Canada: Land of High Shipping Costs and Slow Service

One of the most common questions and inquiries we receive is regarding shipping. Canadian customers want to know how long the delivery will take and recount to us the reason they're purchasing and the need to get it before the celebratory date. 

As a company, we take pride in our transparency about our operations. On each product page we clearly specify whether it will be shipped from our Vancouver warehouse, which will be same day or 1 day processing or if they're being dispatched from our warehouses in Ontario which will require 2 to 3 days.

Our service standards are rigorous and we abide fully to the published processing times but as soon as the product leaves our warehouse we start biting our nails. We simply despise not having control over the shipment process domestically.

The sad truth of the matter is that when we are dispatching to the US or the rest of the world, we are provided with a myriad of options at reasonable prices (which we pass on to customers) and the products take 3-7 days to be delivered. This is usually 3 days to the US and 7 days to most regions in Europe.

Canadian customers (depending on the region) will take anywhere from 2 days to 19 and are paying as much as four times for shipping than what US customers pay to buy products from Canada. In fact shipping from Vancouver to Frankfurt with a trackable service is cheaper than sending the same product to Nova Scotia. 

Wanting to gather some data for writing this article we checked our service tickets and we don't have a single shipping inquiry from our international and US customers. 

Canada Post is Failing Canadians

Canadian customers however are losing out because of the lack of free enterprise in the domestic shipping and logistics market. Canada Post is what is known as a "Crown Corporation". Crown corporations in general is a corporation that is regulated by the Canadian federal government.

In effect, the corporation is said to be independent (i.e. not run as a government department) but as a standalone corporation which should aim to minimize losses as to dampen any budgetary needs or bailouts. 

The rationale behind maintaining Canada Post as a crown corporation is a noble one. Canada is a large country with a relatively low population. To ensure non segregated pricing and equal access of all Canadians to delivery services and pricing, the crown corporation steps in where private enterprise would not find economically viable.

For example, due to larger population in BC, Ontario and Quebec the corporation enjoys some scale and distribution efficiencies and can offer lower pricing but prices are artifically high and uncompetitive to cross subsidize service to other provinces and remote locations.

This publication in no way minimizes this noble strategy and agrees that Canadians living in the most remote and rural locations should receive the same cost and service standard as those living in urban centres. We do however disagree with the approach the federal government has taken over the past centuries. 

What it means for Canadian consumers

The table below represents the actual cost of shipping as of December 2021 for various inter provincial shipping with three types of carriers: 

1. Canada Post - National Carrier

2. United Parcel Service (UPS) - Private Carrier

3. ChitChats - Uses Canada Post as Last Mile Carrier

When looking at the comparative charts above the following are the most interesting insights: 

1. Canada Post (which should benefit the most economies of scale) due to its handling of lettermail and parcels should be most competitive but prices are more expensive for both domestic and international shipping across the board. It is less expensive to ship with UPS (albeit we suspect UPS could be less expensive but prices according to Canada Post rates) and transit times are much faster for domestic shipping. 

2. Shipping to the US is much less expensive thanks to the vast network and volume of shipments in the country. 

3. ChitChats, which effectively takes shipments from many sellers and delivers to Canada Post for final mile offers more competitive rates and savings but has long transit times as it must be processed twice, once at its own warehouse and once again at Canada Post. 

The question remains, if Canada Post and ChitChats are both driving packages to the US border and handing over to USPS for final mile delivery one charges close to 12 CAD and the latter 5 CAD. 

Once again, it is noble and necessary to ensure equal access to all Canadians, but at what cost? As Canadian small businesses we are competing with large companies such as Amazon, which handle there own logistics because of the sheer volume of parcels as well as US companies.

Remember that US companies can deliver products much cheaper to Canada than a Canadian company can to Canadian consumers. All of this puts pressure on the Canadian consumer. 

Canadian consumers face slower transit times and more expensive shipping because of Canada Post's inefficient and expensive service. The purpose of having a Crown Corporation is to ensure equal access and for it to put the less strain on the taxpayer.

Millions of packages being overcharged hardly seems like a net benefit for the country. The larger intangible cost is the pressure on Canadian small businesses which are uncompetitive in their own market. 

So if the majority of companies and majority of consumers are aware of this issue, no change is in sight? Tyranny of the minority. It is much easier for the few to lobby the government than to get the majority to call action.

It requires rigorous economic calculation to show Canadians the true costs of the Canada Post monopoly and to find answers on how to step into the market and relax competition rules for private enterprise to serve larger cities and for the government to focus on innovation and efficiencies to ensure equal access of rural Canadians. 

Canadians should receive reasonable shipping costs and/or much more efficient service, which can not be done by a state company. We need to start a discourse for a way forward to make Canadian companies more competitive and consumers bearing less of the cost of inaction on shipping and logistics in Canada.