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Following a pilot program launched 12 months ago, Loblaw is rolling out its PC Insiders subscription programme nationally.

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We look at the prospects for the online grocery channel in Canada as major retailers step-up their investments.

Forecasting 21.0% CAGR through to 2023

Although the online grocery channel has seen an increased level of activity this year, it represents only a small proportion of the overall grocery market, estimated at 0.8%. This is forecast to grow to 1.8% by 2023, with a CAGR of 21.0% expected over the period.

Source: IGD Research

Loblaw: building sector leadership with store pickup

Loblaw has set the pace in the channel. Its store pickup program reaches 70% of Canadians, serviced out of over 520 stores and 28 spokes, including 19 Shoppers Drug Mart stores. Its home delivery partnership with Instacart extends to 60% of Canadians, with the service available in 18 markets. Following a successful pilot of its membership-based program, PC Insider, this year, a larger scale roll-out is planned in 2019. The retailer is also testing a pickup service through its No Frills and Maxi discount banners.

Walmart: partnering to win in urban locations

Walmart has also been pushing hard with its ecommerce programmes. In the latest quarter, sales increased over 20%, underpinned by the expansion of grocery pickup to 40 additional locations. The retailer has also formed new partnerships to help it reach customers in urban locations, where it has relatively fewer stores. In Toronto, it has partnered with Penguin Pickup to open co-branded pickup locations for online grocery orders in the downtown area.

In Vancouver, it has partnered with Spud.ca to use its Food-X food delivery platform to offer grocery home delivery in Metro Vancouver. Walmart Canada has also announced plans to offer home delivery through Instacart.

Sobeys: building capabilities with Ocado partnership

At Sobeys, works has begun on its first Customer Fulfillment Centre (CFC) which is being developed in partnership with UK-based Ocado. The retailer expects to launch its grocery ecommerce solution into the Ontario market in the spring of 2020. This partnership, which utilises Ocado’s automated robotic technology is expected to help the retailer deliver a compelling, lower-cost proposition at scale, enable it to reach new catchments and offer an extended range of products. This will build on its established ecommerce business in Quebec.

Metro: developing omnichannel meal solutions

Having focused initially on Quebec with both grocery pickup and delivery, the retailer is turning its attention to the Ontario market in 2019. In line with the broader brand proposition, the retailer has aimed to build a differentiated, customer-centric proposition, keeping fulfillment and delivery in-house. However, the retailer has extended its ecommerce presence by making a majority investment in Miss Fresh, a leading meal kits company. The retailer has also started to pilot hot food delivery in a programme with UberEats in Montreal.

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We review Loblaw’s third quarter performance and how it’s investing in developing its data and ecommerce capabilities.

Solid performance in third quarter

Loblaw delivered a solid performance in the third quarter as it focused on delivering its commitments of stable trading, addressing cost headwinds and investing for the future. The retailer’s Q3 revenue increased by 1.8% to $14.5bn, with retail segment sales up 1.7% to $14.1bn. Same-store sales increased by 0.9% within food retail and by 2.5% within drug retail. The latter was underpinned by strong front store same-store sales growth, up 4.3%, with all categories performing strongly. Adjusted net earnings increased 2.4% to $562m.

Source: IGD Research

Optimising data capabilities

The retailer is benefitting from the enhanced use of data within the business, particularly its promotional tools, helping to drive traffic to its stores. This is also generating a more profitable basket mix, enabling further investment in the offer. With 15m members within its PC Optimum loyalty program, the retailer continues to push ahead with its personalisation initiatives. These include executing promotions and offers to grow basket spend across different customer segments. 

Aggressive ecommerce roll-out

Loblaw’s focus on simplifying the business and streamlining processes has also enabled it to invest in growth opportunities. This is a major, multi-year program across the business with seven different streams. Its online business is a key area of investment, where the retailer’s tech team has grown to over 1,000 members. It continues to push ahead with its grocery ecommerce programs, with 70% of Canadians currently with access to its click and collect program. This is being serviced out of over 520 stores and 28 spokes, including 19 Shoppers Drug Mart stores. Its home delivery partnership with Instacart extends to 60% of Canadians, with the service available in 18 markets. The retailer is also testing a click and collect proposition within its No Frills and Maxi discount formats.

During the quarter it also relaunched its beauty website, doubling its online assortment. It also opened six new-generation, enhanced Beauty Boutiques as it aims to gain share in the key category. While the retailer contimues to see an opportunity to grow its drugstore network, new food space growth will be minimal going forward.

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Following the appointment of Jeremy Pee to the new role of Chief Digital & Data Officer at UK-based M&S, Herman Paek is to take the lead role at Loblaw Digital.

Played key role at Loblaw Digital

The Canadian Grocer reported that Herman Paek has been an integral element of Loblaw’s digital journey since he joined the retailer in 2012. For most of the period, he has worked closely alongside Jeremy Pee as the retailer established its digital team and developed its ecommerce propositions.

Source: Loblaw

Built leadership position in grocery ecommerce

With grocery ecommerce, Loblaw has built a leadership position, establishing over 500 PC Express, click and collect locations. Last year, the retailer started partnering with Instacart for online grocery delivery and started piloting a new membership-based program. The retailer also operates clothing, beauty and wellness ecommerce sites.

Internal appointment ensures consistency of approach

One of Pee’s legacies at Loblaw was to build out its digital capabilities, including establishing a separate office in downtown Toronto for Loblaw Digital. He has assembled a team of experts in technology, data science, digital marketing and trading. Under Paek’s leadership, the business will look to build on this, with the internal appointment ensuring a degree of consistency.

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Presentations

04/12/2018
An essential summary of trading priorities, latest developments, and other key commercial insights for Loblaw.
10/10/2018
We highlight five new stores in Toronto which bring to life the development of new format types in response to macro trends, demographic shifts and changing shopper preferences.
20/08/2018
Almost seven years after it first opened, we revisited the flagship Loblaws Maple Leaf Gardens in Toronto to see why this store remains a source of inspiration for global retailers.
View all presentations

Key presentation

We review the outlook for Loblaw as it brings to life its 'Live Life Well' purpose.

This in-depth guide to Canada explores the key trends in grocery retail and the growth strategies of the leading retailers in the country.

An essential summary of trading priorities, latest developments, and other key commercial insights for Loblaw.

We've developed a single, universal methodology for calculating food and consumer goods retail data, supported by our programme of primary and secondary research. This makes Retail Analysis the most reliable and robust source available for data of this type. 

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