Deficit-ridden Canada Post tries to change its image - with mail-order business

The Canadian post office has gone into the catalog sales business. It is running a test in eight Canadian centers, and local merchants are outraged by the subsidized government competition. One shop even sold cut-rate stamps as a form of protest.

Canada Post is no longer a government department but a government-owned corporation, and is trying to change its stodgy, strike-ridden image.

So consumers Distributing of Toronto is offering its catalog items at eight post offices in Ontario and Quebec in a 90-day test project. If it is successful , it could be used at the more than 8,000 post offices across Canada.

Customers can place orders from the catalog at the test post offices and pick them up there three days later. Canada Post, as the Canadian postal system is known, gets a fee for handling the order.

The program appears to be a good deal for the post office, which increases its revenue at an existing site, and for Consumers Distributing, which picks up business without having to set up a catalog operation. It has 201 catalog showrooms across Canada and 140 outlets in the United States.

The post office says it wants to use its existing post offices to generate more money to cut into its deficit, which was $262 million last year.

None of this has impressed George Abdallah, who runs a furniture and appliance store in Pembroke, Ontario, a town about 90 miles from Ottawa. He does not enjoy the competition from the post office, which he supports with his taxes.

''We have a lot of empty stores downtown here. Let Consumers come in and peddle their wares at the same expense as the rest of us. But they won't come in here because it would cost them too much.''

Mr. Abdallah fought back by selling 32 cent stamps for 25 cents each, a combination protest and promotion.