The future of mail

With test store created for the digital age, Canada Post bets on an era of dwindling snail mail

Theglobeandmail.com
Oct. 20, 2015
By Marina Strauss

Canada Post’s store of the future is a laboratory for the digital age.

The brightly lit store, which opened this month in an open-air mall in Richmond Hill, has self-serve kiosks for parcels and postage, a drive-through for package pickups - and even a change room for online shoppers to try on their e-commerce fashion purchase so they can return it if it doesn’t work.

The test store, and two more to open next year in Edmonton and Vancouver, is designed to cater to young digital shoppers on whom Canada Post is betting heavily in an era of dwindling snail mail.

“We’ve never done a post office like this before,” said John Reis, general manager of retail at Canada Post. “The entire place is focusing on e-commerce so we can solidify our position in e-commerce ... The e-commerce world is changing so fast.”

As retailers rush to figure out how to efficiently operate both online and physical stores for increasingly demanding shoppers, Canada Post is counting on cashing in on the growing appetite for e-commerce to help revive its business.

Already handling two-thirds of items bought online, the postal service is aiming to get retailers to think of it first as the go-to place for e-commerce shipments rather than teaming with alternative couriers.

“There is an aspect of urgency to this,” said Peter Sheldon, vice-president and principal analyst at researcher Forrester. “The biggest challenge in Canada is the time it takes for deliveries to occur between clicking the order button and receiving the items at home, and the cost of that delivery.”

To add to the challenge, retailers have to take on Amazon.com Inc. and its popular Prime program, which provides free two-day shipping for an annual $79 membership.

“The reality is that the consumer is becoming way more demanding and expecting a considerably higher level of service,” Mr. Sheldon said.

Retailers also are searching for a better economic model to deliver online purchases to customers because sending them to their homes can be expensive, retail consultant David Saffer said. And consumers often aren’t home when the shipment arrives, he said.

“Canada Post is putting into place steps not to become a Blockbuster,” Mr. Saffer said, referring to the failed video-store chain whose key product was overtaken by digital alternatives. “In the age of Apple defining a new retail environment, Canada Post is playing in that space.”

The need for a new e-commerce focus is evident. Online sales growth in Canada is expected to outpace that of the overall retail market in the next five years, Forrester has forecast. E-commerce sales will rise at a compound annual rate of 12.3 per cent in that period, reaching $39.9-billion by 2019, compared with “a measly” 2.6 per cent for overall retail, it says.

Wal-Mart Canada Corp. and Loblaw Cos. Ltd. are among retailers that have set up pickup lockers and drive-throughs at some stores for customers to fetch their e-commerce orders. Wal-Mart recently teamed with 7-Eleven for more pickup points.

“It’s allowing people to schedule the pickup when it’s most convenient for them,” said Simon Rodrigue, senior vice-president of e-commerce at Wal-Mart. “For me it was very counterintuitive that pickup would be a preference. What we’re seeing is that customers are preferring that a lot of the time over home delivery.”

As an illustration of the importance of e-commerce, in Wal-Mart Canada’s second quarter those sales jumped more than 40 per cent (although on a small base) while its overall sales grew 5.4 per cent.

Shopping centre owner Smart Real Estate Investment Trust, which runs malls with Wal-Mart and other stores in them, is expanding its Penguin Pick-Up drive-through in more malls, allowing e-commerce customers from an array of retailers to have their purchases brought to their cars.

“Many of the shoppers continue to shop at the relevant centre after they have come to complete their actual pickup,” Huw Thomas, chief executive officer of Smart REIT, told investors recently. “So it is doing what it was intended, which is obviously helping drive traffic to our sites.”

Still, at the new Canada Post test store this week, most customers bypassed the new self-serve and drive-through options, heading instead to the employees behind the counter.

But some who tried out the new alternatives were impressed. “It was more convenient than I thought it would be,” said Mary-Anne Wiltshire, a 28-year-old teacher who dropped off a package to be mailed at the drive-through. She said she would purchase clothing online now that she knows there’s a change room in the post office where she can try it on and return it if it doesn’t fit.

Canada Post’s Mr. Reis said he expects it will take a little time for people to get used to the self-serve and drive-through, but predicted that up to 80 per cent of shoppers will eventually use the drive-through and half will use the self-serve, for which it is currently offering a 10-per-cent discount.

The store is roomy with a supersized digital screen and space set aside for future pop-up shops whose products - and those of other companies - can be advertised on the screen. The change room is at least twice as big as those at many other retailers, with a bench, hooks and mirror. The counters at the back of the store are slimmer than those in regular post offices to try to be more welcoming, Mr. Reis said.

Mr. Reis said the new store replaces two former post offices, but insisted the move isn’t aimed at reducing staff and in fact adds a couple of employees over all because of extended hours. The self-serve areas will be open 24/7 with security cameras.

He envisages as many as 25 of the new concept stores and “hundreds” of existing post offices adopting elements of the lab store if it takes off. “We’ll keep trying new things,” he said.