I had the same dilemma a few weeks back so I spent a few hours trying to figure out the best solution.
As you say, there’s untracked Lettermail that costs just under $2 or a tracked parcel that will run close to $12. There’s absolutely nothing in between. The parcel option is straightforward but usually just destroys any profit margin for things under $50.
www.canadapost.ca/tools/pg/manual/PGletterml-e.asp section 4 here outlines the types of Lettermail. Non-standard Lettermail is probably what you want. The key parameter is that it must be under 2cm in thickness (I think it’s a limitation on the mail sorting machinery). I’ve sent a couple bubblemailers this way and have had no issue.
I’ve also seen (but not yet tried) this shipping box: www.theslotbox.com/box-mailer-fits-canadapost-oversize-slotIt’s advertised to be perfect for Non-standard lettermail and it may be worth a look
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