Canada Ends Door-to-Door Postal Delivery: A Lesson for the USPS?

Did you hear the one about the U.S. Postal Service wanting to stop delivering mail on Saturdays? Actually, that's nothing. Up in Canada, the postal service says it's planning to quit delivering mail ... period.

Or at least, delivering it door-to-door.

The postman always rings twice, or ...
Currently in Canada, 63% of mail recipients get their mail delivered "the old-fashioned way," by trusty mailmen hoofing it directly to home mailboxes or, for apartment dwellers, placing it in building lobby mailboxes.

Like the U.S. Postal Service, however, the Canadian version is racking up heavy losses from the worsening economics of the mail business. As shrinking volumes of mail result in declining revenues from mail, while pension obligations rise and operating costs remain stubbornly stuck, Canada Post is looking at potentially losing $1 billion annually as early as 2020. (Don't pity them too much, though. USPS lost $5 billion last year.)

Hoping to get ahead of the curve on the problem, Canada Post CEO Deepak Chopra (yes, seriously, that's his name) has outlined a series of moves aimed at reducing the service's costs -- including most of the measures we've already become familiar with here:

  • Cutting employee benefits.
  • Increasing employee contributions to their pension plans.
  • Laying off 6,000 to 8,000 postal workers.
  • Raising rates for postal customers.

Whereas here in the U.S., we grumble with every penny-or-three rise in the cost of a first class postage stamp (for the time being, still just $0.46), in Canada the plan is to raise rates by an astounding 35%, from $0.63 currently, to $0.85, in March. And those are the "bulk" rates. If all you need is one single stamp, Canada Post will sell it to you ... for $1.00.

The postman never rings at all
Now, in the cruelest cut of all, Chopra warns Canadians that this year, Canada Post will begin phasing out door-to-door mail delivery for city and suburban dwellers altogether. Henceforth, delivery to homeowners will be accomplished mainly at community maildrops -- similar to the hotel lobby arrangement of apartment dwellers, but on the street. (Rural residents will still be serviced individually, and parcels will still be delivered to Canadian doorsteps).

Chopra estimates that the simple step of making homeowners take a few more steps of their own, out of their houses, and down the street to a mail drop, could cut Canada Post's losses in half, saving $500 million a year.

Could it work here?
Canada Post and the U.S. Postal Service both claim ancestry from the English colonial system of mail, established by Postmaster General Benjamin Franklin in 1756. As such, the two systems are similar in form and function. And yes, this means that measures implemented to cut costs in Canada could be used to save money in the U.S. as well.

How much money? Well, if eliminating door-to-door delivery can save Canada $500 million a year, it stands to reason that the U.S., with a population nine times as large, could save $4.5 billion through a similar move. This, all by itself, would come very close to closing the USPS's $5 billion deficit from 2013.

Add in the $500 million in revenues that USPS hopes to generate from its new "Metro Post" project -- where USPS aims to compete head-on with FedEx (NYSE: FDX  ) and UPS (NYSE: UPS  ) by facilitating same-day delivery of packages ordered from local retailers -- and USPS could conceivably break even, with no further cost-cutting measures necessary.

That's right. No layoffs, no kicking Post Office retirees out of their health insurance plan, or delaying prepayments into the USPS pension fund. No post office closures. No mail sorting facilities closures, either. And definitely no need to eliminate Saturday delivery. None of the drastic "why-use-a-scalpel-when-we've-got-this-perfectly-good-meat-cleaver" measures for fixing the USPS budget.

In fact, Canada's plan makes so much good sense that you could almost imagine USPS wanting to give it a try here, too. Almost.

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Read/Post Comments (16) | Recommend This Article (6)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 06, 2014, at 10:30 AM, ugo wrote:

    Congress passed a law prohibiting the P.O. from ending Saturday deliveries when they considered it, but they will allow ending door to door deliveries? I don't get the logic. I think this will inconvience more people than not getting your junk mail on Saturdays.

  • Report this Comment On January 06, 2014, at 12:27 PM, TMFDitty wrote:

    Fair point. But "when you have eliminated the impossible, whatever remains, however improbable, must be the truth."

    The truth is that USPS says cutting Saturday delivery would save only $1.7 billion annually. It's not possible to cover the losses with that move alone. "Centralizing" delivery as Canada is doing would come much closer to accomplishing the goal.

