With the advent of the Internet leading to the ability to communicate via social media and electronic mail, there has been a continuing decline in the need for hand delivered mail provided in both countries by national postal services. Their entry into more express parcel delivery has also not blossomed as expected given the stiff competition by more cost-effective private sector providers.
In the U.S., the result is that its Postal Service reported a $6.5 billion net loss in the 2023 fiscal year for the 12 months ending Sept. 30, and has said that it will not breakeven next year as first-class mail fell to the lowest volume since 1968. This deficit is despite the fact that the U.S. Postal Service aggressively hiked stamp prices and is in the middle of a 10-year restructuring plan announced in 2021. The plan aims to eliminate $160 billion in predicted losses over the next decade, and had initially forecast 2023 as a breakeven year. However, despite substantial planned reductions in its cost of operations and growth in package revenues, the service is still predicted to not reach breakeven results in 2024.
In Canada, Canada Post lost $748 million in 2023, and now warns of ‘critical’ financial situation. As a Crown corporation, it is projected that Canada Post could run out of money in less than a year, citing declining revenue and stiff competition. Even with Canada Post’s recently proposed stamp price increase, the Corporation projects that, without additional borrowing and refinancing, it will fall below its required operating and reserve cash requirements by early 2025. The company noted that the cost of delivering mail and parcels is increasing. Canada Post has struggled to compete post-pandemic with the rising number of new, privately owned delivery companies that use what it calls a “low-cost labour” business model. In its most recent report, the Corporation noted that competitors grew rapidly, leaning on their low-cost-labour business models that rely on contracted drivers to provide lower prices, plus greater convenience with evening and weekend service.
If you’re like me, I receive hardly any mail via the postal service. Like most people, I do my banking on line, read the news on line, have funds directly deposited or withdrawn from my bank account, and correspond most frequently via electronic mail or social media networks. As for parcels ordered on line (e.g. Amazon), the majority are delivered via private companies. One can see such delivery vans pretty well every day on our block.
Given this situation and the loss of revenue of both national postal services, one has to ask if mail needs to be delivered directly to homes on a daily basis each week. Perhaps, one could cut down to every two to three day delivery, accommodating those individuals who continue to rely on written mail for their dealings. In many communities, notably in rural communities, there will continue to be a need for an outlet provided by a national postal service. After all, a convenient outlet is most likely the only federal presence in the community. In urban communities — especially new developments, there are increasingly postal boxes where people can access their mail, thus reducing the need for mail deliverers. In both cases of Canada and the U.S., traditionally the national postal services were subsidized by the federal governments, and in turn by taxpayers.
Given the rising cost of doing business and declining revenue base, it only makes sense that both national postal services look at creating cost-cutting efficiencies in their operations. In light of the expected political backlash, such a move will no doubt be tough for both federal governments to initiate. However, it now seems like they won’t have much choice.
FROLITICKS 