Open Mike
Online grocery shopping
Is it worth the investment? By Michael Marinangeli
Online grocery shopping has been around for over 20 years. Yet, it still represents only about one per cent of the grocery business in Canada, three per cent in the U.S., and four per cent in the U.K., according to the grocery e-commerce report issued last year by BMO’s Peter Sklar. The analysis also mentioned a Mintel report that found 88 per cent of Canadian grocery shoppers have never tried online ordering, and 68 per cent are not interested in it at all. The grocery industry seems to be badly lagging other retail segments such as clothing, electronics, shoes and sporting goods, which are much more developed and have experienced exponential growth over the past few years. At the recent FMI Winter Conference, a panel of experts made the following predictions for online grocery shopping:
Greater Toronto market since 1999. Loblaws and Walmart have offered click-and-collect since 2014 at selected locations. In addition, Walmart recently announced that, after testing grocery delivery in three Toronto condos, it will take the service to more homes in the city core. Throughout Canada, other grocers, including Overwaitea, Thrifty Foods and IGA in Quebec, provide an online service as well. Metro has announced it will be launching this service soon in Quebec. But grocery retailers have been slow to embrace online grocery shopping for two simple reasons:
• Grocers will move more aggressively to digital by 2025. • In the next decade, online grocery shopping will reach maturation in the U.S. • Centre of the store will shift to online more rapidly than other departments. • Online grocery shopping in the U.S. could reach $100 billion in the next eight years, equivalent to the volume of 3,900 stores. • 25 per cent of U.S. shoppers will buy groceries online. • 60 per cent of consumers who buy online will spend 25 per cent of their food dollars online in 10 years.
All eyes are on Amazon, which seems to be pulling out all the stops to penetrate the large grocery market. We have witnessed the tremendous success that Amazon has had in recent years in expanding its online business in other retail segments. If it gains a similar foothold in the grocery industry, the impact could be catastrophic to existing grocers. Amazon could be a major disrupter in the grocery business. Some say it is contemplating a new grocerystore concept in which a staff of robots grab and bag groceries for shoppers. Robots and possibly the use of drones, if executed successfully, would change the dynamics and economics of online grocery shopping, making the concept more viable. Time will tell whether the bold predictions for online grocery shopping hold true. I am skeptical that it will ever be a large segment of the Canadian market. It will service a niche and be a small part of the grocery sector. Canada‘s vast geography and small population with limited major urban centres make the economics challenging.
In Canada, the two main types of online grocery shopping provided to consumers are home delivery and click-and-collect (order online and pick up the assembled order at the store). Longo’s, through its Grocery Gateway service, has been providing home delivery in the
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March | April 2017
1. Consumer demand has been weak. 2. The economics of providing this service in a cost-efficient manner are challenging.