Evidence of meeting #53 for Government Operations and Estimates in the 42nd Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was post.
A video is available from Parliament.
Conservative
The Chair Conservative Tom Lukiwski
Colleagues, we'll start. It's 10 a.m. We're missing a couple of our committee members, but I'm sure they will be here in just a few moments.
Ms. Stairs, welcome to the committee. I think you know how things work around here, but very briefly, we'll ask you for an opening statement of five minutes or less, followed by a round of questions from all of our committee members.
Thank you for being here. You're on for five minutes.
Andrea Stairs Managing Director, eBay Canada Limited
Good morning, and thank you for the opportunity to present today. On behalf of eBay Canada, I appreciate the committee's focus on ways to improve Canada Post, something in which we also have a keen interest. Indeed, eBay participated in phase one of the task force hearings, and I've also written and spoken on this topic in various forums.
We care about Canada Post for the same reason that this committee and all Canadians should; there are more than one million small and medium-sized businesses, or SMBs, in Canada that rely on Canada Post as an essential part of doing business. It's not overstating the case to say that Canada Post provides critical enabling infrastructure to the Canadian economy.
Let me begin with some background on eBay. Launched more than 20 years ago, eBay has become one of the world's largest online marketplaces, with approximately one billion listings and 165 million active buyers globally. Here in Canada, eBay is a top e-commerce destination, with more than eight million unique visitors each month who trade more than $1 billion each year.
In addition to changing how consumers buy, e-commerce has changed the way we sell. eBay has created a platform where anyone can become an entrepreneur, starting with a single listing, and e-commerce is levelling the playing field for rural versus urban retailers. You no longer need to live in a city to access enough buyers to make your business viable.
Canadian entrepreneurs have been able to make impressive gains through e-commerce, and we should be very clear that Canada Post is a critical partner in driving that success. At present, there's much talk about the innovation agenda, but the reality is that SMB innovation is facilitated by a 200-year-old corporation.
Canada Post allows small and medium-sized Canadian businesses to participate in the global economy by offering relatively cost-effective access to the world in what could be described as a 21st-century trading route. In terms of significance, this is meaningful trade. Canadian commercial sellers on eBay export at a rate of 99.9%, reaching 20 markets annually, much stronger results than those of traditional SMBs. As a result of their ability to effectively serve foreign markets, these companies find that, on average, more than half of their sales come from international customers.
Canada Post has more than a 90% share of eBay Canada transactions. There can be no doubt that the micro-multinationals I've just described depend on Canada Post to drive their businesses both domestically and internationally.
Canada Post is an enabler of small and medium-sized businesses, but it also creates significant challenges for them. For example, this summer's uncertainty around a possible disruption created major business obstacles for Canadian SMBs. While a work stoppage didn't occur, Canadian businesses were forced to prepare for the possibility of a strike or lockout. They had to invest time and effort in adopting alternative, and in many cases, more expensive shipping arrangements. Given what we heard from our sellers, we were not surprised when, on July 8, Canada Post announced that its parcel volume had declined by more than 80%.
Unlike their larger competitors, smaller businesses were not able to leverage their scale to negotiate favourable rates with private couriers, and as a result, many SMBs were forced to create patchwork solutions to ensure they could meet buyer expectations. As Winnipeg-based small business owner Maureen Lyons described to this committee, she had to “offer local pickup for regional sales, courier service for domestic orders, and day trips south to utilize USPS for international sales.” Maureen was one of thousands of sellers dealing with this uncertainty.
As the risk of a work stoppage extended into August, eBay drafted a letter to the Prime Minister asking for a return to consistent postal services. Within 24 hours, more than 2,000 concerned eBay sellers had signed the letter. Everyone was gratified to see that a negotiated settlement was reached shortly thereafter, but given that it's a two-year agreement, SMBs worry that they'll be facing a return to uncertainty in a matter of months.
Going forward, we believe that Canada Post should focus on accelerating the growth in its parcel division by expanding its e-commerce services, including affordable tracking and aggressive rate tiering. Further, Canada Post should invest in improved marketing of the e-commerce services it has already created, such as flex delivery, to drive wider awareness and adoption.
Modernization of customs rules would also drive volume for Canada Post. As the task force noted, Canada's de minimis threshold, the value of goods that can be shipped into Canada before duty and taxes are assessed, is out of line with international standards. Increasing it could accelerate parcel volume growth. eBay Canada concurs and asks that the committee recommend increasing Canada's de minimis threshold.
As a platform for small and medium-sized Canadian businesses, eBay appreciates the time to appear before you today, and I look forward to your questions.
Conservative
The Chair Conservative Tom Lukiwski
Thank you very much.
We'll get into questions, right now.
Monsieur Drouin, for seven minutes, please.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
Thank you, Mr. Chair.
It's great to be back at the Canada Post study. I've missed you guys for a while.
I want to thank Ms. Stairs for being here. I appreciate your testimony. You have mentioned how important Canada Post is to some of the SMEs operating on an eBay platform. You said 90% of the transactions on eBay in Canada are delivered by Canada Post. Is that correct?
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
I've read your op-ed in The Walrus. You have talked about slower services, and you have also mentioned that in your testimony.
What do you mean by slower services as a potential revenue stream for Canada Post?
Managing Director, eBay Canada Limited
What we hear from our small sellers and our large e-commerce retailers, as well, is that they would love to be able to offer free shipping to their buyers. It's table stakes in Canada and around the world in e-commerce to offer tracking when you deliver something. The current service offering from Canada Post really only has expensive, fast-tracking services. What would be great would be to complement those with slower services that also offer tracking.
