How grocery ecommerce is evolving in Canada

Date : 03 February 2016

As Walmart expands its test of click and collect for online groceries to the Toronto area, we review how the channel is developing in Canada.

Builds on successful launch in Ottawa

Following the launch of an 11 store test in Ottawa last year, Walmart Canada has expanded this to 12 stores in the Toronto area. The Ottawa test revealed strong interest from shoppers in the service, with the convenience aspect proving to be one of the key drivers. Walmart charges a $3 fee for each pick-up. This initiative builds on the retailer’s successful operation of a non-food focused ecommerce operation for a number of years, while it is also able to draw on significant best practices from Walmart’s operations in the UK, and the US, where it has been scaling up its grocery ecommerce operation.

Loblaw expanding into Western Canada

This expansion from Walmart follows on from Loblaw extending the roll-out of its click-and-collect operation to stores in Western Canada. It launched its initial test at stores in Toronto and subsequently expanded it to stores in Edmonton and Ottawa. Following the expansion, Loblaw offers the service at its larger format Real Canadian Superstores in the Vancouver area, Kelowna and Red Deer. Nationally, around 40 stores offer the click and collect service. Developing the proposition is an important element of the retailer’s future growth strategy, particularly given the opportunity to integrate the service at its Shoppers Drug Mart locations.

Overwaitea setting the pace with home delivery

However, the retailer which has been most active in the channel is British Columbia based Overwaitea Food Group. With over 150 stores, it is one of the leading operators in Western Canada and in addition to offering store pick-up (10 locations), it also offers home delivery as part of the proposition which initially launched in the summer of 2014.

Pockets of development focused on local markets

Prior to these launches, the channel was mainly dominated by smaller operators. Sobeys was the only major grocer to offer any form of grocery ecommerce, with a service operating at its IGA stores in Quebec and Thrifty Foods in Western Canada. Other leading ecommerce providers, such as Grocery Gateway in Toronto, operated by Longo’s, and, based in Vancouver have developed their propositions with a focus on individual cities. Going forward we expect to see additional retailers enter the channel, both existing operators and technology focused companies which are looking to disrupt the sector.  Metro is expected to launch its first test later this year.

Channel remains small but scope to grow quickly

While still very early days for the channel, the prospects are for significant growth over the next two to three years as retailers move from test to roll-out mode. Currently the channel represents 0.2% to 0.3% of the total grocery market, but it could more than triple in value over the next five years. The pace of growth will depend on how quickly the individual retailers expand their initiatives across the country, increasing the number of stores offering the service, and how quickly consumer acceptance grows.

Stewart Samuel, Program Director, IGD Canada
Based in Canada, Stewart heads up all of IGD's research and coverage on the market. He is also responsible for shaping IGD's research program across the wider North American region. Contact Stewart at [email protected] for further insight on the region.