Canada Post parcel volumes drop 50% as labor dispute compounds challenges

Canada Post parcel volumes are down 50% year over year and continue to drop as ongoing tensions with labor over a new contract erode shipper confidence in the national mail carrier. The package business’s decline, however, predates the current dispute by nearly a decade, the result of management’s inability to respond to competition from private courier companies, according to industry analysts and stakeholders.

Negotiators representing Canada Post and unionized employees are scheduled to resume contract talks on Wednesday. 

Many businesses have fled to alternative last-mile delivery providers after a five-week strike during the holiday season and the threat of yet another strike, the postal operator and parcel service firms said last week as a deadline approached. On Sunday, Canada Post quantified the contraction, saying shipments are half what they were at this time a year ago.

Canada Post avoided a shutdown on Friday when members of the Canadian Union of Postal Workers opted to keep the pressure on by declining overtime assignments, limiting their work to eight hours per day and 40 hours per week.

The state-owned corporation said it received a response Sunday to its latest offer on May 21. The parties met near Ottawa with the Federal Mediation and Conciliation Services, which operated as an interlocutor passing documents and ideas back and forth in lieu of face-to-face meetings, according to a CUPW account of the talks. 

Unresolved issues include wages, cost-of-living allowance, sick days, workers’ compensation, staffing, outsourcing, weekend delivery and use of part-time workers. 

Parcel headwinds

Canada Post never developed a strategy to capitalize on the parcel market when presented with a choice about 10 years ago, said Alison Layfield, director of product development at cross-border package consolidator ePost Global, in an interview. 

Since then, online shopping and home delivery have skyrocketed, letter mail volume has plunged (down 66% over 20 years), and Canada Post has lost more than $2.2 billion. In addition, Canada Post’s market share in parcel delivery plunged from 62% in 2019 to 29% in 2023, according to a report this month from the Industrial Inquiry Commission. 

“Canada Post’s biggest mistake was they did not move forward with any changes in their network structure, which made them unable to compete with the other carriers that are out there, like Amazon’s Dragonfly, Fleet Optic and all these other carriers that have popped up, especially since COVID,” Layfield said. 

The government’s review commission noted that private couriers, which dominate in urban and suburban settings, benefit from being able to choose which routes to serve while Canada Post is bound by law to serve all addresses. Private couriers also have access to huge amounts of capital and are typically able to hire nonunion workers, many on a part-time basis or as independent contractors.

Layfield endorsed the commission’s call for flexible use of part-time employees and said Canada Post also needs to deliver seven days per week and offer better pricing to compete with last-mile carriers.

Canada Post’s parcel development has been hamstrung by leadership that focuses on letters and doesn’t understand the evolving parcel market, Layfield said.

Canada Post says it needs a flexible business model to compete in the new environment. That includes basing delivery routes on parcel volumes for each day; the ability to offer weekend, evening and next-day delivery services at affordable rates; and a lighter regulatory hand so it has more autonomy to adapt quickly to the growing e-commerce market

It has proposed a weekend delivery model using a dedicated part-time workforce as well as dynamic routing, which would allow it to plan and optimize delivery routes based on volumes, delivery addresses and pickup. The union has been reluctant so far to accept some of those changes.

“There’s two things they have to do: Reimagine the day-to-day standard postal delivery, and they need to be great at dealing with the competition in the express world,” said Eric Miller, president of cross-border government relations consultancy Rideau Potomac Strategy Group, who worked on industrial policy while in the Canadian government. 

Management hasn’t shown the imagination or the fortitude to push against entrenched interests, including labor, to make transformational change, he said. 

If Canada Post were willing to experiment, Miller said, it could try some sort of premium delivery model, such as secure package delivery in cities.

“They aren’t great at anything, and they haven’t figured out how to make their business model viable,” Miller said. “It’s an organization massively in need of restructuring, but there isn’t the political will to do it because if you reduce service you take away service from seniors, who are the biggest voters.”

Many of Canada Post’s parcel challenges are similar to those faced by the U.S. Postal Service, noted Kate Muth, executive director of the International Mailers’ Advisory Group. 

“The future seems to be in packages, but how do you do that in a way where you can compete with the other providers, but still do it at a price that’s competitive and with the service that people are coming to expect with package delivery,” she said.

Click here for more FreightWaves/American Shipper stories by Eric Kulisch.

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