The future of postal services (cont’d)

Today’s Front Burner was absolutely on point. It’s been a while since I heard such a well-spoken and insightful guest on this show, and the topic of postal services aligns with my thoughts too.

The news mentioned that Canada Post workers have been ordered back to work by the federal government, which is not surprising at all given the strike has lasted over a month and holiday season is around the corner. But what really caught my attention was the guest Ian Lee’s knowledge about Canada Post and postal industry’s struggles. For one, the decline of letter services — not surprising in this digital age. For two, Canada Post’s shrinking parcel services, particularly in urban areas.

Lee shared some interesting statistics about costs in the parcel industry. For Canada Post, the all-in-one cost (the driver plus truck plus fuel) per hour is estimated to be ****$65****. Compare that to their major competitors, where the average cost per worker comes to ****$45 per hour****. But even this number does not get the price advantage because there are also gig workers, who uses their own cars and operate at an astonishing $25 per hour rate. Obviously, this cost difference is almost impossible for Canada Post and traditional parcel companies to compete with. On the other hand, gig workers do not gain the full advantage: they have no holiday pay, no pensions, no benefits. Nevertheless, their low-cost structure is reshaping the market, leaving traditional players like Canada Post struggling to keep up.

One idea that brought to the table earlier is postal banking, and it has already been implemented in some countries. As someone who works in the banking industry, I have to agree with every word of Lee’s skepticism. The Big Five banks are accessible enough to cover rural areas, leaving no room for Canada Post to squeeze in, not to mention the cost of hiring business-trained professionals. Banking also requires fast and expensive data flow system (this is the first time I’ve heard that) and that is a huge lump-sum investment that is questionable to see a return.

However, Lee does see that the future of postal services relies on specialized delivery — that is, shift its focus to providing essential services, particularly for elderly. Any delivery involving physical items could count, such as grocery and food delivery, medicine drop-off, etc. Canada Post is losing its game in big cities, but if they could downsize and utilize existing infrastructure, there’s still hope.

Though at the end, I personally would still question the gig worker model. My gut feeling is that it’s not a sustainable business model, but it needs to be proven. We shall see.