Like most of the world's post offices, Canada Post offers a variety of bulk mail services designed to help businesses reach customers and find new ones. Canada Post's discounted Admail services are what businesses rely on to mail advertising flyers or what is otherwise known as "junk mail." In 2011 Admail accounted for 23% of Canada Post's revenue, up from 20% in 2005. Admail revenue now exceeds what Canada Post gets for parcel delivery. Clearly, junk mail is not going to go away any time soon despite perennial public irritation over this class of mail.
Admail is a success. But is it the right kind of success?
A look at today's advertising mail reveals an important fact that partly explains why Canada Post's parcel services are declining. Most of the Admail that fills mailboxes is not designed for mailorder. The flyers and catalogues lure people into stores, or to call, or to go online; but very little of it produces orders that will be shipped by Canada Post. Canada Post is missing out on billions of dollars of parcel delivery revenue because it has failed to foster a healthy mailorder culture in Canada.
For mailorder businesses that operate in both the U.S. and in Canada, the difference in the respective mailorder cultures is striking. Americans are much more likely to order by mailorder than Canadians are. There are many reasons for this, both on the order acquisition side and on the package delivery side.
The Tyranny of the Minimum
One of the key cross-border differences is the minimum piece requirement for advertising mail. This is the minimum number of identical pieces that must be mailed at the same time in order to qualify for bulk mail discounts. In the U.S. the minimum number of pieces is 200 pieces; in Canada the minimum was for many years 1000 pieces, but in 2014 it was reduced to 500 pieces.
This difference in the minimums has a profound effect for small businesses. To understand this, imagine that your business produces a seasonal sales catalogue that you mail to your customers when the catalogues are printed every 3 months. Any business that prints catalogues will likely have a mailing list of a 500 names or more, so the minimum is not usually a barrier for the initial mailing. But what about the catalogue requests that come in after the initial mailing? What if your business has a website and you invite visitors to sign up for a free catalogue? If these catalogues are not mailed weekly customers may lose interest or purchase from a competitor. Not many small mailorder companies can generate 500 catalogue requests each week. In Canada, a business that gets 200 requests a week would have to wait more than two weeks before it has enough to meet the minimum -- or mail weekly at the far more expensive lettermail rates. In the U.S., the 200 requests meets the minimum, and catalogues can be mailed weekly. The conversion rate -- the rate at which catalogues sent to prospects produce an order -- is higher in the U.S. because catalogues get to prospective customers sooner.
Canada Post has been urged to lower the minimum to 200 or use a system that aggregates the total number of pieces mailed over multiple dates. A company that mails 200 catalogues a week will mail more than 10 thousand a year, and that is good business for Canada Post if many businesses take advantage. Thankfully, in 2014 Canada Post reduced its minimum to 500 from 1000 after years of pleading from businesses. We believe that it should have gone further, to a 200 piece minimum, but this change is a step in the right direction.
Addressed Admail Costs More in Canada
Although Canada Post's Admail is a discounted bulk mail service, it is expensive compared to a similar bulk mail service offered in the U.S. by the United States Postal Service. To illustrate, consider a catalogue printed in a 'digest' format (24cm x 15cm) weighing 83 grams and mailed at the same time in 2011 in large batches of similar size on both sides of the border. The per catalogue cost to mail this catalogue in Canada was more than twice as much as what it cost in the United States (54 cents vs. 26 cents). No wonder the mailorder catalogue industry is stunted in Canada and thriving in the U.S.!
How can Canada Post justify this excessive -- and even abusive -- pricing of advertising mail in Canada?