[00:00:00.000] Hey, Charles. Hi, David. How are you?

[00:00:02.250] I’m great. It’s the end of the week.

[00:00:04.080] It’s the end of the week.

[00:00:04.940] Who isn’t happy?

[00:00:06.980] Yeah, it’s nice.

[00:00:07.910] Especially. Well, go ahead.

[00:00:09.580] What were you going to-Well, I did this morning. I forgot it was Friday. Yeah. And so I apologize for only wearing a T-shirt when I see you’ve got this gorgeous, gorgeous shirt.

[00:00:20.160] It’s a Black Friday deal. Yeah? Yeah. Yeah. Holt Renfrew had it on for $50 down from $300, which, of course, is stupid to begin Yeah. But once you see that thing, you can’t resist. I can’t say no. No, no, of course. I just walked in because I saw these signs and they had a bagpiper doing Christmas tunes because Holt Renfrew used to be Ogleby’s in Montreal, which is very classic Scottish name and department store, very high-end. And I would never go in because I don’t personally think Hugo Boss is high-end in my mind. It seems plastic. But I did do the walkthrough just looking at the liquidation racks.

[00:01:09.020] I mean, it’s the only way to buy clothing.

[00:01:12.610] How do you say no to a deal? You can’t.

[00:01:14.800] Yeah, exactly.

[00:01:16.150] But today, we’re going to talk… We’re going to get behind the headlines. And we’re going to talk about… There’s so many articles about it. And to our international friends, don’t give up because it’s about Canada Post. Here we are. Canada Post’s strike has cost small business $765 million. I have no idea how they calculate that number, but it rings completely true to me. So we are edging our way towards week four of a strike at Canada Post. Canada Post, government-owned quasi-monopoly, if not full-out monopoly on letters, on mailing things. And well, I’m going to make the bold declaration that I think this is the death of Canada Post.

[00:02:09.820] Yeah. I mean, it’s a striking statement, and especially when you go like, well, it is so ingrained in this country. It’s so large. So it’s at the same time hard to believe.

[00:02:23.290] Too big to fail?

[00:02:24.030] Too big to fail. But then what has been going on and how business must adapt, you go like, Yeah, this is… If you’re not dead soon, you’re not going to ever go back to what you were.

[00:02:37.520] Well, let’s put it in context. They’ve been losing money for six years now, billions of dollars. They forecast, even without the strike, that they were going to be in a cash crisis in the first quarter of 2025. The strike saves them a little bit on payroll, obviously, but the drop in business is, of course, crippling. But let’s talk about some of the long term impacts that this particular strike and the length of it is having. So talk about parcels for a second.

[00:03:16.360] Yeah. Well, so parcels, a lot of small business and small, medium businesses rely on Canada Post as their main shipper for any online sales that they make. And potentially the only one they use, not only the main, but the only one. So in this, obviously, the timing of this strike-Right for the holidays. Yeah, Black Friday, Cyber Monday. Is Cyber Is the holiday still a thing or it’s just-No idea.

[00:03:47.480] Yeah, okay.

[00:03:47.720] And obviously the holidays coming. This is extremely hurtful to many businesses that-So what do they do?

[00:03:58.450] I mean, the people still want to place orders with these people. Yeah, of course. So what do they do?

[00:04:03.320] Well, fortunately, there are options.

[00:04:05.960] Competition in the parcel business.

[00:04:08.170] In the parcel business, the FedEx and UPS, and a lot of smaller players, regional players. And it’s like this everywhere that, since COVID, have built fleets and put on systems that allows them to take on these deliveries. But then again, it’s not just… It still is very disruptive to the small and medium business owners and operators to have to make that changes. Not only these other competitors are also very, very busy and have some capacity to treat the increase in volume for that holiday period. It’s just can make or break the ability to deliver and therefore meet to your profit numbers in a period that is where you should potentially be making the most of your year.

[00:05:07.230] Yeah. So in other words, you forced… Canipost has forced a small, medium business to very quickly completely re-adapt their online supply chain, to use other carriers. And in so doing, when the strike is over, Well, what a lot of people do not understand is the power of inertia in the economy, the power of inertia in a business. Just think about a banking relationship, right? Everyone at home or all We all have a bank, and we have a mortgage with a bank. And the minute we have a mortgage with a bank, the odds of switching, the effort it takes to switch banks is so overwhelming, maybe not in actuality, but certainly mentally, it feels overwhelming that you don’t switch banks. You stay with your bank forever. And the banks know that.

[00:06:04.880] It’s got to hurt real bad.

[00:06:06.620] It’s got to hurt real bad to make that change. That’s the power of inertia in the economy. And in this case, what Canada posts Union has done, along with the… I mean, they’re both to blame, not to single any party out, is force businesses to change who they use as their main shipper. They’re not going to come back.

[00:06:29.240] They’re not going to come back.

[00:06:30.300] It’s inertia. Once they set up another way, they’re going to ask, why would I go back?

