BC Business
Canada Post's $200-million YVR distribution centre is part of a larger $1.7-billion cross-Canada strategy focusing on e-commerce deliveries.
Canada Post’s $200-million YVR distribution centre is part of a larger $1.7-billion cross-Canada strategy focusing on e-commerce deliveries.
Canada Post’s cavernous new distribution plant, seated on the edge of Vancouver airport’s north tarmac, is loud. Scanners beep, parcels clunk, and oblong cardboard boxes—some the size of a textbook, others as large as refrigerators—snake in Rubbermaid bins around the plant’s half-kilometre conveyor belt, operated by a smattering of Posties in steel-toe boots and safety vests. In a corner, a lobster trap sits wrapped in plastic, neglected.
The national postal service has long played a pivotal role in parcel deliveries in this country—a role that’s become increasingly important as more people turn to online shopping with the expectation that whatever they order in the morning can be in their hands by afternoon. This year, the always-busy holiday season is expected to be a lot more stressful—but potentially a lot more profitable—as Canada Post tries to reap the benefits of a $200-million investment in this new YVR distribution centre. The move is part of a $1.7-billion modernization program (which includes new automated plants in Montreal, Winnipeg and Toronto) that’s shifting the corporation’s focus away from letter mail and toward e-commerce parcel delivery. Following four years of being in the red, its last two quarters have crossed into the black; in November, Canada Post announced third-quarter earnings were $142 million higher than the same period last year—and consequently profitable.
Last March, a second wave of postal workers relocated to the airport plant from Canada Post’s multi-storey Modernist complex in downtown Vancouver (a building that was sold, in January 2013, for $153 million). The 700,000-square-foot Pacific Processing Centre, with a tarmac for the carrier’s contracted fleet of Boeing 727s, is, to say the least, massive. The move was no small feat either. “It’s the biggest change at Canada Post in over 40 years,” says Kim Evans, president of the Canadian Union of Postal Workers’ Vancouver chapter.
Online shopping is a big opportunity for the Crown Corporation: by 2017, the value of goods delivered to online shoppers in Canada is expected to rise to $16.9 billion from $9 billion in 2012, according to Canada Post’s internal market research. “E-commerce is our sweet spot,” says Rod Hart, general manager of Canada Post’s domestic parcel business. Between 2012 and 2013, Canada Post’s parcel volume increased by five million pieces, or 6.9 per cent, driving up revenues by 7.2 per cent. Today the corporation delivers two out of three packages ordered online in the country.
For a company with its eyes trained on e-commerce growth, the holiday season is particularly lucrative, with three out of every five parcels delivered in the month of December. Deliver Tonight, a program piloted by Canada Post last holiday season in Toronto, was expected to be up and running by the end of October in Metro Vancouver. A selection of Canada Post’s top retail partners—which have yet to be announced—will be offering same-day delivery service as part of the program: order by noon, the package will be picked up by 2 p.m. and delivered that evening. Last year alone, revenue from those top e-commerce customers grew 29 per cent over the previous year.
One of those e-commerce customers is London Drugs, which has done business with Canada Post in some form or another since 1945. The Vancouver-based retailer, which launched into e-commerce a decade ago, has used the postal service to ship everything from computers to photo-books to European specialty foods (think German chocolate) through direct-to-consumer e-commerce deliveries. “We do a lot of business in the North,” says Clint Mahlman, chief marketing officer at London Drugs. “Private couriers can’t deliver to the farm gate the way Canada Post can.”
But the transition from a nationalized letter carrier into a courier that competes with multinational giants such as UPS and FedEx means fewer employees on Canada Post’s payroll. In the Lower Mainland alone, the corporation expects to cut 500 from the 3,000 employees it currently has.
According to some workers, the move comes at the expense of the postal carrier’s traditional letter-carrying business. One employee who works on the floor of the Richmond plant, who asked for anonymity, reports that 25 trailers full of letter mail, largely from Japan, China and South Korea, currently sit waiting to be offloaded. “We used to process 32,000 letters an hour; now we process 5,000 to 10,000,” she says. Whereas a letter or parcel sent from Kelowna to Prince George would go directly, now all mail is routed through Vancouver, explains John Bail, national director at CUPW. “It’d be generous to call them growing pains,” adds CUPW’s Evans.
Canada Post’s network and investments had been focused on mail until around 2008, says Rod Hart, a 20-year veteran with the corporation who has played an instrumental role in shaping the company’s e-commerce strategy. Due largely to falling letter mail volumes, the corporation posted an operating loss of $193 million last year—hence the hard push into parcels. From 2008 to 2010 the company made a series of decisions to invest in its parcels business, says Hart, and has funded that strategy through the sale of key real estate assets, including its downtown Vancouver facility.
With Canada Post’s high-tech YVR facility now fully operational, the company expects this holiday season to start delivering packages in the Vancouver area the same day that they are ordered. The corporation is still years away from realizing a return on its investment in e-commerce, and the pain so far—in terms of job losses, the end of home delivery and the rapid rise in postage rates—has been substantial. But as Canada Post CEO Deepak Chopra said in the company’s 2013 annual report: “Fundamental changes to our business model are needed—not for the sake of the company, but for the sake of the country it serves.”