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Get ready for online grocery’s rise

Walmart and Loblaw both ramping up online sales

loblaw-clickandcollect

Of Canada’s vast supermarket sales, only a drop in the bucket are online. Nevertheless, grocers and CPGs should start to plan their e-commerce strategy now or else get left behind as consumers start to fill their pantry from their computers and smartphones.

That’s the advice from Keith Anderson, vice-president of strategy and insight at Profitero, a company that studies e-commerce around the world.

By 2018, three per cent of CPG sales in Canada could be online, up from the current estimates of 0.5 to one per cent, Anderson said in a presentation at Retail Council of Canada’s Store conference last week.

Three per cent may seem small, but Anderson pointed out that in the U.K online now represents five per cent of CPG sales and all the major grocery chains there are fighting for that share with their online stores.

Online is also around five per cent of grocery sales in New York City where several companies are battling for market share, including Fresh Direct and Amazon.

One reason that grocers and CPGs here should pay attention now is that online grocery sales in Canada are likely “to grow really slowly at first, then really quickly,” Anderson said.

He said online grocery could rise three to four times faster than bricks and mortar sales over the next few years as Canadians begin to do their full shop online.

Canada’s big grocery retailers are starting to invest in online. Loblaw Companies began a three-store click and collect service in Toronto last year (photo above) and plans to expand that to 50 stores by the end of the year, Bruce Burrows, chief information officer at Loblaw, said in a separate presentation at the Store conference.

Walmart, meanwhile, will launch an online grocery pickup service in Ottawa in the next few weeks, according to an article in the Globe and Mail, which quoted Simon Rodrigue, the company’s senior vice-president of e-commerce.

“Our intent is to continue building on our commitment to provide customers across Canada with convenient access to our grocery and general merchandise assortment and low prices,” Rodrigue told the paper.

In February, Sobeys Quebec expanded the online offer through its IGA network. The service now includes 247 of the 288 IGA stores across the province with more than 30,000 products at IGA.net.

Included in the IGA service is the ability for shoppers to personalize orders. For example, if a shopper buys avocados and makes a special request that they be ripe, this comment will be passed on to a personalized shopper who collects the products in-store.

Other grocers selling online include Overwaitea, which launched a service last fall in the Vancouver area, Thrifty Foods in B.C., and Grocery Gateway, the online division of Longo Bros in Toronto.

Amazon too has been ramping up its CPG product assortment in Canada though the company has yet to launch a fresh delivery service as it has done in the United States.

Anderson said he suspects that click and collect (or pickup at stores) will become the primary model for online grocery in Canada. Delivery, he added, might be done mostly through third-party companies, such as Instacart, which works with major grocers already in the U.S.

Selling online will likely become a war for customer loyalty rather than margin, he noted.

One interesting point he made is that the top selling brands online aren’t always the same as the category leaders in store. For instance, Kind branded snacks are among hot sellers on Amazon in the U.S.

“The big brands don’t jump into e-commerce fast enough but the hungrier smaller brands do,” he said.

“If you’re not focused on [e-commerce] before it gets big, you’re going to miss the opportunity,” he added.

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