Mr. Chair, I would certainly like to wish the minister the best of greetings on a special day and thank her for being here tonight.
In December last year, Canada Post Corporation released a comprehensive five-point action plan entitled “Ready for the Future”. It was designed to realign how it delivers and prices postal services to meet Canadians' emerging and future needs while substantially reducing costs to the taxpayer.
This is a watershed moment for Canada's national postal service. Letter mail volumes have been declining since 2006, when Canada Post delivered 1.2 billion more letters than it did in 2013. That is a big number. The corporation estimates that for every 1% drop in mail volume, it loses $30 million in revenue. This is placing a huge strain on Canada Post's finances, as witnessed by losses of $129 million, before tax, in the postal segment alone in the third quarter of fiscal year 2013. It is quite clear that the services, as currently provided by Canada Post, are no longer sustainable.
Canada Post must now manage its business as a viable commercial enterprise that competes effectively in every product line. Even its traditional direct marketing business is facing digital rivals that use mobile and smart technologies, and the parcel business operates in a highly competitive environment.
The corporation is well aware that to build on recent successes, it must attract customers in an increasingly complex economic environment. The parcel business, unlike letter mail, is highly competitive, and parcel volumes have been rising worldwide. Postal services in many countries have been aggressively using their extensive sorting and delivery infrastructure to expand in this sector. Globalization has more parcels coming into Canada to be processed to the same high standards, and the highly competitive parcel delivery market means that service providers must modify operations in order to win and retain customers with the quality and reliability of their service. In the business of the customer parcel delivery market, that means providing fast, reliable, and convenient delivery, excellent tracking options, and reasonable prices.
The growth in the parcel industry has also intensified local and global competition. FedEx and UPS, for example, have increased their competitive positions in Canada. Customer patterns have also shifted from premium to less urgent products that cost less. The increased competitive landscape has put increased pressure on Canada Post to manage costs, improve product offerings, and provide a superior customer experience.
With approximately 40% of parcel deliveries to Canada originating internationally, Canada Post has negotiated bilateral agreements, notably with the United States and China, to increase its share of this inbound traffic. The corporation has also made extensive investments in new facilities, including a 700,000 square foot plant at Vancouver International Airport. It has increased real-time tracking through portable scanners for employees and has added to its capacity for motorized delivery to handle growing package volumes.
Canada Post also offered on-demand parcel pickup for small businesses in 2011 and 2012. It provided enhanced web services for online retailers, including seamless management of returns.
I wish to emphasize that the government is committed to ensuring transparency in how Canada Post provides quality postal service to all Canadians, rural and urban, individuals and businesses, in a secure and financially self-sustaining manner. That is why the government established the Canadian postal service charter in 2009, which set out its expectations regarding Canada Post service standards and related activities in providing postal services that meet the needs of Canadians.
An important aspect of the postal service charter is its commitment to universal service that ensures that Canadians in both urban and rural areas can send and receive letter mail and parcels within Canada and between Canada and elsewhere. As part of Canada Post's continued commitment to parcel delivery, parcel services to Canadians living in rural and northern communities not currently serviced by competing parcel delivery companies will have significantly wider access to, and the ability to return products from, Canada and around the world.This is crucial for the many rural and northern communities not currently served by private sector courier companies.
Canada Post's five-point action plan embraces the principle of reform without seeking any change to the Canadian Postal Service Charter. This plan is about giving Canadians the postal service they need in the emerging digital economy. Canada Post is quite aware of the changing face of the postal industry and has been preparing for a future with less mail and more parcels for a number of years.
The corporation has implemented measures to expand its parcel volume both through its postal operations and through its Purolator courier service. For example, changes to internal operations first begun in 2010 have made for a more efficient flow of parcels through the network to the customer. Canada Post has launched an aggressive plan to invest in replacing its aging processing infrastructure and delivery processes with more modern and cost-effective approaches driven by technology. The sorting equipment in place today is much faster and more accurate. From a delivery perspective, it has meant a massive shift toward motorization.
Canada Post will continue to leverage these investments. Doing so will further reduce the cost of processing the mail and will allow the company to better serve the growing parcel market and provide the services Canadians will need in the future.
In many urban areas, Canada Post has moved away from letter carriers delivering mail by foot to carriers who leave their depot every morning with a fuel-efficient van containing the mail and parcels for delivery on their route. Putting mail and parcels in one truck for delivery provides a better end-customer experience, especially in the parcel business, at a much lower cost to the corporation. These improvements will allow Canada Post to compete more effectively in the fast-paced and technology-driven global parcel market. All kinds of parcels are now flowing through Canada Post sorting plants, including items that depend on fast and accurate delivery, from health care products and gourmet food to live bees and baby chicks.
Canada Post realizes that the parcel business is highly competitive and it does not have the exclusive privilege to deliver parcels, as it does for letters. Therefore, the corporation has focused on providing a superior customer experience, recognizing the attachment Canadians have to their parcels. Canada Post has indicated a desire to expand en-route pickups and launch a comprehensive returns solution that will benefit e-commerce merchants and shoppers by improving inventory management, returns processes, and automatic billing.
An important component of Canada Post's proposed strategy is its intention to build upon its current strength in parcel delivery, which has demonstrated growth over the past few years thanks in large measure to the fast-growing market of online shoppers.
It is clear that Canadians have become enthusiastic online consumers. Statistics Canada reported in October 2012 that the value of orders placed online by Canadians reached $18.9 billion in 2012, up 24% from 2010 when the survey was last conducted. That is 24% in two years. More than half of Internet users, 56%, ordered goods or services online in 2012. Perhaps even more encouraging, most Internet shoppers, 82%, had placed an order from a company in Canada.
Canada Post's parcels line of business currently offers a range of domestic and international delivery services and is the largest player in the Canadian parcel market, with more than 50% market share. The corporation sees an unprecedented opportunity for additional growth linked to e-commerce as online business activity increases. Customers for parcel services include businesses, consumers of all sizes, governments, international postal administrations, and other delivery companies.
According to a recent report by the Conference Board of Canada, residential and small business customers indicated that their demand for parcel service will continue to rise with the spread of e-commerce.
Parcels are the fastest-growing line of service in the core Canada Post business. The corporation reports that overall growth in parcel volumes experienced a record-breaking holiday season, which runs between November 11 and January 4. Canada Post delivered 30 million parcels during this period, which was five million more than the holiday season last year. The corporation delivered more than one million parcels in a day, on 10 different days. Weekend delivery was also very successful. Canada Post employees delivered a total of 1.1 million parcels over the six weekends of the holiday season, with the highest number of deliveries occurring on the December 21–22 weekend. That is 317,000 deliveries.
The main reason behind this growth is that parcels are the one postal product that has seen growth driven by the digital revolution. Canada Post advises that its top-25 retail customers are making major e-commerce gains. January parcel volumes from these retailers shot up 35% compared to January of last year. This dramatic increase follows a highly successful holiday season in which year-over-year parcel volumes from this top-performing group grew by 50%.
It is very obvious that things and times change. They have certainly changed at Canada Post, and it has tried to adapt.
I have a question for the minister. The opposition is refusing to see that Canada Post is facing a new digital reality. Can the minister please explain why the status quo was not a possible solution to Canada Post's financial situation?