The cheque is increasingly not in the mail for Canada Post, and neither is the flyer or hydro bill.
The Crown Corporation is experiencing the financial repercussions, reporting a pre-tax loss of $104 million for the three months ended June 29, as transaction mail volume, which includes letters, bills and statements, fell 6.3% – or 51 million pieces – from the corresponding year-earlier period.
Volume for the first two quarters declined by 111 million pieces, or 4.1%, from the corresponding year earlier period.
The losses reflected the ongoing shift to electronic communication that Canada Post said is “eroding mail volumes at an accelerated pace.” It also prompted a warning that the Canada Post Group of Companies – which includes Canada Post and three non-wholly owned subsidiaries: Purolator, SCI Group and Innovapost – is on track to record a “substantial” loss in 2013.
Direct mail volume for the second quarter was essentially flat compared with the previous year, with revenues falling 2.2% to $310 million. Direct mail revenues for the first two quarters fell 3.2% to $612 million, as volume decreased by approximately 59 million pieces or 1.5%.
Direct mail revenue came from four streams: Addressed Admail ($136 million), Unaddressed Admail ($108 million), Publications Mail ($60 million) and Business Reply Mail and Other Mail ($6 million).
Declines were seen across all four categories, largely driven by decreased activity in the telecommunications, banking and insurance segments.
Canada Post attributed the decline in DM revenue to intense competition, reduced marketing budgets and falling demand for its publications mail product. “Some commercial customers have reduced their overall marketing spending or redirected some of their marketing activities to other products or media channels,” said Canada Post.
In an attempt to slow its direct mail losses, Canada Post sent 900,000 letters to Canadians earlier this year asking them to remove “no flyer” signs from their mailboxes.
The letter informed recipients that the decision was preventing them from receiving coupons and savings from local businesses, catalogues, fundraising appeals, municipal and community notices and product samples.
The one bright spot for Canada Post is its parcel business – it grew by $19 million in the first two quarters due to the increased popularity of online shopping. But while total parcel volumes for the first two quarters increased by about 1 million pieces compared to last year, the growth was not enough to offset the losses in its other business lines, said Canada Post.
Revenue losses are expected to increase as the shift towards digital accelerates. A recent independent study from the Conference Board of Canada, “The Future of Postal Service in Canada,” forecasted an annual financial loss of nearly $1 billion for Canada Post by 2020.
The study also examined various options to serve Canadians while reducing financial losses, including the conversion of households with door-to-door delivery to community mailbox delivery; alternate-day delivery for mail (but not parcels); the replacement of corporate post offices with dealers; price increases and relaxed delivery standards.
