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

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Canada Post is selling its IT and logistics services, a move business experts see as a critical first step to saving a losing Crown corporation more than half a billion dollars in 2022.

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

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

Last week, Canada Post announced it will sell its internal IT business, Innovapost, to Deloitte Canada. As part of the outsourcing agreement, Canada Post will maintain an IT management team while most Innovapost employees workforce of 750 people is absorbed by Deloitte.

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

This announcement came a week after Canada Post announced it would sell its 3,000-person logistics company.

Canada Post declined multiple interview requests from CBC and instead provided a written statement.

“Over the past two years, Canada Post has implemented a comprehensive transformation plan focused on meeting the evolving needs of Canadians and Canadian businesses,” wrote Canada Post spokesperson Janick Cormier.

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

The lucrative “last mile”

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

“The future of Canada Post is not about pretending it can deliver mail when the number of items is collapsing 6 to 8 percent per year,” Lee said.

Canada Post needs to move aggressively and quickly into e-commerce, Lee said. Sales of products purchased online and delivered to your home are exploding.

“That future is about reinventing ourselves as a partner to e-commerce companies and trying to reclaim the business that they abandoned and lost to the Amazons of the world,” he said.

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

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“The U.S. Postal Service partners with some of these big logistics companies that bring in millions of packages. They basically sort them by the local zip code of the local post office,” he said.

“The only area where Canada Post has a competitive advantage is in the last mile. It serves 16 million addresses. It’s the last mile.”

But Canada Post would have to cut costs for such a plan to work, Lee added.

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

Develop services to survive, says union

The Postal Workers Union (CUPW), which represents 60,000 Canada Post workers, did not grant an interview to CBC News. (CUPW does not represent any employees working in the businesses sold.)

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

“CUPW is advocating for a comprehensive plan to ensure the future financial viability of Canada Post by expanding services,” spokesperson Siân Griffiths wrote in an email.

A postal worker seen from behind as he puts mail in a mailbox at the entrance to a suburban home.
The postal workers’ union says the key to Canada Post’s future lies in expanding its services. (Justin Tang/The Canadian Press)

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

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

E-commerce ambitions may come too late

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

Attempts to explore logistics and IT have not improved the company’s bottom line, she said.

“While this increased revenue, it also increased costs in a way that did not increase profitability,” she said.

Canada Post tried to do too many things at once, she said.

“You cannot be a unionized company that treats its employees well, that has a broad geographic reach, that has a social responsibility as a crown corporation to ensure accessibility for all, and that is also the company who will offer the lowest prices.” she says.

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

“Canada Post…was the last to really enter the parcel market. It launched its initiatives well after its competitors had consolidated, Chhinzer said.

While the e-commerce sector grew by 3.5 percent last year, Canada Post saw no growth in this area.

“There are currently significant critical flaws in the operation of Canada Post,” Chhinzer said.

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