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Loblaw is set to roll-out its grocery ecommerce pickup and delivery services nationally, reaching 70% of Canadians by the end of the year.

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Loblaw is partnering with transit organisation Metrolinx to launch a new PC Express grocery pickup service at five GO Transit stations in the Greater Toronto Area.

Testing range of pickup solutions

The new PC Express service will launch at five GO Transit stations this spring, before being expanded in phases to additional sites in the region. The service will allow commuters to pre-order groceries online for pickup during the next day’s commute. Depending on location, the groceries will be picked from a nearby Fortinos or Loblaws format store and will be waiting in a special delivery truck, in lockers or in an enclosed kiosk.

 

Source: IGD Research

Complements existing grocery ecommerce services

This service builds on the retailer’s growing ecommerce business, including click and collect which is available from almost 300 stores. This new service will bring an added level of convenience to many of its shoppers, enabling them to integrate the pickup into their existing journey. At the end of last year, Loblaw started partnering with Instacart to offer home delivery in the Toronto area, ahead of the service’s planned expansion to Vancouver and other cities later this year.

Focusing on helping shoppers save time

While several retailers in Europe offer a transit-based pickup service for online grocery shopping, Loblaw is the first to do so in Canada. In the US, Ahold’s Peapod service piloted a similar service in Washington in 2016. Beyond transit locations, retailers have also been testing grocery pickup in other convenient locations including university campuses, fuel stations and workplaces. While there are some added complexities compared to store-based click and collect, service costs are typically lower than for home delivery.

Building the PC brand

Through branding the service as PC Express, Loblaw is helping to further elevate the PC, or President’s Choice brand. Recently it launched PC Insiders, a fee-based subscription program and PC Optimum, its new loyalty program which brings together its former PC Plus and Shoppers Optimum programs. The PC brand is an important strength and point of difference for Loblaw, and beyond its range of private brand products, it has also been applied to its PC Financial and PC Mobile propositions.

Learn more about Loblaw and the Canadian grocery market by signing up to our free newsletter here 

Stewart Samuel, Program Director, IGD Canada: based in Canada, Stewart heads up all of IGD's research and coverage on Loblaw. He is also responsible for shaping IGD's research program across North America. Contact Stewart at [email protected] for further insight on the region's markets, channels and retailers. Follow Stewart on Twitter: @Stewart_IGD

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We review Loblaw’s fourth quarter performance and the outlook for the year ahead.

Loyalty launch adds $211m to costs

Loblaw’s fourth quarter retail sales fell by 1.2% to $10.7bn, reflecting the divestment of its gas bar business. Excluding this impact, sales improved around 2.1%. Food retail same-store sales were up 0.5%, while drug retail saw a 3.6% improvement. Operating income in the quarter was down 85.7% to $56m, impacted by costs associated with the launch of its new loyalty program, PC Optimum. The retailer also saw an impact of $107m related to the Loblaw Card Program which forms part of the company’s actions to address its role in a price-fixing arrangement involving certain packaged bread products.

For the full year, retail sales increased by 0.6% to $45.6bn, with operating income up 18.2% to $2.2bn.

Source: IGD Research

Sacrificing volume to deliver profitable sales growth

Despite the impact on profitability, the business continued to drive positive same-store sales across both food and drug retail, with the latter delivering a significantly stronger performance. Volume was impacted in the quarter as the retailer chose not to undertake unproductive promotions, focusing on maintaining stable margins. It will aim to manage this by operating within a volume trading range but expects to be at the lower end of that range this year.

Mitigating cost headwinds with range of measures

The Canadian market remains highly competitive, with promotional intensity increasing, as retailers face several cost headwinds. This year, Loblaw expects labour costs to increase by $190m, following changes to the minimum wage, while operating income will be impacted by $250m due to healthcare reform. Plans have been put in place to mitigate these impacts, including restructuring activities, increased supply chain handling fees and initiatives to improve processes and efficiencies. Recently it expanded its Scan and Go pilot in Toronto and plans on expanding self-checkouts within the Shoppers Drug Mart network.

Scaling up ecommerce programs

The retailer will continue to invest in scaling up its ecommerce operations. Following the launch of home delivery in partnership with Instacart at the end of last year, this will be expanded to additional cities. It is also adding critical mass to its click and collect operation, adding around five stores each week, building on the 300 which were in place at the end of the year. This year it will undertake capital expenditures of around $1.3bn, including $1bn in its retail segment, broadly in line with last year. Most of this will be directed towards remodels, with space growth remaining flat.

Loyalty programs performing ahead of expectations

Although the launch of the PC Optimum program impacted profitability, the retailer is seeing a strong response to the program in the first few weeks. The retailer views its personalised program as a significant competitive advantage, particularly given the ability to have a single view of its customers across all it retail stores, services and digital platforms. Its recently launched pilot subscription program, PC Insiders, is also tracking ahead of expectations. The business is focusing on understanding which elements of the proposition resonate most with customers and the impact on shopping behaviour.

Learn more about Loblaw and the leading retail trends by signing up to our free newsletter here 

Stewart Samuel, Program Director, IGD Canada: based in Canada, Stewart heads up all of IGD's research and coverage on Loblaw. He is also responsible for shaping IGD's research program across North America. Contact Stewart at [email protected] for further insight on the region's markets, channels and retailers. Follow Stewart on Twitter: @Stewart_IGD

Loblaw has launched its new loyalty program, PC Optimum, combining its previous Shoppers Optimum and PC Plus loyalty programs.

A platform for cross-promotions and events across its assets

The new program is accessible through a single card or app, enabling members to earn and redeem loyalty points across Loblaw's network of stores and its ecommerce sites. This creates a more seamless experience for Loblaw’s customers as they move across its various physical formats and digital platforms, while providing the retailer with a platform to run promotions and events across all of these.

Source: IGD Research 

Ability to create personalised offers

The previous programs, PC Plus and Shoppers Optimum, had 8m and 11m members respectively, are were among the leading loyalty programs in Canada. The new PC Optimum program features elements of both, including weekly personalised offers, the ability to redeem points for almost any products, and points-earning and points redemption events. Personalised offers are an important element, providing Loblaw with the ability to create a customised experience for each shopper.

Builds on launch of PC Insiders program

The launch of PC Optimum builds on its new pilot program, PC Insiders. This is a fee-based subscription program which offers a range of perks to its most loyal customers. These include free online delivery for its non-food websites, free pickup for its grocery click and collect service and 20% back in PC points on family essentials including diapers, infant formula, and all PC Organics products. The digital, loyalty-based program is initially targeted towards PC Plus loyalty members who are also President's Choice Financial Mastercard cardholders. Following an initial launch in British Columbia and Ontario, the program is expected to be expanded out more widely this year to PC Optimum members.

Locking-in shopper loyalty across Loblaw’s ecosystem

Undoubtedly comparisons will be made with Amazon’s Prime membership program. Like Amazon Prime, PC Insiders aims to optimise the retailer’s ecosystem, offering benefits which incorporate its physical and online stores, financial services, travel services and private brands. The benefit of a fee-based subscription program is that it helps to lock in shopper loyalty, and limit cross-shopping across other online services. This is likely to help drive higher spending at Loblaw among members of the program.

Learn more about Loblaw and the leading retail trends by signing up to our free newsletter here 

Stewart Samuel, Program Director, IGD Canada: based in Canada, Stewart heads up all of IGD's research and coverage on Loblaw. He is also responsible for shaping IGD's research program across North America. Contact Stewart at [email protected] for further insight on the region's markets, channels and retailers. Follow Stewart on Twitter: @Stewart_IGD

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