    TMFDitty

  • Report this Comment On January 06, 2014, at 2:03 PM, Mjamison wrote:

    Please do a little more fact checking before you write.

    Metropost is a market test product that cannot, by definition, generate more than $10 million a year.

    The PRC analysis shows that ending Saturday delivery could end up driving more mail out of the system resulting in very little savings.

    Savings from ending door and curb delivery would be offset by costs and problems related to installation of CBU units. There is also a great deal of evidence to suggest that ending door delivery would cause people to lose faith in the system causing a spiral in losses.

    Postal Service made money on operations last year. The RHBF payments which were unnecessary and created as a means of extracting money out of the Postal Service created the "loss".

    http://www.savethepostoffice.com/canada-gets-cluster-boxed-w...

    Motley Fool's reporting on these issues has been consistently uninformed.

  • Report this Comment On January 06, 2014, at 3:39 PM, Enochtheman wrote:

    Hey Mr. Motley have you considered the cost that it would take to maintain these cluster boxes? In many Neighborhoods the boxes would need constant and continual maintenance, because people would constantly destroy them. Not to mention the danger that you would put alot of the disabled and seniors in by having to go between these thugs posted up at the boxes doing God knows what, to get to their mail boxes. and then you finally get there only to find out that your important mail has been stolen out of your box. It is not safe for them already as it is. Are we so willing to sacrifice lives for savings of dollars. In a perfect world this probably could work, but not in this world. Why can't congress and the senate close some of the loopholes for the rich who pay no taxes on their offshore accounts?

  • Report this Comment On January 06, 2014, at 4:17 PM, mom5cats wrote:

    My house was built in 1985 and even back then, my street was built with a couple of "drop boxes," like what they are talking about here. It's no problem to pick up the mail; everyone just stops on their way home from work. However, getting your mail is another issue. There is one large box for packages; the postman is supposed to leave packages in that box and the key for it in your box - however, that never happens. They just leave you a note to go pick it up at the post office. I have all my packages sent to me at work so I don't have to take off in order to go get my packages before the post office closes.

  • Report this Comment On January 06, 2014, at 4:21 PM, jakesdaughter07 wrote:

    I have lived in a residential area in Orlando, Fl for over 12 years and we have never had door to door service. We have mailboxes located in various places throughout the development. Can't see this as any different than what Canada is proposing there, so I'm guessing the USPS has already tried the idea and is still in financial trouble.

  • Report this Comment On January 06, 2014, at 4:44 PM, JohnMartin58 wrote:

    Centralized delivery be it by CBU's or 2 to 4 to a post

    would streamline street delivery through out the nation. The arguments against, due to cost and replacement is without merit. CBU's are easily maintained and normally are the responsibility of HOA's or city zoning. Curtailing of Saturday delivery is essential, particularly now with USPS delivering Amazon parcels on Sunday to mix reviews. Streamlining is and always has been the future of USPS, time for real change is now.

  • Report this Comment On January 06, 2014, at 4:58 PM, Sakura wrote:

    Well, this is the dumbest idea EVER. Only the so-called ABLED people think this is so wonderful. What about the people who can't drive and have disabilities or, are seniors?? And, who the heck wants their mail in a community area where ANYONE can steal their mail right out of their box? Also, why would ANYONE want to walk in below zero temperatures that are NOT SAFE to walk in, to get their mail??? Are you people INSANE??? This is a rotten idea and for this Mr. Smith to act like it is such a wonderful idea is BEYOND foolish and plain ignorant too. He is only thinking of himself and the other people who DRIVE and do NOT have a disability or aren't old and can't drive. Also, in areas with a lot of crime, nobody would want to have to walk far to get their mail. This is GOVERNMENT telling YOU that you can't have a PRIVATE mail box and them telling you what you have to do just to get your mail. That's an infringement on one's freedom. If OUR government even TRIES this, I will personally go to the post office and protest for MY RIGHT to have MY mail, which is MY personal business, delivered to my house. I will NOT walk to a community box just to get my mail, especially where I live, which is FREEZING here in the winter. And, I don't want some punk stealing from my box, either. Also, since I don't drive, this would make me just plain angry if they try this stupid "idea" here. It is only the "perfect people" who think this sort of thing is ok. Take all their transportation from them and make them live the life of a person who is either disabled and old for a while, and maybe they would think of someone else besides themselves and how much money they THINK they would save. You can't subject a hardship on those who have disabilities or are old just because there are more people without disabilities and people who are old, than the young "perfect" people. That's selfish, egocentric thinking. The disabled and elderly's needs are just as important.

