Canada Post announced on Friday that it plans to introduce weekend parcel delivery in three major cities later this year, part of a plan to modernize its business model and capture more parcel business from electronic retailers as it tries to return to profitability.
The postal carrier credited this year’s resolution of a drawnout labor dispute with restoring customer confidence in the second quarter, which sparked an early-stage recovery of parcel business and helped reduce the pre-tax loss by a third to US$199.7 million.
The state-owned company also said it reduced costs by 6.3% during the quarter as operational productivity improved.
Mail carriers represented by the Canadian Union of Postal Workers ratified a contract in early June after more than two years of rocky negotiations, interspersed with two general strikes, rotating strikes by area, and work slowdowns. The volatile labor situation caused huge uncertainty for households and businesses. Many e-commerce shippers switched to using private sector delivery companies, adding to the decline in Canada Post parcel volumes and revenues.
The retroactive, five-year contract runs through Jan. 31, 2029.
Canada Post’s loss for the first half was $347.5 million compared to $323 million in the same period last year.
Quarterly revenue grew 1.5% year over year to $1.1 billion, led by a 20.7% jump in parcel revenue as parcel volume increased 15.6%. Letter mail volume declined 9.2% compared to the prior year, which benefitted from an election and related mailings by candidates, which led to a 9.1% fall in mail revenue. The mail business has been trending down for years as more Canadians communicate through digital channels.
Direct marketing mail volume ticked down 0.2%, with a corresponding dip in revenue.
Stability from the labor contract is allowing Canada Post to implement more parcel services, as well as operational efficiencies, such as flexible staffing, tailoring workloads to workforce deployment, vehicle sharing and streamlining letter mail operations.
The national post is working with communities nationwide to convert 621,000 addresses from door delivery to secure community mailboxes by early 2027. In total, about four million addresses will be converted to community mailboxes over several years.
Centralizing residential delivery is part of a larger transformation plan, which includes closing post offices and lowering delivery standards, to turnaround the company’s finances and improve service. Since 2018, Canada Post has lost $4.76 billion, forcing it to rely on government assistance.
Management sees e-commerce as a growth opportunity and intends to strengthen its position in the competitive parcel delivery market by expanding home parcel pickup service to 8.6 million households; offering box-free, label-free returns with select online retailers; improving local next-day delivery service; offering strategic pricing discounts for businesses; and preparing to launch weekend parcel delivery in the Ottawa, Montreal and Toronto metropolitan areas later this year.
In the second quarter, Canada Post also launched a proof of concept for Canada Shops, a new online marketplace connecting Canadian small businesses with customers across the country through the organization’s delivery network.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
Write to Eric Kulisch at ekulisch@freightwaves.com.
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