Newsroom - Letters to the Editor
March 9, 2007
Letter to the editor of the Financial Post
Dear Editor:
Mr. Libin is wrong to claim that Canada Post is exercising a monopoly to impose “rip off” rates that are crippling Canadian ecommerce (“The Joke’s on us: Did you hear the one about the profit-maximizing postal monopoly whose high prices crippled a nation's e-commerce infrastructure?” - Financial Post Magazine March 1, 2007).
The Canadian parcel delivery market is in fact one of the most competitive in the world, and Canada Post fights for share against large and efficient multinationals such as UPS, FedEx, and DHL, as well as a plethora of smaller regional and local players. Yes, in order to finance Canada’s universal service obligation under the Universal Postal Convention, Canada Post has an exclusive privilege on the delivery of letters weighing less than 30 grams (and even that is subject to a host of exceptions). But its “monopoly” begins and ends there. Moreover, this exclusive privilege cannot (because using exclusive privilege revenues to subsidize our parcels business is prohibited by law), nor does it have any bearing on ecommerce which is concerned with the delivery of parcels, and the subject of Mr. Libin’s article. Our parcel services are therefore provided on a purely competitive basis and are priced accordingly.
Mr. Libin goes on to compare Canadian domestic and cross-border shipping rates with domestic US rates offered by the United States Postal Service (USPS), with the conclusion that lower US rates demonstrate injurious pricing on the part of Canada Post . This is simply not an apples-to-apples comparison. True, it is the reality for Canadians involved with ecommerce that are selling into the continental market, such as the eBayers featured in his article. However, it is simply unrealistic to expect that a Canadian-based eBayer selling to a Californian, and therefore obliged to pay international shipping rates for fulfillment, would be on equal footing with an American eBayer offering a competing item and could fulfill using a domestic US service.
Postal administrations and private couriers alike structure their processing and delivery networks on a national footprint. Crossing from one network to another duplicates costs, while customs clearance adds more still. It is not uncommon to see prices for US delivery that are double or triple the price for similar service within Canada, and again Canada Post fares favourably relative to competitors.
Comparisons with US rates have other pitfalls. As a legacy from a national policy to subsidize the “dissemination of knowledge”, the USPS, through its Media Mail service, continues to subsidize shipping of books, cassettes, CDs, and DVDs, which is the largest category of "low value" sales on eBay. Recognizing the modern communications environment, Canada long ago abandoned such a policy. Canada Post does not subsidize shipping with respect to the content of the item shipped.
Mr. Libin mentions the “devastating” impact of Canada Post’s price increases over the previous five years, but fails to make any mention of the impact of exchange rates on cross-border ecommerce. Five years ago Canadian eBayers could subsidize the higher cost of shipping cross-border to US buyers with the exchange rate premium inherent with a 70 cent dollar. This simply cannot be done now that our dollar is closer to par, but this is a reality of cross-border business. The relative impact of price increases pales in comparison.
Given these realities, Canada Post has been actively encouraging the growth of ecommerce in Canada. As a delivery company, it is in our interest to do so. Rather than “gouge” eBayers, Canada Post engaged in a strategic partnership with eBay in order to integrate shipping within the eBay / PayPal online marketplace. Not only does this afford eBay sellers and buyers significant convenience and time savings, it also provides eBayers with savings of 8-9% on their shipping costs.
Canada Post is equally proud to have been selected as the shipping partner for online retailers such as Chapters.Indidgo.ca, Amazon.ca, and Zip.ca. These firms, contrary to Mr. Libin’s claim, do have competitive options for delivery and Canada Post has to prove itself not just on price, but in ability to integrate, innovate, and deliver reliably.
Sure Canada Post turned a profit of nearly $200 million consistent with our statutory mandate to operate on a financially self-sustaining basis. This was on revenues of nearly $6 Billion, over an operation with more than 70,000 employees. And with that profit Canada Post pays a dividend to its shareholder – our Government. Is this consistent with Mr. Libin’s claim that Canada Post “gratuitously strips income from private businesspeople to line its own pockets”, or evidence of a well managed business?
John Swettenham
General Manager, Marketing and Strategy
Parcels Division
Canada Post
