Business

Going E-postal

Canada’s mail service wants to transform itself into a leader of the electronic age

Mary Janigan September 13 1999
Business

Going E-postal

Canada’s mail service wants to transform itself into a leader of the electronic age

Mary Janigan September 13 1999

Going E-postal

Canada’s mail service wants to transform itself into a leader of the electronic age

Business

Mary Janigan

Tucked into the prosperous British Columbia golf-and-ski resort of Sun Peaks is a rustic shop, Uniquely Canadian Enterprises Inc., with an equally unique online shipping service. Those who venture onto its Internet site encounter a range of distinctive craft selections under such playful titles as Wear It” and “Eat It.” But even more interesting options appear when they turn to their delivery method: eParcel service automatically calculates the weight of their package and the distance it must travel—then offers a choice of postal services, itemizing the exact cost and date of arrival. It even selects the most economical container from the list of eParcel boxes, and illustrates how those items should be packed by Uniquely Canadians warehouse. “We said, ‘Lets make ecommerce work for us,’ ” says co-owner Barbara Mowat, “so that we can keep the prices low.”

Perhaps the real surprise with eParcel—only available at Mowat’s site until its official launch on Oct. 1—is its unlikely owner: Canada Post Corp. Yes, the post office. That ugly duckling of the communications industry, which can trace its often-troubled ancestry back to the creation of the first post office in Halifax in 1755, is struggling to transform itself into the swan of the electronic age. Starting next week,

and continuing into the new year, it will be launching an array of online services ranging from a secure courier to electronic money orders to an Electronic Post Office that will deliver financial statements, direct mail and bills—with electronic payment options included.

At the same time, Canada Post is aggressively drumming up other new business. It is courting direct-mail clients, emphasizing its ability to target deliveries. Its sales agents have been so zealous that Canada Post predicts direct marketing revenues will rise from the current $687 million in 1998-1999 to more than $1.1 billion in 2003-2004. Meanwhile, it is planning to transform its postal outlets from stamp counters and greeting card stores into one-stop operations that could offer everything from Internet access to the Electronic Post Office to basic financial services such as the establishment of registered retirement savings plans with participating banks. “Canada Post has to become much quicker on its feet,” says Daniel Sawaya, Canada Post’s vice-president of marketing and product development. This is not a difficult time: it is the biggest single opportunity Canada Post has ever had.”

That “opportunity” first appeared to be a sentence of slow

death in the mid-1990s, as electronic communications and courier services began to carve chunks out of the post offices business. Over the past five years, the total annual volume, which includes everything from direct-mail flyers to packages, dropped to 9.6 billion from 11.6 billion pieces. Personal letters are declining at the rate of about one per cent a year— as plugged-in customers switch to the convenience of e-mail. Total letter mail grew slightly over the period as two-income families received more individual bills and financial statements. But the writing is on the post office wall as financial institutions move to deliver those missives electronically.

Canada Post itself predicts that revenue from letter mail will drop by more than $200 million over the next five years. “We could not put up our hands and say, ‘Stop,’ ” says Bill Robertson, Canada Posts general manager of electronic commerce. “All of our research says that electronic transactions are going to continue to grow. It is just a fact of life.”

But joining the electronic fray has been an uphill battle— if only because Canada Post has had to fight its own lingering reputation as a strike-prone, inefficient relic of another

era. In 1981, Ottawa transformed the former government department into a Crown corporation—largely because it was exasperated with the frequent labour disruptions, poor service and hefty annual deficits. The new corporations mandate contained Ottawa’s pious injunction to deliver the mail on time, improve labour relations—and make money for its hard-pressed federal shareholder.

The results are mixed. Last year, Canada Post made a profit of $50 million, its fourth consecutive year in the black. It even paid a $ 12-million dividend to Ottawa, based on the previous year’s earnings. But the corporation is still without a president and CEO more than eight months after Georges Clermont resigned last December. Chairman and former Liberal cabinet minister André Ouellet’s term as interim president and CEO is to expire at the end of this month.

