Purolator Canada won’t be squashed by Amazon, CEO says

“In 60 years, we’ve almost never seen such an investment in our business so it’s really a big day for us to announce this.”

That’s Purolator Canada boss John Ferguson speaking to BNN Bloomberg on Tuesday on the announcement that his company will be investing $1-billion to upgrade its logistics network across the country, including a “super hub” to be built in Toronto to handle the now booming parcel business, thanks to the rise of e-commerce in general and Amazon in particular.

And while we’ve for years witnessed Amazon’s Canadian expansion as it builds more distribution centres from coast to coast, the temptation would be to conclude that just as it has done in practically every market segment it has come across —starting with bookselling and merchandise and now including groceries and cloud computing— Amazon’s development of its own logistics network might seem like game over for delivery companies like Purolator Canada, a subsidiary of crown corporation Canada Post.

Purolator and Amazon have a complementary relationship, Ferguson says…

Not so, says CEO Ferguson, who argues that the mutually beneficial relationship between Canada Post, Purolator and its biggest customer, Amazon, is likely to persist.

“In Canada, they’re a great partner,” says Ferguson. “It’s a company that’s very innovative but we are as well, and I think that companies like Amazon and others really like the innovation that we’re bringing to market. Companies like Amazon want high customer experience and speed, and part of what we’re doing here with this announcement is cranking up our speed in our network.”

Purolator’s new five-year investment plan should result in a tripling of its delivery capacity, according to the company, with the Toronto super hub, which when completed will handle 60 per cent of the company’s total volume, as the focus of the buildout.

Ferguson says the delivery business has never been as complex as it is today and that Purolator is looking to strengthen all aspects of its logistics network as a result.

“Everybody wants things faster and more convenient. We’re after data and analytics and we’re investing in IT, and that’s the kind of industry it has become,” Ferguson said. “It’s almost becoming as much about technology as it is about the physical piece,” he said.

The “Amazon Effect”, of course is nothing new. Most any business with a stake in the retail or home delivery game must consider their relationship to the Seattle-based giant the way moons do to the planets they surround. Take the case of Canada Post, which is in the enviable or unenviable position of having Amazon as its largest customer.

At a recent AGM in Ottawa, Canada Post CEO Deepak Chopra reportedly put up slides of an Amazon Boeing 737 Prime Air jet and remarked: “Our largest parcel customer could deliver their own goods.”

Flash forward to May of this year and the announcement that Amazon is now building its own airport, and it is safe to say that tech moves at a pace traditional business maybe cannot comprehend.

“Amazon plans to take greater control of its shipping process and become less reliant on carriers such as UPS, FedEx, or the US Postal Service as it seeks to cut costs and speed up delivery times. This will be especially pertinent to its plans of one-day shipping for Prime members,” Mary Hanbury of Business Insider reported.