What we find when we do studies is that there are a certain number of transactions or occasions when people engage in e-commerce. They are looking to have the goods very quickly—the same day, the next day, within two or three days—but there are also a number of occasions when consumers are buying something on e-commerce when they want their item next week or two weeks from now. If I'm buying a Halloween costume in September, I don't need it there the next day. In that case, I might as a buyer, trade off time in order to have free shipping from my seller.
The challenge right now is that Canadian sellers find it really difficult to offer free shipping with tracking because of the service offering from Canada Post. Complementing the fast, expensive services with slower, less-expensive services that also have tracking would give a better spectrum of services that buyers and sellers could use in e-commerce.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
Have you had a conversation with Canada Post with regard to tracking? Do you know if they have the infrastructure in place or the software in place to do that?
Managing Director, eBay Canada Limited
My understanding is—and I'm going to preface my remarks by saying that I'm not an expert on Canada Post and Canada Post infrastructure—that they have been moving more of their volume to planes and faster modes of transport, and off trucks. There would have to be some rebalancing there in having some volume go by ground as opposed to air.
The tracking infrastructure exists. I think there's another issue around the tracking of packet services that go through the letter mail channel. I think the infrastructure is a real challenge.
When we talk to our sellers, there's another key pain point for them. When they compete against American sellers—in most cases you have a Canadian seller competing with an American seller for an American buyer, and that's our most traditional use case in Canada—if the Canadian seller is shipping something very small, then it qualifies for packet, but they are in a catch-22. Either they can send it for not very much money in a packet, but give up tracking, or they can spend significantly more, often the same amount of money as the item price itself, to provide tracking to their customer. That's a really difficult position for a seller to be in.
In an e-commerce environment, particularly in a marketplace where you're a small business, you don't have a brand reputation, so buyers certainly do want to see tracking. On a platform like eBay, feedback is incredibly important. On one hand, in not having tracking, you risk feedback issues, such as, “Where's my package? It hasn't arrived by the time I expected”. On the other hand, you want to offer value services, so I think there is a real infrastructure issue around tracking on lighter, smaller packet-qualifying items. But on the slower service, that should be something that is relatively doable.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
I'm reading your article. You mentioned that 99.9% of transactions on eBay are exported in Canada.
Managing Director, eBay Canada Limited
When we look at our commercial sellers, those are sellers who do more than $10,000 a year on the platform, and eBay may be all of their business or it may be a small fraction of their business. When we look at that cohort of sellers, we find that almost all, 99.9% of them, export. When they export, we find they do more than 50% on average of their volume outside of Canada.
This is a great success story in the Canadian economy, where you have small businesses that can reach demand beyond their local market. They can tap into the benefits of exports, and they can be insulated from local market shocks.
In Toronto, for example, we were hearing about small retailers who lost their business as a result of road construction. If you have the ability to tap into demand beyond your local area, then you can weather those storms and diversify your sales base. Canada Post is key to that, with a 90% share of the volume traded on eBay. They are very much implicated in what we call these micro-multinationals. These are very small businesses who are trading internationally.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
How would you see Canada Post increasing its parcel business while at the same time increasing your export opportunities?
Managing Director, eBay Canada Limited
When we had a round table with Minister Chagger last year, and we invited a number of small businesses to come to talk to her, they raised only two issues. These are entrepreneurs. They're not looking for handouts, but they are looking for the removal of obstacles.
Postal rates at Canada Post was a key area of concern. The other area of concern was border frictions, specifically Canada's de minimis threshold, which is that threshold above which duties and taxes are assessed. It currently stands at $20, a rate set in the early 1980s. For that reason alone, it should be reviewed, but the task force noted that an increase in the de minimis threshold would likely increase the parcel volume to Canada Post.
We see millions of transactions every year, purchases by Canadians that are delivered south of the border or to locations outside of Canada. In some cases, right along the border there are businesses that exist only for this, to receive parcels essentially for Canadians. They then drive them across the border. That's lost revenue to Canada Post.
Were the de minimis threshold higher, the vast majority of those parcels would be delivered within Canada, and Canada Post would get some of that revenue.
Conservative
Conservative
Kelly McCauley Conservative Edmonton West, AB
Thanks for joining us today. We appreciate that.
You made a comment that you do transactions of about $1 billion in Canada. Is that correct?
Conservative
Conservative
Kelly McCauley Conservative Edmonton West, AB
You mentioned the urban-rural divide. Do you have stats on how much of that $1 billion is through urban and how much is through rural businesses?
Managing Director, eBay Canada Limited
We see the businesses across the country, and we've done a heat map where we looked at commercial activity per capita across the country. We found that the hotbed of e-commerce is Perth, Ontario, perhaps not known to be the e-commerce—
Managing Director, eBay Canada Limited
Yes, exactly.
We also saw significant hot spots in northern B.C., the southern part of the Northwest Territories, and down the east coast. What we see is that on a per capita basis, these little businesses that are in small towns, by relying primarily on Canada Post, are able to access demand across the country and around the world.
Last year—
Conservative
Kelly McCauley Conservative Edmonton West, AB
Do you have any stats that break it out between those hot spots and the big cities?
Managing Director, eBay Canada Limited
I don't have the stats, but I'm happy to share the heat map with you. It's on a population basis, so you can get a sense of where the....
Conservative