Canada Post announced on Friday that it plans to introduce weekend parcel delivery in three major cities later this year, part of a broader effort to modernize its business model and win more parcel business from online retailers as the company works to return to profitability. Weekend delivery has become a competitive baseline in North American parcel shipping, with major private carriers already offering Saturday service, so matching that capability is seen as key to winning back e-commerce volume that migrated away during recent disruptions.

The postal carrier credited this year's resolution of a drawn-out labor dispute with restoring customer confidence in the second quarter, which sparked an early-stage recovery in parcel business and helped reduce the pre-tax loss by a third, to US$199.7 million. The state-owned company also said it cut costs by 6.3% during the quarter as operational productivity improved.

Mail carriers represented by the Canadian Union of Postal Workers ratified a contract in early June after more than two years of rocky negotiations, interspersed with two general strikes, rotating strikes by area, and work slowdowns. The volatile labor situation caused significant uncertainty for households and businesses, and many e-commerce shippers switched to private-sector delivery companies, adding to the decline in Canada Post's parcel volumes and revenues. The retroactive, five-year contract runs through Jan. 31, 2029.

Canada Post's loss for the first half of the year was $347.5 million, compared with $323 million in the same period last year. Quarterly revenue grew 1.5% year over year to $1.1 billion, led by a 20.7% jump in parcel revenue as parcel volume increased 15.6%.

Letter mail volume declined 9.2% from the prior year, which had benefited from an election and related mailings by candidates, driving a 9.1% fall in mail revenue. The mail business has been trending downward for years as more Canadians communicate through digital channels. Direct marketing mail volume slipped 0.2%, with a corresponding dip in revenue.

Stability from the labor contract is allowing Canada Post to implement additional parcel services and operational efficiencies, such as flexible staffing, tailoring workloads to workforce deployment, vehicle sharing, and streamlining letter mail operations.

The national postal service is working with communities nationwide to convert 621,000 addresses from door delivery to secure community mailboxes by early 2027. In total, about four million addresses will be converted to community mailboxes over several years. A previous attempt under the former federal government to expand community mailboxes in 2013 was paused in 2015 amid public opposition, making the rollout's reception in affected communities a factor worth watching.

Centralizing residential delivery is part of a larger transformation plan — which also includes closing post offices and lowering delivery standards — aimed at turning around the company's finances and improving service. Since 2018, Canada Post has lost $4.76 billion, forcing it to rely on government assistance.

Management views e-commerce as a growth opportunity and intends to strengthen Canada Post's position in the competitive parcel delivery market by:

• expanding home parcel pickup service to 8.6 million households;
• offering box-free, label-free returns with select online retailers;
• improving local next-day delivery service;
• offering strategic pricing discounts for businesses; and
• preparing to launch weekend parcel delivery in the Ottawa, Montreal and Toronto metropolitan areas later this year.

In the second quarter, Canada Post also launched a proof of concept for Canada Shops, a new online marketplace connecting Canadian small businesses with customers across the country through the organization's delivery network.

Source: FreightWaves