Is Loblaw finally ready to sell groceries online?
Online grocery sales – an elusive and long-awaited concept for most in Canada – appear poised to make a meaningful leap in the coming months.
All it took was for the country’s largest supermarket operator to get into the game, which at last, it looks like it’s preparing to do.
“Loblaw is planning a pilot test of online grocery retailing this year,” experts at Desjardins said in a note to clients on Tuesday.
The particulars of how the test may play out are likely state secrets at Brampton, Ont.-based Loblaw, but the objective isn’t:
With the number of big players pulling for you grocery budget increasing in the past year, Loblaw needs to innovate if it wants to win more or even just maintain the amount of money Canadians spend at its many grocery stores.
How the new digital initiative will work is again guesswork, but there is some early speculation that the pilot project will try out a new “click and carry” plan at two stores whose locations have yet to be disclosed.
The click-and-carry method is different from a standard delivery model. Shoppers place their orders over the web then go and pick them up.
Desjardins says Shoppers Drug Mart locations could be ideal for such a plan. That may be because outlets owned by Shoppers, which Loblaw bought for an astronomical amount of money last July, are located in more densely populated urban areas compared to Loblaw locations scattered across the burbs.
Local-area consumers can shop online, then walk or drive a short distance to pick up their order.
If the trials go well, the Shoppers chain of more than 1,200 stores could be used to launch a full-scale program to sell grocery orders online available for pick up, Montreal-based Desjardins suggested.
The rumoured move from the country’s biggest grocer could dramatically shake up the industry, experts say.
While U.S. retail behemoths Walmart and Amazon launched e-commerce food businesses in Canada last fall, neither have won much fanfare from shoppers.
WATCH: Amazon introduces food sales via the Web to Canada (Oct. 31, 2013)
Canadian grocers, meanwhile, have largely avoided opening up online sales, with only Grocery Gateway in Toronto and some IGA outlets in Quebec making purchases online possible.
As a result, online sales of food in Canada comprises a miniscule proportion of all grocery sales – just a fraction of 1 per cent, according to Strategy&, a consultancy owned by PriceWaterhouseCooper.
But the amount stands to grow by a factor of 10 over the next decade, Strategy& figures suggest.
That growth potential coupled with major competitive pressures being felt now by traditional grocers as the likes of Target and Walmart muscle in on their turf, makes a push into digital grocery sales a necessary move, experts say.
“We expect them to be quite aggressive in the hunt for sales this year and everyone will have to respond” with new promotions and ideas, Perry Caicco, an analyst at CIBC said after a retail conference last month.
Loblaw likely wants to avoid making grocery deliveries to individual homes, however.
Experts suggest that’s because it would cost the grocery giant more and it would be paying for what customers essentially do on their own now.
Still, Amazon.ca gives free delivery for customers to its Amazon Prime service, while Walmart generally offers free shipping.
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