  • Report this Comment On January 06, 2014, at 5:34 PM, Kojak wrote:

    I don't know the secret to the woes of Canada's postal service, but whenever the USPS is spoken of, it should also be mentioned that it is the only entity requirer to PRE-FUND employee retirement benefits. It also receives NO taxpayer money. In truth, it actually makes money, but it has been placed in a position that makes things more difficult. I think their outreach and positioning have been rather good.

    As it stands, new communities are often built with a 'mail station", for lack of a better term. There is no new door to door mail delivery in many areas. It has been consolidated into the set of metal boxes all grouped together.

    America is not known for making sensible decisions, so nothing that happens will surprise me.

  • Report this Comment On January 06, 2014, at 5:57 PM, angelwithwings wrote:

    We have cluster boxes in our neighborhood. I love them. They are secure, and you don't have to worry about going away for a day or two.

    They are not an inconvenience. You just pick up the mail on the way home. Easy!

  • Report this Comment On January 06, 2014, at 6:42 PM, blockprasher wrote:

    "So much good sense"??? Do you know that the Canadian Gov't has NO IDEA where they are going to put the big banks of community mailboxes in the cities....... They are going to need many HUNDREDS of square feet for the millions (?) of boxes they will need. No idea..........but they voted the plan in anyway. Good sense?? Have to seen the photos of the large "community boxes" that are up. Everyone just takes the junk mail out and throws it on the ground. In a photo of a guy getting his mail it looked like he was standing at the city dump!! Good sense??? Really???

  • Report this Comment On January 06, 2014, at 10:58 PM, Robvn29 wrote:

    Also, information that needs to get put out there, the USPS is required to PRE-FUND retiree benefits. This so-called prepayment is supposed to be in a special fund, but guess what? The government has already spent all those prepayments in the general funds. So when future postal retirees become of age, the money won't be there for them either.

  • Report this Comment On January 07, 2014, at 12:36 AM, biscuit wrote:

    I have delivered door to door in the USA for almost 30 years, and have done many other routes many times with centralized delivery.

    Sometimes, as I walk my route, I consider how foolish it is, these days.

    It was fine when Franklin started the Postal Service, when there were simply hundreds of homes in most cities, and the only mail was real, handwritten, important "first class" mail and maybe an occasional newspaper.

    The homes were tight, together, with hardly any space, if any, between them.

    Those who holler safety, security, what about the seniors and disabled, and those with no transportation, should consider that most (I see them) go where they want, when they want, even several times per day. They can make a side trip to the Post Office or one block to the centralized box.

    The caregiver, etc. should be able to access the mailbox, also!!!

    With centralized deliver, your mail is still secure even if you slip off for a few days.

  • Report this Comment On January 07, 2014, at 10:54 AM, cityperson wrote:

    We have centerlized postal box on our street for 10 homes and this is i consider a good idea. If there is a large box or package the postal delivery places it on our porch and sometimnes rings the door bell.

  • Report this Comment On January 07, 2014, at 2:32 PM, hagar2935 wrote:

    The USPS needs a MAJOR overhaul and the Union needs to be vaporized.

  • Report this Comment On January 07, 2014, at 5:26 PM, keeponwalkin wrote:

    The USPS is required to pre-fund FUTURE retiree Health Benefits 75 years in advance. This is for people that aren't yet working at the Post Office, and haven't even been born yet. The USPS has to set aside $5.5 Billion every year for ten years...no other private or public entity is required to do this. The PO actually made a $660 million PROFIT last fiscal year.

    The POs problem is some in Congress want the PO privatized. The PO is top-heavy in management...there are 37 Executive VPs that make in excess of $174,000 per year. In the last 12 year the Blue Collar workforce has been cut by 20% while the White Collar workforce has been increased by 27%.

    The Postal Service is a governmental entity that was set up to provide a SERVICE to the people, it was not set up to make a profit.

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