EXCLUSIVE — Canada Post Cuts 20% Of Annual Service Fees Paid To C-Stores With A Postal Outlet

Without warning and unilaterally, Canada Post recently reduced by 20% the “Operating Service Fee” payable to convenience stores for operating a postal outlet.

According to what DepQuébec has learned exclusively, at least two c-stores with an approved dealership agreement have confirmed this fact, which occurred for one a few months ago and for the other, almost two years ago. In both cases, the amount of operating service fee granted decreased from $25,000 to $20,000, a loss of $5,000 annually.

These fees based on achieving a certain sales volume as well as sales commissions (for parcel deliveries and others) sum up the total revenues collected by a convenience store enabling it to pay for the staff serving customers at the outlet, often during long hours on weekdays. In fact, convenience stores generally make very little profit, if any, for operating a postal outlet but appreciate its capacity to generate store traffic.

This devastating revenue decline for the targetted convenience stores was also laconically communicated to them through a sanitized letter obtained by DepQuébec, which is anything but a model of compassion and empathy.

“Every year Canada Post determines the “Operating Service Fee” payable to Dealers in the form of a credit on Dealer’s monthly invoices from Canada Post as per Section 8.4 of the Dealership agreement. (…) As you know, the Dealership Agreement currently being offered by Canada Post has, among many other differences, a change in the Operating Service Fee. The amount set-out above reflects this change.” – Martin Sarch, Director Retail Network, Canada Post

Canada Post insists: c-store owners have been warned

Contacted by DepQuébec, Canada Post spokesperson, Sylvie Lapointe, acknowledged the facts but insisted that convenience stores owners were aware of the coming increase.

“Canada Post is reviewing its agreements and partnerships on a regular basis to better align them with the competition and to continue investing in its facilities, network and products. In 2013, authorized dealers received information about changes that will come into effect when renewing contracts with Canada Post.” – Sylvie Lapointe, Canada Post

This assessment, however, is not shared by a c-store owner whom we have spoken to.

“We never had any information, I would have remembered. Maybe they slipped a little note into a long document, I don’t know, but otherwise this cut is a complete surprise to us.” – Jean-Louis (fictitious name), owner of a convenience store with a postal outlet.

Jean-Louis says that it becomes increasingly difficult for him to reach the necessary sales volume to obtain the full fees now at only $ 20,000 instead of $ 25,000 and that in addition, Canada Post competes directly with him by soliciting his best clients!

According to Ms. Lapointe, there are 120 convenience stores in Quebec operating a postal outlet out of a total of 490 in Quebec, a growing number according to her. In addition, each agreement is “confidential, specific and individual to each dealer”, she added.

Another owner we talked to said that Canada Post has cut his fees two years ago. He said that it is very difficult to make a profit out of it and that he must put in many hours himself since he can’t afford paying a full-time employee to do it.

Far from being a Klondike!

Other c-store owners we talked to had a lot of frustrations to vent with regards to this service and their tense relationship with Canada Post.

Robert (fictitious name), owner of a small grocery store, said he only earns about $ 700 a month in fees, or about $ 8,000 a year, while it costs him around $ 40,000 in salaries to staff the outlet from 7:30 AM to 6 PM or 52.5 hours per week plus about 5 hours on weekends.

“Of course we saw a drop in store traffic when the service at some point was affected by a labor dispute at Canada Post, which is why we keep the counter. But it is under very difficult business conditions. ” – Robert (fictitious name), grocery store owner with a postal outlet.

Sales commissions are not high enough to make up the difference and since the service is very complex and requires even two weeks of training for a new employee, Robert feels obliged to pay them 50 cents over and above the minimum wage.

According to him, a dealer must work a lot for very little and when problems arise, it is very difficult to get answers from Canada Post, which he claims is a huge bureaucracy.

“Customers talk to us as if we are Canada Post employees: they complain about all kinds of things, but we have absolutely no control or information to give them.” – Robert

Another convenience store owner, Thomas, is established in a remote area. He enjoys the status of “Postmaster”, meaning that he is paid directly by Canada Post for the hours he puts at the counter. Except that even him suffered cuts of the same order.

“I too was cut about 20%, because my hours have gone from 24 to 20 a week since about a year,” he told DepQuébec.

As for Stephanie (fictitious name), another convenience store owner, she has not seen any reduction yet but she only rents some space within her store to Canada Post. This shows the vast diversity of agreements that Canada Post engage in with the retail network.

Divide and conquer?

The question raised by this brutal business conduct is whether Canada Post is abusing its dominant position to force convenience stores and grocery stores to deliver a service at a loss.

Or is it merely a strategy to having them replaced by pharmacies? With their higher margins on the sale of prescription drugs, they seem more likely to offer this service although that seems less and less obvious as demonstrated by the recent sale of the Jean-Coutu Group to Metro.

One thing is certain: for convenience stores owners, operating a postal outlet profitably is increasingly becoming the exception instead of the rule.

This 20% ​​annual service fees cut for a barely profitable service also came at the same time as the 6% increase of the minimum wage to $ 12 in Quebec.

In addition, c-stores owners must deal with the highest credit card fees in the world, contraband tobacco, minimum prices for milk, beer and the ever-increasing requirements of the deposit, including a compensatory amount of only 2 cents per container established in… 1984.

There is a limit at milking convenience stores like cash cows. At some point, something will break. And at that time, suppliers like Canada Post will lose opportunities as well as the government and society as a whole, a process that is unfortunately already well underway while the most fragile are already closing one after the other.