[00:06:35.540] Yeah. This is a golden opportunities for the other. Then you’ve got to deliver, obviously, meet service levels. And as you said, there’s not going to be any switching back. You could say for some business, Well, I will switch back when they’re up again if the price is so much lower, but it’s not. It’s not. Even if it was a little bit lower, as you say, the risk and the hassels right now is not worth the money.

[00:06:59.920] The risk of exposing yourself to a company that is a monopoly, therefore the union is essentially also monopoly that could, on a win, shut the entire supply chain down. You can’t take that risk. No way. The other interesting thing is a side note. So I do know someone who just got a UPS, United States Postal Service, USPS, not UPS, USPS notification saying that because of the Canada Post isn’t delivering, we’re not going to get your package in time for Christmas. I was just thinking when I saw that, how disruptive that is to the United States Postal Service, who they’re in their busiest period of the year, and Their outbound loads to Canada will be the busiest of the year for them as well. And now they have nowhere to send it. It’s not like they’ve got ootles of space sitting around. So they’re going to do all sorts of special things, send out outside storage, have mail sit in some highly controlled outside storage, expensive, incrementally expensive. Everyone’s going to take advantage of price gouge, the USPS, as they seek these services because of this disruption. Obviously, Canada is not a huge part of the USPS’s business, but I would be pretty strong.

[00:08:24.540] It is the largest outbound international destination for USPS mail.

[00:08:31.530] Yeah, and it’s not like the USPS can go… It’s not crossing the border and then Canada Post is holding it until… Canada Post can’t handle it. No, they’re just not touching it.

[00:08:40.470] So that’s parcels. Now, let’s talk about letters. Everybody thinks of letters, their first grandma’s Christmas card.

[00:08:49.300] Which is very important. Well, yes.

[00:08:51.310] I mean, I don’t mind an empty fridge. I don’t personally need to see a picture of you and your family on the- It’s not for you, it’s for her.

[00:09:02.990] It’s for the grandma being able to do it, not for you to receive it.

[00:09:06.730] I like grandma. What I don’t need is my neighbor sending me a Christmas card where they’re all in Rudolf the Reindier pajamas, and then they give me a laundry list of every vacation they went on last year. I don’t need that. That’s what Instagram is for. But, again, most people don’t appreciate that The Canada Post is actually integral to a major form of payment. And payment is actually what closes the loop in a supply chain. Getting paid for goods, and in our case, services is important. And still a large number of businesses, including very large businesses, use checks and mailing checks as their a main form of payment. You can pretend that a Walmart or some other behemoth, every corner and nook and cranny of their technology stack is the latest and most updated. It is not that. It’s not how the world works. Large organizations cannot just on a dime change systems. I was just talking to a wholesaler, and they have 75 DCs across the United States. They have an eight-year plan to do their WMS changeover because you just can’t do more than one every two months. So you do the math and it just takes forever.

[00:10:43.210] So a The Canada Post is in a critical sineu in the supply chain and in the economy as the medium by which payment is transferred from the customer to the supplier, especially, well, almost exclusively, but importantly in B2B transactions.

[00:11:08.210] Well, just us. The first week goes by, you go like, Okay, is this going Will there be a force back to work, or measures? Will there be back to work legislation? Yeah, legislation. Thank you. And then you go, Well, let’s check. And then after a week and a half, two weeks, you say, Well, maybe we should do something about this. So even on our end, we Our finance department had to list every client that pays us by check, reach out to all of them, except that there are things that are already in transit and there’s nothing to do. That are stuck. Are stuck. And And for the others, ask them, Hey, can you do this favor? Can we switch to-We’ll organize it. Can we get a courier?

[00:11:54.190] A wire or ETF?

[00:11:55.540] Yeah, that. But as you were saying, sometimes some businesses were is not there yet. So it’s still a check. Okay, can you put it in a courier service? We’ll pay for it, we’ll organize it, we’ll send you the… But it’s just it adds clerical work. And it’s annoying.

[00:12:12.920] And for the folks that actually you can When they then move from check to wire an ETF, they don’t go back.

[00:12:20.770] Same thing as we were saying for parcels.

[00:12:22.700] No one is going to be printing checks. Again, it’s inertia that creates one thing, and it’s a crisis that forces everyone to find an alternate course. And so let’s say, if we take our client base, if 5 % of that switches from checks to wires and ETF, that volume will never return to Canada Post. Never. It will be permanently missing. Again, inertia is what kept that volume in the Canada Post system, and it’s inertia that will keep it out permanently from the Canada Post system. I think that’s the critically important thing because the strike will end however it ends, or Canada Post will run out of money and the strike will end because Canada Post will be dead. You come out of this strike however you come out of it, and the volume is now going to drop again. And stay there. And stay there. And then there’s this infrastructure across the country that has a capital cost We know that Canopost has spent hundreds of millions of dollars in the recent years on some very sophisticated facilities that depreciation cost doesn’t magically disappear because of a strike. And it’s going to spread across a smaller volume, which is going to create this vicious circle of unaffordability.

