Canadian grocers adding online heft as Amazon raises home delivery stakes

Online shopping
Online shopping

More Canadians may soon be able to order their groceries online for delivery as the country’s grocery wars heat up following Amazon’s entry to the competitive space.

The impetus for grocers to up their e-commerce offerings was likely Amazon’s acquisition of Whole Foods Market last year, said Kevin Grier, an agriculture and food market analyst with Kevin Grier Market Analysis and Consulting Inc.

“That got everybody’s attention,” he said.

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The tech titan already operates its Amazon Fresh delivery service in certain cities and the acquisition, which included 13 Canadian Whole Foods locations, led to speculation it may be looking to expand the service north of the border.

The company also opened the doors to its Amazon Go store in Seattle, Wash., Monday – a cashier-free, cashless concept it’s been piloting for a year.

When the tech giant entered Canada’s competitive grocery industry, it was “a wake up call,” said Grier, and other grocery chains started experimenting with how best to offer home delivery.

Sobeys Inc. announced Monday that it signed a partnership deal with Ocado Group for the British company to help build the grocer’s online shopping business, which they expect to launch in the Greater Toronto Area in about two years.

“We cannot count Amazon out and know that they will be strong,” said Cynthia Thompson, a Sobeys spokeswoman.

“We want to be the other player. The grocer that is competing with them head on,” she added.

It will take the companies two years to build a customer fulfilment centre in the GTA. A video of a similar Ocado facility in Andover, England, shows an operation spanning nearly 21,000 square metres (or 226,000 square feet) with robots rolling over a grid to pick and pack customer orders in about five minutes.

The companies said they will look at further development in other Canadian urban centres, though Thompson said Sobeys has yet to decide where or when it will expand the service next.

A two-year wait is too long, said Robert Carter, executive director of foodservice for NPD Group, a market-research firm.

“The growth and demand in the space is now,” he said.

While Amazon may have added some urgency to the matter, Carter said other forces have prompted grocers to boost their e-commerce offerings, including the growing millennial consumer base that responds well to delivery options.

Waiting that long, he said, could mean Sobeys loses some customers to other retailers who fill the gap in the meantime.

Loblaw, for example, announced in mid-November it would partner with California-based Instacart to launch home delivery services in Toronto starting Dec. 6 and Vancouver starting this month.

Since beginning the service in Toronto, the company has expanded to other parts of Ontario, said spokeswoman Catherine Thomas, including the Greater Toronto Area, Ottawa, the Niagara region, Kitchener-Waterloo and Guelph.

Vancouver services will begin soon, she said, as well as additional new markets this year.

Since Instacart’s business model doesn’t require a distribution centre – its employees fulfil customer orders from store locations – Loblaw was able to start offering delivery sooner.

Sobeys’ Thompson said customers are constantly assessing retailers, and the company is convinced their offer will be very compelling.

Ocado, which was founded in 2000, will partner exclusively in Canada with Sobeys and also provide support and engineering services.

Sobeys, which will invest some capital into the fulfilment centre and pay licensing fees to Ocado, has yet to determine what it will charge customers for the service, she said.

Both Sobeys and Loblaw are just taking different strategies to get to the same outcome of being able to offer delivery services, said Carter – something he expects more grocers to keep focusing on to stay competitive.

“I expect, you know, over the next six to 12 months we’ll hear a lot more news coming from the grocery players about their digital delivery, app and ordering strategies.”

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