Labour relations also remain strained. In late 1997, postal workers staged a crippling two-week strike on the brink of the Christmas holiday season. Ottawa eventually passed back-towork legislation, but the dispute over work conditions and job security is still in arbitration. Canada Post fears that its

labour contracts will impede its adjustment. Just one example: its 53,000 workers include 19,000 postal carriers who are allowed up to 70 minutes of paid time to travel back and forth to their home depot for a 30-minute lunch break. As well, although Canada Post says it will guarantee job security for permanent employees, it is refusing the unions demand that a set percentage of work be performed by full-time employees. Bracing for an electronic future, its own corporate plan warns dourly: “Labour issues will become even more acute as electronic substitution severely erodes volume.”

It is such historical hangovers that do little to reassure still-wary clients. “Every time there is a postal strike, it tells the customer, ‘You had better find new ways of delivering your service,’ ” says Garth Whyte, senior vice-president of the 95,000-member Canadian Federation of Independent Business. A

The post office of tomorrow will offer Internet shopping and choice of delivery

member survey in 1995 indicated that only 37 per cent of 15,000 respondents were satisfied with Canada Post’s cost and service. “I am getting hints that their awareness of our needs is increasing,” says Whyte. “But not that much has changed.”

For Canada Post, its best hopes lie with its parcel distribution services: as more customers shop on the Internet, more packages will have to be delivered. Canada Post owns 96 per cent of Purolator Courier Ltd. and operates its own distribution services, ranging from Priority Courier to the fastgrowing Xpresspost to regular parcel service. When eParcel becomes fully operational next month, its clients will include more than 75 shopping sites. “Products like books and videos and CDs have become a Web commodity,” says Canada Post’s business development director Francine Conn. “And online customers want more choices and more control.”

Canada Post officials estimate that parcel distribution revenues will soar $1.8 billion to $2.3 billion by 2004. They may be right. “Only about 30 per cent of the people who are online shoppers today actually buy something,” says Elliot Schreiber, chief operating officer at the Toronto-based Alliance for Converging Technologies. “What is stopping them is the issue of security— which will soon be fixed—and the fact that they want the product now. So

Canada Post is right: the distribution network is going to be critical.”

Then there is the Electronic Post Office, a joint venture with Cebra Inc., a subsidiary of the Bank of Montreal. Large-scale trials begin next week, when the service will be offered to 200,000 employees at the bank, Canada Post and other participating billers. Fullscale public service may commence later this fall. That is at least four months ahead of its toughest competitor: e-route inc., the creation of six financial institutions including the Royal Bank of Canada and the Canadian Imperial Bank of Commerce.

Both services will deliver electronic bills or other documents—with crucial differences. Clients will be able to create a personal mail box on the Canada Post Web site, receive a user ID and password, and select the organizations from which they want mail. That mail could include everything from hydro and credit-card bills to sales pitches from se-

lected retailers. They could then pay the bills by clicking on a hot link to their bank. Eventually, they will be able to pay their bills directly with the simple click of a button. Although the service will be free for the client, the sender will pay a fee. “Canada Post has a reputation for privacy, security, trust and reliability,” says Robertson. “And that is a big value in this particular marketplace.” When it begins this spring, e-route inc. will initially deliver only bills. Although it will later add financial information such as bank statements or stock-purchase confirmations, it will not deliver other types of mail such as retail ads. “Between our six members, we already represent two-thirds of Canadian bank accounts,” says e-route chief executive officer Bryan Kerdman. “We have 1.25 million customers who already pay their bills through some form of electronic method. Since people are already paying their bills here, this is the best place to deliver them.” Given such blue-chip competition, can the purveyor of the past expect a promising future? Letter writers may be ceasing to paste stamps on pages. But with direct mail and eParcel and the transformation of its postal oudets into retail centres, Canada Post is projecting profits of $80 million by the spring of 2004. “Canada Post delivers things really well to people’s doorsteps,” says Bill Broddy, president of the Toronto-area consulting firm E-Statements. Com. “If you hand them 100,000 properly sorted leaflets, they will get it there. So if Canada Post focuses on what it can do with the Internet, on how it can deliver stuff from Chapters or Sears, it will be a very profitable organization.” ED