[00:13:54.790] And the worst part of this whole situation, and it’s the third thing I want to talk about, is how, and you can see this with businesses all over the place, shareholder issues can create a paralysis that prevent a business from solving the problems it has. And in this particular case, the shareholder is the government of Canada. But the government of Canada is in a precarious situation. It’s polling at what is abysmal, almost historic lows. It’s a very unpopular government, and it is propped up by a fiercely pro-union party. Without that party’s support, it doesn’t survive. So it cannot legislate an end to this strike, which is the traditional way that we would manage these essential service situations. And because of that Morales is at the shareholder level, which in this case is a government political weakness, Canada Post is left rudderless in the middle of a storm, and I don’t think it survives. That’s my prediction. Do I hope I’m wrong? Of course. Am I ever wrong? Never. Never wrong. No, but it’s a dramatic statement. And of course, they’ll I can figure something out, maybe. But this is chopping your arm off.

[00:15:36.190] This is-Self-inflicted.

[00:15:37.790] And hugely debilitating.

[00:15:39.780] Yeah. But the volume, as you said, the drops, and maybe not even stay there, because even those companies that were not able to make the switch prior to the end of the strike, whenever that is, they’ll continue, they’ll still make. So the volume, it’s only a downfall from But the global volume, the total volume, doesn’t go away, right?

[00:16:05.440] It’s going to find other ways of getting things done.

[00:16:08.520] So the parcels need to go from point A to point B. So that infrastructure, and again, I’m looking further down the road, but will become available to some competitor.

[00:16:21.130] Well, that’s very true. If Canada Post was to fall apart, there are some nice assets, some very great material handling equipment sortation facilities and all that, that could probably be better used in the private sector, where we have enough, at least, and then build up enough of at a base that the country and the country’s economy is never again exposed to such a problem. I mean, a billion dollars over four weeks, it sounds like pennies, but what is not… I mean, we are a very large economy. But what’s not being counted here are all the small businesses that don’t have the luxury of we’re blessed with a large amount of wire and electronic transfer paying customers. Not every small business is like that. And not every small business has lines of credit that can take them through this strike. So if we see an uptick on bankruptcies, I would not be surprised. Even if that business is healthy, on your income statement is healthy, you’re showing that you can make a profit. But if you can’t collect the cash, you’re dead. Actually, we have to tell this story.

[00:17:46.200] Sorry. Oh, from the years and years ago?

[00:17:48.780] Years and years ago at the beginning of Lid.

[00:17:50.490] It was one or two years old.

[00:17:52.610] It was two years old because I remember exactly- Where we were. Right. And we were doing a project with, ironically, a Crown Corporation in Saskatchewan. And it was a very large project. And we were waiting for their down payment.

[00:18:07.400] I remembered the amount.

[00:18:08.740] Me too. But we won’t say it.

[00:18:10.520] Was a big amount?

[00:18:11.340] It was a big amount, and especially back then for us. Yeah, it was. And it wasn’t coming, it wasn’t coming, it wasn’t coming. And we asked. We were very scared to ask in those days.

[00:18:22.900] But just, if I may ask to the context, we were renting offices on a monthly basis.

[00:18:28.440] We were renting month to month in a mostly empty building.

[00:18:31.780] Because they were going to convert this-into condos, luxury condos, which by now, they’ve actually built the tower.

[00:18:37.960] Yeah, I know. It’s very nice.

[00:18:39.190] So we were one of the last remaining- There were us and another tenant.

[00:18:44.120] And When we travel, we were all travel. We were a team of three. So we traveled and we’d lock the door, the lights would be out. And we were gone because we were in Saskatchewan doing work. We were gone for a week. And somehow… Okay, so they said they paid, they sent a check. It checks in the mail. And so finally we got this theory, is it something with the mail? We called our local post office, right? Yeah. And it turned out that the mailman-Would not come by anymore. Would not deliver mail to us anymore and had written down that we had moved. Yeah.

[00:19:22.130] You see, it’s an empty building, the door’s locked. Yeah. For a few days. Our office. Of our office for a few days.

[00:19:27.940] For five days. Yeah.

[00:19:29.000] It’s like, okay, this is This is done.

[00:19:30.290] This is done. They’re gone. No more delivery. Why would I go to that floor anymore? We nearly died because we nearly went bankrupt because a mailman had decided on our behalf That we no longer worked where we worked. That was scary. That was very scary. And that’s no shade on the mailman. He was very apologetic when he showed up. He was very, very kind. But to show you what we mean by how important the Canada Post is to sending payments between businesses. It’s actually critical. And it’s a real shame that there’s no way to resolve this labor issue.

[00:20:22.680] Well, let’s hope it does start.

[00:20:25.070] I don’t think it will. I think this is the end of Canada Post.

[00:20:28.690] Well, shame on them. Yes.

[00:20:32.010] Absolutely. All right.

[00:20:33.410] Good.

[00:20:33.980] Thank you, Charles. Have a good weekend.

[00:20:34.730] Yeah, you, too.