Thanks for having me here.
My name is Gary Kirk, and I'm the owner of A Good Read bookstore in Toronto. Twenty years ago, as a hobby, I started selling rare books online. Nine years ago, that hobby had grown to the point where I was able to open a bricks-and-mortar store, and I now have four employees.
I like to think that's what the Canadian government wants to see happen with e-commerce. The sad reality is that Canada Post has been more of an obstacle than a tool in the growth of this business, most of which has been done by having my books taken across the border and mailed using the U.S. Postal Service.
E-commerce is not going away. In 2012, it represented about 5% of total retail. In 2015, it was up to a little over 9% of total retail. In 2019, it is predicted to exceed 20% of total retail, and our postal system will determine what that looks like.
I have with me a chart from a Global News report in 2014. I apologize, but my printer died and I didn't get to print enough copies for all of you. The dark red bars shown here represent foreign-owned or foreign-based sellers online and their percentage of total e-commerce. Normally, when you do the top 10, you would stop there, but here they had to go to the top 14, because otherwise there would be no Canadian companies. There are a number of reasons for that. I'll try to get to them as quickly as I can.
One is the Canada Post pricing model for packages. The second is the strategic advantage that Canada Post concedes to foreign sellers. Number five is the market distortions caused by the extremely large discounts that Canada Post gives to certain large sellers.
The first is the pricing model. If I want to mail a hardcover book anywhere in the United States, I can do it for under $3.50 U.S. In Canada, if I want to mail that same book across the street, it would cost me $12.90. That is before the discounts given to sellers, but those discounts amount to 20%.
Aside from the expense, the bigger problem is that each package will have a mailing rate that is a function of the dimensions, the weight, and—this is the best part—the volume of traffic at the originating postal code and the volume of traffic at the destination postal code. The range in prices for a package of the same size is over 400%, so a book that I can mail across the street for ten bucks would cost me $35 to mail to Canmore, Alberta. It would cost me more to mail a book from Toronto to Fergus, Ontario, than it does to Montreal, because of the volume.
That's not how e-commerce works. When you sell something online, you have to pick one shipping rate or the website you're using provides you with one. You have absolutely no way of predicting what it's going to cost you to send something somewhere, because you have no way of knowing where your customer is going to be. You can hope that the majority will be in large urban centres, but the reality is that a lot of people in smaller and more isolated communities rely on e-commerce to get things they can't find locally.
What makes this particularly galling is that if I'm mailing a book from the U.S. into Canada, I pay one rate that's based on weight, so it would be cheaper for someone to mail a book from Hawaii to Canmore, Alberta, than it would be for me to mail a book to Canmore, Alberta, by a factor of 50%. To me, that's just crazy, and I don't understand why we do this.
If I want to mail a CD in Canada, depending on whether or not the employee at the post office bends it to make sure there's only paper inside, I might mail it as a small letter for about two bucks. If he or she decides to bend it and says that I can't have anything stiff in there, it will be $8. That same CD mailed from China to anywhere in Canada costs $4, so we're creating a situation where we're putting our own domestic sellers at an enormous disadvantage. If I wanted to get into e-commerce in Alberta, I wouldn't be able to do it. It would cost me 40% more to mail a book within my own postal code than it would for a seller in Toronto.
The last point is that it isn't this way for everyone, and I know this because a couple of times a month Amazon.ca asks me: “Paying too much for shipping? Send your inventory to our warehouse and we'll do the fulfillment for you.” Now, every package I've ever received from Amazon.ca has come through Canada Post. When I look at what the FDA fees are, for a package that would cost me $9 to ship, Amazon.ca charges $3.75 in postage for the first 500 grams—37¢ a gram. Given that they've built in a profit margin there, that suggests to me discounts in the order of 80% or more.
People make their decisions about e-commerce based on the combined price of the item and shipping. We have created a monopoly: Amazon.com representing 23.6% of Canadian e-commerce and Amazon.ca 8.5%.