Government Operations Committee on Oct. 31st, 2016

[David Druker]

Thank you.

We're a retail network offering product, so there is really no cost to Canada Post for making their services available through our locations. We're offering to put more parcels into the stream at a fair cost, in the same way that Staples or anyone else does.

Now, that's different from my colleague, from the carrier. We are not a carrier. We do a transaction at a counter and hand it off to somebody's truck. For us, whether I'm handing it off to a Canada Post truck, a Loomis truck, a DHL truck, or a UPS truck, I am offering Canadian small business an access point to these services. Really, that's why, in our opinion, it's an upside for Canada Post, because we are offering to put variable cost volume into their network with no fixed costs associated to it.

We're not asking them to pay for our locations. We already have franchisees with established retail counters that are selling these products. Again, this is just another offering.

[Ramez Ayoub, Liberal, Thérèse-De Blainville, QC]

I have about 30 seconds left.

[The Chair, Conservative, Tom Lukiwski]

You have 30 seconds for both a question and an answer.

[Ramez Ayoub, Liberal, Thérèse-De Blainville, QC]

Regarding your employees' remuneration, as compared to Canada Post employees...

[David Druker]

It's a franchise. We make a gross commission on transactions. Just like anyone else, if our part of the transaction retails at $10, and if there is a 30%, 40% or 50% reduction on published rates, normally, that is a discount. That is where the profit lies for the franchisee. As a franchisor, we receive our part afterwards.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Colleagues, as I mentioned, this is only an hour-long session, so we'll be using the truncated version, which means that we have two five-minute interventions left. I have Mr. Clarke and Mr. Ayoub on my list.

I'm not sure if you want to change that on the government side, but we'll start with Monsieur Clarke.

You have five minutes.

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

I thank the witnesses for being here with us.

Mr. Druker, you said that you would like to conclude an agreement with Canada Post. The UPS Store is present in the United States, it goes without saying. What working relationship do you have with the United States Postal Service, the USPS? Is it different from the one you have with Canada Post?

[David Druker]

I own the licence for Canada for the franchise network. I have no association with the USPS. I'm not privy to the specific data that goes on in that network.

The only thing I know from interacting with my colleagues in the United States, including my counterpart who is the president in the U.S., is that it has been beneficial to both parties, and the program continues to expand. My general assumption is that if the program continues to expand, it is therefore beneficial for both parties and ultimately beneficial for the consumers involved.

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

Okay, I understand, but could you give me some details on the formula that is used?

[David Druker]

As for the other suppliers, their services are offered at our counters. Being able to have a choice has become a selling point.

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

Fine.

Ms. Falcone, can you tell me whether the expansion of Canada Post's activities in the parcel post sector has had repercussions on your enterprise, and if so, could you describe them?

[Cristina Falcone]

Within the UPS Store locations, or what specifically...?

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

Well, throughout all your activities—

[Cristina Falcone]

Sorry?

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

I am talking about all your activities related to parcel delivery.

[Cristina Falcone]

In general?

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

Yes.

[Cristina Falcone]

From our perspective, Canada Post has indicated that it is seeking expansion into the parcel delivery market. It's taking a look at new revenue streams. If that is completed in a fair way in terms of cost allocation and competitiveness, we welcome new competitors to the market. We deal with other competitors as well, but this has to be completed in a fair and equitable way in terms of the way Canada Post allocates its cost.

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

Over the past five years, the quantity of parcels delivered by Canada Post has increased.

What repercussions have there been on your business, whose main activity is parcel delivery?

[Cristina Falcone]

Yes, I would say that this is one of the reasons that we do advocate for a third party regulator. It's to ensure there's oversight in terms of the price structures for Canada Post services and to ensure they're done in a competitive way. That reinforces the direct recommendation in the task force report: to assure competitors that Canada Post is not cross-subsidizing its competitive business lines.

As I mentioned, Canadians want choice. We welcome competition, whether it be from FedEx or from Canada Post entering into this field, but we do feel that a third party regulator would help to provide that oversight and assurance that it's being done in a fair way.

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

Okay.

You also spoke of the best practices found in other countries, including Australia. Can you give us other examples?

[Cristina Falcone]

There are a couple of the examples that I've provided in terms of the regulator, the Ofcom in the U.K., the PRC in the U.S.

In terms of the annual report that is put out from the crown corporations, there's a review from these these third party regulators to ensure that the cost allocation has been done correctly, that the costing is appropriate. More importantly, it provides a channel or mechanism for stakeholders who could be impacted to bring potential issues forward, or questions forward.

Just as this task force offered the opportunity on Canada Post most recently, this would be an ongoing channel that would allow stakeholders to receive the information they would be inquiring about, and it would operate at arm's length.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Our final intervention will be Mr. Whalen, for five minutes, please.

[Nick Whalen, Liberal, St. John's East, NL]

Ms. Falcone, you mentioned the example of delivering to the ground floor of an apartment building. It helped clarify one of my thoughts around the service to a community mailbox or super mailbox versus directly to my door. I thought, well, I own the mailbox at my door, but the community mailbox is owned by Canada Post.

In your experience, and maybe in the experience of the United States—I'm not sure if it's possible there—what sort of fees would be paid by private delivery companies and couriers to have access to Canada Post's community mailbox network? In suburban areas where Canada Post is not delivering to the door, would the thought then be that UPS would cease to deliver to the door, or would UPS continue to prefer delivering straight to the door of a suburban customer rather than accessing a community mailbox?

[Cristina Falcone]

On the first question, we don't have that relationship yet with the USPS in terms of access to mailboxes. These discussions—considering what should happen—are ongoing right now, so I can't give you revenue or a price on that.

On what UPS is doing in the suburban areas, again, we're facing the same challenges. We've implemented a number of different types of solutions. We work with some companies that prefer to do their first delivery to what we call an access point, which could be a UPS Store location or a small business in the area. The consumer would go and pick it up. With other companies, we make a first delivery attempt at the door, and then the second delivery attempt would go to one of these sites.

There are different models right now based on working with a shipper and what they see as being feasible for what their consumers want. One thing I can say is that it has changed from what it was 20 years ago. We're looking at different solutions, both to meet the consumer needs, but also to create a more sustainable footprint in reducing the number of times that truck drives down the road to make that attempt if we know the consumer is going to be home. A third example is use of technology. We've introduced a product called My Choice, and the number of sign-ups has really grown over the past number of years in Canada.

If a Canadian consumer orders something online, they will get a message in their inbox saying that the shipment is on its way. If they're not going to be home, they can redirect it to an alternate delivery location. We've found that's helped to save us the time of making that first attempt, because sometimes the consumer doesn't want it.

It varies right now, depending on the type of consumer. We try to work with them to find out what they want first, and then meet their needs without making an unnecessary trip if we don't have to.