Canada Post should give small / medium businesses the same low parcel rates that CPC gives big businesses!

By Frank Cianciullo and Martin Sarch

?One would expect that any country's Government-owned national postal services would collaborate closely with their Government to create jobs, increase? GDP, boost the economy and improve the lives of all citizens!

Small businesses are a key and significant part of any economy!

Small businesses need to have the same low parcel rates that Canada Post (CPC) gives to big businesses. Small businesses are offered any one of dozens of “discount levels” with small incremental changes only as that small business offers CPC more parcels to CPC. ?

This practice is a huge inhibitor to business and why parcel consolidator companies, like Toronto’s Stallion Express, have emerged and grown to help level the playing field.?They literally take the parcels from those small businesses (at a lower rate than CPC was asking for) ?and give them to CPC. In the long run, CPC is delivering the same parcels, but for less money.

?Does this make any business sense to you?

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What is the business problem?

?Canada’s Post Office is in severe financial trouble. In 2023, Canada Post (CPC) recorded a loss, before tax, of $748 million. In 2022, it recorded a loss, before tax, of $548 million. It has lost nearly $3 billion in 6 years. The Corporation projects that, without additional borrowing and refinancing, it will fall below its required operating and reserve cash requirements by early 2025.

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SMEs are very important to our economy.

?According to Statistics Canada “Key Small Business Statistics 2023” report ,

·????? 1.2 Million Small and Medium Enterprises (SMEs) in Canada (Dec. 2022): 1.19 million (97.8%) were small businesses, 23,395?(1.9%) were medium-sized businesses, and 3,128?(0.3%) were large businesses.

·????? 7.8 Million People Employed by SMEs: Small businesses employed 5.7 million individuals in Canada, or 46.8% of the total private labour force, medium-sized businesses employed 2.1 million individuals (17.0% of the private labour force) and large businesses employed 4.4 million individuals (36.0% of the private labour force).

·????? SMEs Contribute to Half of the GDP: Over the 2016?2020 period, SME contribution to gross domestic product (GDP) was 50.3%, on average, in the goods-producing sector, compared with 47.0% in the services-producing sector. In 2020, SMEs accounted for nearly half of the GDP generated by the private sector. Small businesses contributed 35.1% to the?GDP generated by the private sector, while medium-sized businesses contributed 13.4%.

·????? SMEs Responsible for 41% of Exports: In 2022, 53,327?Canadian establishments exported goods worth $717.6 billion.?SMEs contributed 40.8% of the total value of exported goods (72% of exports to the UK).

Even though SMEs employ 64% of citizens and generates 50% of Canada’s GDP; Canada Post has alienated many of the SMEs – SMEs that the Government has repeatedly said that SMEs form the backbone of the Canadian economy and the cornerstones of our communities.

The Canada Post strategy continues to favour large businesses.

Canada Post's “sales” strategy involves the commercial sales team increasing sales and/or mail volume. In recent years, large-volume mailers (LVMs) leveraged their significant parcel volumes to tempt and negotiate with CPC for much lower rates (discounts) and special treatment.

?No matter the business size, all parcels are handled one at a time and generally processed individually. Whether large or small, the work involved remains the same. Discounts should only be offered for self-delivery of large volumes to plants and for pre-sorting.

?The preferential treatment given to large mailers also led to a disproportionate allocation of resources. To accommodate the substantial volume of these mailers, their shipments were prioritized, dedicating significant labour and logistical resources to ensure timely delivery spelled out in contracts. This meant fewer resources were?available for regular mail services, leading to delays and reduced service quality for ordinary customers.

?Today, Canada Post continues to offer much lower parcel-shipping rates to large companies and e-retailers and charge small and medium enterprises (SMEs) and consumers much higher rates. Inevitably this has caused SMEs to look elsewhere for service to compete effectively on the playing field.

?The CPC's aim was to cover its fixed costs, fill the processing pipeline, gain economies of scale, even if it made minimal,?if any, money per parcel. The margin would be smaller but they could make money on volume. Once the pipeline was full, the higher margin would be made on the SME and consumer parcels.

?The discounting supported the “sales strategy. It would bring in large parcel volumes and increase the annual sales number, ?significant for annual bonuses. However, management did not look at the long-term effects of putting most of your eggs in a few “big” baskets.

?Amazon is a great example of what happens in this scenario – it drives all? prices down. Once “big” mailers you have the necessary volume, they can set up their own network or find even cheaper alternatives, leaving only the crumbs (and the people you alienated) behind.

That questionable strategy always backfires. One could argue that it has:

1.???? Lowered the CPC profit margin and damaged the brand (the business strategy is seen as lazy marketing instead of selling based on ?the intelligent articulation of the CPC parcel-delivery service’s value proposition);

2.???? Devalued the customers’ perception the overall CPC service;

3.???? Alienated small businesses and consumers;

4.???? Created many parcel-delivery competitors willing to fill the disaffection created by CPC and deliver for SMEs at less cost, as well as provide the customer experience and parcel-delivery-status notifications that people want (disruptive innovation);

5.???? Created a new industry of parcel consolidators who could play with the CPC “sales” system and siphon off CPC revenue;

6.???? Led to Shippers cherry picking the services and shifting to other companies;

7.???? CPC collecting less revenue in the long-run; and

8.???? Led to CPC becoming more irrelevant in what is now a bigger playing field.

