combination of measures, but not necessar-ily all at once.


www.cboc.ca/ip



When speed matters, Canadians will send information

electronically and packages by courier. When using mail,

speed has become less important, suggesting that options

such as alternate-day delivery or reduced time standards

could be used to cut costs while still meeting customer

needs. Similarly, when half of households send two pieces

of mail or less each month, even a major increase in the

price of a stamp would impose a monthly cost increase

worth less than a cup of coffee. And when two-thirds of

Canadians already do without delivery to their door, is it

either cost-effective or fair to maintain, for the remain-

ing third, a degree of service that long ago disappeared

for products like milk? Shifting delivery from the door

to a more consistent use of community mailboxes also

could lead to a net improvement in meeting the evolv-

ing needs of customers by making parcel delivery easier

and more convenient.

The analysis done for this report indicates that no single

change in policy will be sufficient to bring Canada Post

back to break-even by 2020 and beyond. While there

will probably be some relatively stable, residual level of

demand for mail services, it is impossible to determine

when and where that level might be reached. Any given

change in service is likely to have a one-time positive

impact on the bottom line, but cannot change the relent-

less downward slope of the mail volume curve.

Therefore, sustaining a postal service that will meet the

evolving needs of Canadians will require a combination

of measures, but not necessarily all at once. An aggressive

approach to change that would lead to a self-sustaining

result by 2020, if implemented quickly, could produce

a big spike in profitability in the short term. This might

provide resources for investment in new technologies or

competitive profit-earning ventures. But a more phased

approach would have the advantage of reducing the

impact of change on employees and customers while

remaining true to the shareholder’s expectation of

self-sufficiency.

The purpose of this report is not to recommend any

one or particular combination of options. Rather, its

goal is to illustrate both the potential financial impact

of a range of choices and how such changes would be

seen by Canada Post’s business and residential custom-

ers. As well, it offers a framework for constructive dis-

cussion of how Canadians would prefer to shape a

sustainable postal service for their future.

> Tell us how we’re doing—rate this publication.

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The Future of Postal Service in Canada

Technology

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