Government Operations Committee on Oct. 31st, 2016

[Cristina Falcone]

There are a couple of opportunities.

First of all, right now we are working with some regional carriers, where they would provide the final hand-off to Canada Post. We would like to have some dialogue, where we would work directly with Canada Post on handling some of that final mile, even beyond the really remote areas, where it would just be preferable for one delivery truck to go to the centre versus our sending up another vehicle.

Second, there's an infrastructure that Canada Post operates. Primarily it was established to support the letter mail service. There are the retail outlets, the community mailboxes. Yet increasingly, consumers are ordering parcels, and increasingly, couriers, including UPS...our final delivery is made to residential areas. This infrastructure could also support acceptance of courier packages, parcel packages, as it is doing today for Canada Post. Canada Post has an opportunity to open up to private couriers to access that infrastructure for final-mile delivery, making it more accessible for consumers to retrieve their parcels regardless of who is carrying the shipment.

I'll give you an example. Someone ordering a parcel online may order three different shipments: one being delivered by UPS, another one being delivered by Canada Post, and another, for example, by FedEx. That consumer will probably have three different experiences to pick up that parcel. If they're in an apartment, they can go down to their locker box in the lobby and pick up their Canada Post parcel, or they'll see a sticky note on the door of their apartment building asking them to drive to pick it up at a UPS facility, for example. FedEx may have dropped it off at another facility. There's some synergy that could be experienced if all the parcels were to be delivered into a more modern, innovative type of pick-up centre for consumers.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

For Canada Post to create this, you are really looking for a clearing house: everybody dumps it here, and then somebody takes the ownership to deliver it or somebody comes to pick it up. Is that the concept you are thinking about?

[Cristina Falcone]

It could be a combined look at these locker boxes, with Canada Post working with industry to create a more innovative type of locker box that consumers could access through a digital PIN code or something to that effect. These are the discussions and dialogues that are happening elsewhere in the world. It would be a great advantage for consumers, and it would help Canada Post innovate in the parcel delivery network and share its costs with the industry.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Mr. McCauley, you have seven minutes, please.

[Kelly McCauley, Conservative, Edmonton West, AB]

Welcome.

Mr. Druker, I can't help but notice that a lot of what you offer at the UPS Store is stuff that's already available at the Canada Post franchises.

[David Druker]

Product offerings or service offerings? We have a broader service offering. To my knowledge, at their locations, Canada Post is the only offer that can be done. Staples, for example, offers Purolator and Canada Post. We offer a multitude of different carriers. We are not really talking about exclusivity for anyone. We are really looking at giving Canadians the broadest selection possible to serve their needs. I think our services are a little larger. For example, a small business can send or receive faxes from one of our stores. There are different options available.

[Kelly McCauley, Conservative, Edmonton West, AB]

Maybe their reluctance to enter into an agreement with you might have to do with their agreements with their franchisees.

We've heard a bunch of witnesses over the last couple of weeks going on about how to increase revenue with Canada Post. Box rental and printing have come up as ideas for Canada Post. How would you feel about a government-subsidized business encroaching on your area?

[David Druker]

I don't think it's an encroachment. We have category competition all over the place. We don't really have concept competition, in terms of having the services available in one space and the broad spectrum of services. I will tell you that, for example, printing takes several years of study and knowledge, to be able to produce placemats like the ones that are placed in front of you, and to get all that stuff done. It's not simple. It's certainly an open market. As a taxpayer, I would encourage Canada Post to pursue whatever possible to do the best possible.

From a concept standpoint, I am open to competition across all carriers. I think it's best for everyone. It's best for business. As an entrepreneur, I believe in equal access.

[Kelly McCauley, Conservative, Edmonton West, AB]

Great.

Ms. Falcone, you talked about the last mile, or the interliner, with Canada Post. Could you expand on that a bit more? Canada Post does the interliner or the last mile for you, FedEx, and quite a few others. Where do you see more opportunity for Canada Post with this revenue-wise?

[Cristina Falcone]

In a couple of areas, we would prefer to engage directly with Canada Post, versus having it handed off by regional carriers. There are certain opportunities we have identified that we submitted to the task force when we testified in June. There are specific postal codes in Canada where we think greater collaboration could be done between the larger couriers and Canada Post.

To my earlier point, look at that final-mile infrastructure that Canada Post has established, initially to support their letter mail service, which would benefit access by the courier industry. The entire industry is challenged by this final mile, including e-commerce deliveries to consumers. Rather than repeating the model and establishing new infrastructure, there is an opportunity for Canada Post to open up access to the industry and deliver greater benefit to Canadians, and also take kilometres off the road and benefit consumers. That would be the community mailboxes. That would include assessment of retail sites.

[Kelly McCauley, Conservative, Edmonton West, AB]

They already offer it. You want to cut out the middle person. Am I hearing that right? Canada Post already offers the last mile. Did I hear right that you want to cut out the regional courier?

[Cristina Falcone]

We don't necessarily want to cut them out; we just want to have greater interaction and collaboration with them on opportunities. Up until now, it's really just been dropping it into their system on a published rate basis. Certainly, in many cases we would still go through those regional carriers. We just want the opportunity to have that door open for further dialogue and for where it might make sense for the larger couriers to hand off directly.

[Kelly McCauley, Conservative, Edmonton West, AB]

Okay.

[Cristina Falcone]

I think we're moving positively in that direction. I think Canada Post is very open to that. What we see as an opportunity that still lags is this innovation on the final-mile infrastructure, including the community mailboxes and other infrastructure that was built to support letter mail, which is a declining product. As e-commerce grows, everyone's looking at the same challenge, which opens up a whole kettle of fish.

[Kelly McCauley, Conservative, Edmonton West, AB]

I understand your comment about having a mailbox with shared access to FedEx or UPS. Would UPS be open, then, to helping pay for some of the changes that might be required for Canada Post?

[Cristina Falcone]

We're starting to have some of these—

[Kelly McCauley, Conservative, Edmonton West, AB]

I don't want Canada Post and therefore our taxpayers to be on the hook for that.

[Cristina Falcone]

No. We would want to have discussions to brainstorm on what would work for Canadians. That discussion would go beyond where these locker boxes or mailboxes stand today. I think this is all open to discussion, as we're doing in other countries of the world where we are working hand in hand, testing concepts.

[Kelly McCauley, Conservative, Edmonton West, AB]

Yes. That's a fair comment.

You mentioned USPS and the final mile. One of the reports we saw was that USPS really gave away the farm on the last mile in their agreements with UPS, FedEx, etc. Canada Post needs to protect against that so that the big companies don't cherry-pick the good routes and leave poor Canada Post delivering to the marginal ones with very little activity. Do you have any feedback on that and on what's happened in the United States?

[Cristina Falcone]

I can't speak specifically—

[Kelly McCauley, Conservative, Edmonton West, AB]

You brought them up as examples, so—

[Cristina Falcone]

Well, I would say in that lane that it's the fastest growing product. I know that USPS works very closely with UPS. This has been a continued partnership over a number of years.

[Kelly McCauley, Conservative, Edmonton West, AB]

Right.

[Cristina Falcone]

My recommendation, like others, I would assume, would be that Canada Post needs to take a look at these opportunities in Canada to make sure that it's a win-win. That is always UPS's objective in any relationship with a business partner. The relationship would have to benefit Canadian consumers, who are going to be using the service; Canada Post, with the intention to keep it viable for the long term; and, of course, UPS, because there's a reason we're entering into this partnership, too. It would have to be looked at as a win-win.

I can't comment on what is happening financially. We've been continuing in this partnership for a number of years in the U.S.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Mr. Weir, you have seven minutes.