?Today, Canada Post continues to offer much lower parcel-shipping rates to large companies and e-retailers, while small and medium enterprises (SMEs) and consumers are charged significantly higher rates.

?Does this make any business sense to you?

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Canada Post does market to small businesses and offers trinkets.

Canada Post’s Annual Small Business Tales of Triumph Contest gives away $20,000 in prizes to Canadian small businesses that meet the needs of today or find innovative ways to support communities. In total, 15 small businesses will be selected as finalists, 2 as prize winners and 3 as grand prize winners.?This is a popularity contest!

?For more details on key dates, categories and the application process, readers can visit the?Tale of Triumphs application page .

?In addition, CPC has introduced some Free Shipping on October Tuesdays. This will allow small businesses to ship one free package using either an Expedited Parcel (up to 5 kg) or a Tracked Packet—USA (up to 2 kg) using Canada Post’s promo code of the day. Small businesses interested in taking advantage of the Free Shipping Tuesdays promotion must create a free Canada Post business profile, which they can do?here .

?These trinkets are not enough. Canada Post should give small / medium businesses the same low parcel rates that CPC gives to big businesses!

The postal principle of “uniform pricing for all” no longer exists here.

?Large companies / e-retailers have benefitted from very low parcel shipping rates. ?SMEs, trying to grow their own sales online, have had to pay the much higher small-business rate for the same if not worse service.

?This CPC strategy effectively changed the competitive-business, playing field. This preferential business practice, benefiting some at the exclusion of others, may very be seen by some as unfair price discrimination, detrimental to SMEs.

?Such pricing differences may also violate principles of “uniform pricing” asked for in Canada’s Postal Act and the Universal Postal Union’s principle of Universal Service Offerings.

One small business in Toronto has been asking CPC for better pricing for years and has only been allowed periodic, small discounts. That SME left Canada Post and now ships through Stallion Express, a shipping consolidator.

?Stallion Express offers this SME a shipping contract at 40 - 50% lower than what CPC was charging. Then, Stallion turns around and gives the same SME’s parcels to CPC, which is only too happy to deliver that small business’s parcels at the “big” business rate and receive only half of original rate.

Think this out again:

1.???? CPC wants $40 to deliver an SME’s parcel.

2.???? The SME goes to a company like Stallion Express, which gives the SME a shipping system that allows the SME to choose, print a label and ship via any one of a number of shippers.

3.???? The SME sees that, on the Stallion Express shipping system, the Canada Post price for the very same parcel is now 40-50% less, lower than any other shipper on the system.

4.???? The SME is thrilled but still feels that Canada Post was exercising unfair price discrimination that affected the SME’s ability to compete fairly and that this is prejudicial and detrimental.

5.???? The SME prints off the Canada Post parcel label, sticks it to the parcel, drives the parcel to the Stallion Express location and drops it off into the Canada Post bin for outgoing parcels ….with the parcels of hundreds of other small business parcels.

6.???? Stallion Express gets the CPC bin to Canada Post.

7.???? Canada Post delivers the SME parcel for 40-50% less than the individual SME would have paid.

8.???? In the end: the SME is upset with Canada Post and happy with Stallion Express.

9.???? Stallion Express makes money?just to transfer the parcel to CPC.

10.? CPC cut its own revenue by 40-50% per parcel and alienated this SME.

?Does this make any business sense to you?

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Canada Post faces a grim future without a bold vision and the courage to take action.

?Without a sense of purpose and a bold vision, that every member of the senior management team fully believes in and that each member, can clearly and simply articulate to everyone; Canada Post faces a grim future.

?A sales strategy is not a vision!

?A vision is “a sense of purpose” that will motivate all employees to go the extra mile to support the CPC’s success. Without defining a higher sense of purpose that is more than just “increasing sales,” Canada Post's future is bleak.

The parcel delivery market is expanding rapidly, yet the CPC share dwindle. There is limited time to reflect, reimagine, and reset.

Canada Post (CPC) has alienated small and medium-sized businesses?and everyday consumers by charging excessive rates while offering highly discounted shipping to large businesses.

As a key part of a turn-around strategy, Canada Post should give small / medium businesses the same low parcel rates that CPC gives to big businesses. The current policy has given large businesses an unfair advantage and seriously hurts the small businesses’ ability to compete – for years. Canada Post can get back the small businesses.

The only 3 questions left:

1.???? Will CPC take the bold steps necessary to move forward?

2.???? Will CPC define a higher purpose, such as helping SMEs succeed in exporting more, creating jobs, growing the economy and improving the lives of all citizens?

3.???? Will CPC implement uniform pricing for all businesses, regardless of annual parcel volume, to allow SMEs to compete on equal footing with larger companies?

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Frank Cianciullo and Martin Sarch are postal specialists. Each of them has some 30 years of experience, working at Canada Post. They have spent the last 10 years working with the UPU, CARICOM, the Caribbean Postal Union and the postmasters of Caribbean Posts to “Dream Big Dreams” by reflecting, reimagining and resetting their post offices to address the current and real needs of their citizens.

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