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As online sales dip and costs rise, postal strike may cause business failures, advocates say

December 10, 2024

Online sales are falling and the investments that small businesses have made in e-commerce are in jeopardy as the Canada Post strike stretches on, business advocates say.

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Online sales are falling and the investments that small businesses have made in e-commerce are in jeopardy as the Canada Post strike stretches on, business advocates say. According to Matt Poirier, vice-president of federal government relations for the Retail Council of Canada, brick and mortar still makes up a significant portion of sales for most small and medium-sized retailers. But, in the past few years, he said those businesses have become increasingly reliant on online sales. “What we’ve been finding is that smaller retailers have been gravitating towards investing massively into their online presence, because they're selling more that way,” Poirier told OBJ. “Unless they’re strictly an online shop, (brick and mortar) is still dominant. But it’s not 70 or 80 per cent anymore. It’s 30 or 40 per cent, and the rest is online.” Many of those online sales rely on postal services such as Canada Post to complete the transaction and deliver the products to the consumer. While some businesses with e-commerce platforms have found alternative carriers, Poirier said those services can cost an extra three or four dollars per package. He added that some alternate carriers have become so overwhelmed that they’ve started turning away business due to capacity issues. And, as the strike stretches on, Poirier said businesses are seeing a dip in online sales as frustrated customers shun e-commerce altogether to avoid weeks of waiting for delivery or additional shipping fees. “We’ve already reached the point now where the alternative delivery models for online shopping were expensive, but now they’re basically shutting down,” said Poirier. “We’re really worried that’s going to start impacting online sales, which is where everyone’s been moving.” For companies that are heavily or completely reliant on online sales, the consequences could be significant, he said. “We put out a statement last week because we’re sort of at the end of our rope,” said Poirier. “We’re going to start to see business failures in the new year if this isn’t resolved soon. We’re at that point, unfortunately.” Overall, the strike has already had significant ramifications for small businesses, according to the Canadian Federation of Independent Business (CFIB). Corinne Pohlmann, executive vice-president of advocacy, told OBJ that 75 per cent of Canadian small businesses rely on Canada Post and the strike has so far resulted in an estimated $1 billion in losses for them. “Most of them are not really keen on passing the extra cost on to their customers, because they’re trying to compete with Amazon and other big online retailers,” she said. “I have one anecdote of a business that ended up closing its doors because it was purely an online, very small independent business. They were giving refunds, because they couldn’t get the products to (customers). People were basically saying, no, we’re not buying it now. They essentially made the decision that they can’t get through the holiday season.” She added that while holiday spending has remained relatively steady, it’s the extra costs to ship products that are eating into revenues. This is following an already rocky year for retailers. “The holidays are one of the worst times for this to happen,” she said. “This could be 40 to 50 per cent of their revenue. If that’s only half of what it was, that can have a significant impact. And it’s not like we’re coming out of a prosperous time in a pretty tough year.” Mississippi Mills business Dockmasters Inc. is in its off-season, so it doesn’t typically expect many sales this time of year. But joint CEO Chris Otis said the business is still noticing effects. “Now we have to use other means like UPS and FedEx and it adds on to our cost of doing business,” he told OBJ. “At this point, I think most of our customers prefer to come to the manufacturing location to pick up the parts and pieces, versus having to wait for it through Canada Post.”

How long will the strike go on?

Businesses are bracing for the strike to extend into the new year, said Poirier, who criticized the federal government for not intervening like it did earlier this year during the port and rail strikes. “The problem is they’re not at the table,” he said. Poirier said he can only speculate about what’s holding the federal government back, but criticism received from labour advocates for its intervention in the other strikes may be one factor. Another is that the port and rail strikes impacted the very top of the supply chain. “The business community isn’t as vociferous as it was during those crises because, you know, the whole thing shuts down,” he said. “(In this case), a big part of it shuts down but not everyone’s going to be impacted. So you have us and CFIB saying, hey, this is a big problem, but other associations aren’t there. The government knows that and it gives them a bit of flexibility to not act, if they’re inclined not to.” With the Canada Post strike nearing four weeks, the postal service says it doesn't see an end in sight. On Monday, the Canadian Union of Postal Workers sent over its latest list of proposals, which include wage gains and job protections. But Canada Post said in a statement Monday that the proposals don't bring the two sides any closer together in a dispute that's brought millions of deliveries to a halt. It said it's conducting a full review of the offers, but said the union has in some cases increased its demands or reverted to previous positions. CUPW similarly said that Canada Post has not backed down on what it called "numerous rollbacks" to pensions, benefits and salary increases. The union's new wage proposal is lower than its previous demands. On Monday, it said it's asking for wage increases of nine per cent in the first year of the contract, followed by four per cent in the second year and three per cent in the following two years — a total of 19 per cent. That compares with an earlier demand for 22 per cent or a compounded 24 per cent. It said it's also asking for a cost of living allowance, more job security, and higher short-term disability payments. For urban workers, the union is asking for a minimum 20-hour schedule for all part-time employees, as well as improved full-time staffing and more protections against technological change. One of the key issues in bargaining has been a potential expansion into weekend deliveries, with the two sides at odds over how to staff the expansion. Canada Post has said it plans to staff the weekend shifts with a mix of new permanent part-time positions and some full-time. But the union has accused it of trying to increase its reliance on part-time workers. The Crown corporation said it wants to bring flexibility to its delivery model as it struggles to compete with other carriers and is trying to stem ongoing financial losses. Despite calls for the government to intervene in the strike approaching four weeks long, Prime Minister Justin Trudeau said Monday that the government is putting pressure on the two sides to reach an agreement. The strike began Nov. 14, and though a federal mediator was appointed, that was put on hold nearly two weeks ago due to the sides being too far apart. With files from The Canadian Press