Post-COVID-19: how Canadian retailers are adapting as economic re-start plans move forward

Stewart Samuel
Program Director - Canada
@RetailAnalysis

Date : 19 July 2020

We look at how retailers are adapting to the easing of lockdown restrictions in Canada, in-store and through their ecommerce platforms. Most provinces are making solid progress through the different phases of their re-start plans. We look at how retailers in BC are adapting, with the province recently moving into phase three of its four-phase re-start plan.

Phased re-start plan

As one of Canada’s largest provinces, the impact of the pandemic in BC has been managed well. As of mid-July, total cases stood at just over 3,000 with fewer than 200 confirmed deaths. Phase three recently saw the easing of restrictions on travel within the province, hotels and camping, the film industry and education. Each province is responsible for setting its own re-start programme.

Economic activity 

The main shift for retail and foodservice occurred with the move into phase two, however, phase three will generate further economic activity which is expected to benefit the sectors. During the initial phase of the pandemic, grocery stores and many drive-thru restaurants remained opened, while non-essential retail, restaurants and pubs were able to re-open in phase two.

How food retailers are responding

Most food retailers have eased restrictions on shopping hours and product limits. Most continue to see elevated demand, given the shift from out-of-home to at-home spending. Recently, Sobeys, Canada’s second largest retailer noted that same-store sales growth is averaging around 13% in the current trading period. This will ease as consumer confidence to eat in at restaurants and other foodservice outlets grows. Retailer efforts are focused in five key areas:

  • Maintaining social distancing
  • Food safety and hygiene
  • Evolving the product offer
  • Showcasing community support and appreciation
  • Adding ecommerce capacity 

Maintaining social distancing

Current efforts are focused on reinforcing social-distancing and good hygiene and sanitation practices. Many stores have been reapplying stickers, putting semi-permanent signage in place and re-adjusting space, with the goal of improving the experience for customers.

Source: IGD Research

The front of store continues to look and feel different. At Loblaw's Real Canadian Superstore hypermarket format, hand sanitizers and other hygiene and cleaning products feature prominently, leading promotional deals have been grouped together to make them easy to shop, and some non-food space continues to be allocated to support its PC Express, store pickup service.

Source: IGD Research

Food safety and hygiene

Three key areas remain impacted by retailers’ efforts around food safety. These include food-to-go self-service bars, service counters and bulk foods. The latter represents the most visible change in-store, where the selling of baking ingredients, nuts and spices etc. in bulk format has been a key part of the industry for over 20 years. Although most retailers closed their bulk sections and re-packaged products into single-use containers, some are now starting to re-open these areas in their original formats.

Source: IGD Research

Evolving the product offer

Several retailers have launched new local sourcing initiatives post-COVID-19. Many of these aim to support local farmers and producers through providing new or additional volume opportunities to offset declines they may be experiencing in the foodservice channel. Fresh St. Market has launched the ‘Farm to Fresh St. Market’ program. Each week the retailer features a rotating mix of first of the season fruits and vegetables from local farms in a prominent front of store position. Save-On-Foods, has launched the #LocalsSupportingLocals campaign to emphasise its established local sourcing credentials.

Showcasing community support

Many stores have created interior and exterior murals to reinforce a sense of community spirit. Several focus on support for frontline workers. Several Safeway stores feature murals within service department areas.. At Fresh St. Market a series of counter stickers give appreciation to key workers and essential services.

Source: IGD Research

Adding ecommerce capacity

Building out ecommerce capability is a priority for the major operators. Demand significantly outstripped capacity during the initial phase of the pandemic, and has remained elevated, compared to pre-COVID-19 levels. This is where we expect to see retailers focusing their efforts over coming months. Several new initiatives are underway, with Canada being one of the first countries to have both store-based and centralised automated fulfillment systems operational:

  • Loblaw – has recently gone live with its first store-based micro-fulfillment centre, developed in partnership with Takeoff Technologies
  • Sobeys – launched its Voilà by Sobeys service last month in the Toronto market through its strategic partnership with Ocado
  • Metro – the retailer is building out capacity in the Toronto market, including on-demand delivery through a new partnership with Cornershop
  • Walmart – adding store pick-up capabilities to more stores, optimising data and analytics to create a more personalised experience

Source: Sobeys

What's next?

Beyond the summer months, value and affordability are expected to move to the top of the retail agenda. Governments at various levels in Canada moved quickly to provide support for individuals and businesses as the lockdown took effect. However, with rising unemployment and high consumer debt levels, the economic outlook beyond the fall looks challenging. Although Loblaw, Sobeys and Metro operate both supermarket and discount formats, there will be a need to demonstrate value and support affordability across all store formats.

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