Much like the US, the rise in Canadian small parcels is being attributed to e-commerce growth, which has almost doubled this year. According to Statistics Canada, retail e-commerce sales were $3.2 billion in June, accounting for 5.5% of total retail trade. However, e-commerce sales in June made up a smaller share of retail sales than in April and May, as more non-essential retailers opened their brick-and-mortar stores.
But the proportion of e-commerce in regard to total retail sales still remains above the pre-pandemic share observed in February. On a year-over-year basis, retail e-commerce has increased 70.6%, while total unadjusted retail sales have increased three percent.
Indeed, e-commerce orders have resulted in higher than normal small parcel volumes. In May, for example, Canada Post issued an advisory stating, “Canadians should anticipate parcel delays for the foreseeable future, even as Canada Post delivers at record levels.” On May 19, Canada Post hit an all-time, one-day record with 2.1 million parcels delivered to Canadians. That is about three times the norm for this time of year according to the postal operator. In June, Canada Post delivered 75% more parcels than it would in a typical June.
The number of larger household items, such as refrigerators, patio furniture, and barbecues, ordered online have also increased. As noted by Canada Post, these bulky items often require a two-person lift, which creates additional safety challenges and delays.
So it’s no surprise that a number of US-based trucking firms have expanded over the border to address the last-mile delivery of bulky items. Most recently, Werner announced its plans to provide delivery and white glove services to residential and business addresses in every Canadian province and territory. According to Werner, it specializes in final mile logistics of furniture, appliances, medical and fitness equipment, store fixtures and other heavy goods.
Overcoming the Last-Mile Inefficiencies
Regardless of small or large parcel, 78% of transportation and logistics companies in Canada believe that last-mile delivery is the most inefficient process of the entire supply chain. This is in comparison to 59% of similar companies in the US, according to a study commissioned by SOTI, a provider of mobile and IoT management solutions.
As part of the need to improve last-mile efficiency, Canada Post has increased the number of lockers in residential buildings across the country to more than 11,000 from 9,300 at the end of 2019.
In addition, FedEx and UPS offer alternative pickup locations at their FedEx Ship Centers and UPS Stores locations across Canada.
To meet same-day expectations, a growing number of store-front retailers offer curbside pickup and Buy Online Pick Up in Stores (BOPIS). According to OrderDynamic’s Omni-2000 Research Canada, 31% of Canadian retailers offer BOPIS. This lags behind the global average of 37.6%.
As noted by Statistics Canada, small businesses are increasingly turning to e-commerce platforms versus establishing a storefront presence. Shopify, headquartered in Ottawa, noted that in second quarter, there was a 71% increase in new stores created on the Shopify platform.
Meanwhile, Amazon has about 10 fulfillment facilities in Canada and is expanding further. In September, the e-commerce provider announced plans to build two new fulfillment centers in Hamilton, Ontario and Ajax, Ontario. In addition, five new delivery stations will be built in the Toronto area.
Amazon has also invested in air cargo capabilities in Canada to help speed up the last mile. In 2019, it invested in Cargojet. Amazon utilizes Cargojet’s overnight air network and charter aircraft services to move packages from Amazon facilities to other Amazon or last-mile carrier locations before final delivery to customers.
Cargojet plans to strengthen its domestic network to support the growth in e-commerce and in a drive towards faster deliveries as well as seven days-a-week deliveries.
Over time, Cargojet also wants to add more non-stop flights, allowing later departures and earlier arrivals to the 15 major cities that Cargojet already serves and to add new cities on its overnight network.
Lastly, cross-border e-commerce has always been strong between the US and Canada. While 90% of the population lives within 100 miles of the US, customs clearance has typically been costly and time-consuming. However, the July 1 implementation of the United States-Mexico-Canada Agreement (USMCA) is expected to accelerate cross-border e-commerce and ease requirements. The deal raises the duty-free allowance for shopping to C$150 from C$20.
The Canadian small parcel market is similar to that of the US market. Its growth has benefitted from e-commerce, but will it continue? Regardless of the degree to which Canadians choose e-commerce purchasing options or return to traditional purchasing methods, the retail trade industry in Canada is rapidly evolving and will require unique last-mile delivery options.
Deyman Doolittle is Co-founder and COO of ShipSights.
This article originally appeared in the Fall 2020 International issue of PARCEL.
