FRESH

Looking to bring online service to Canada

COSTCO EYES GROCERY DELIVERY IN CANADA.

TORONTO • Costco

Wholesale Corp. is exploring ways to deliver fresh groceries to consumers in Canada after finding early success with its new online food delivery services in the U.S.

Canada’s biggest warehouse retailer, whose grocery market share has increased substantially over the last decade along with Walmart’s, introduced onl i ne grocer y deliver y of non- perishables to U. S. customers last October. It also expanded a partnership for home delivery of fresh groceries with Instacart, which recently partnered with Loblaw in Canada to deliver fresh online grocery orders in Vancouver and Toronto.

“We are looking at sites f rom which we can f ulfil fresh grocery orders,” confirmed Costco Canada spokesman Ron Damiani. “We are extremely happy with the results that we have had out of the U. S.,” he added, noting the company does not have a specific timeline in mind for the rollout.

Last week, Costco chief executive Richard Galanti told investors on the retailer’s second- quarter conference call that its foray into online grocery sales was “positive year- to- date and growing.”

Instacart delivers groceries from 441 of the retailer’s 519 U.S. warehouse sand the service will be rolled out to the remaining locations by the end of 2018.

The move comes after a record year of bricks- andmortar expansion for Costco in Canada, one of its strongest markets, and at a time when W al mart and the country’s large conventional grocers have announced or rolled out online grocery options.

All of them, industry experts say, are eyeing Amazon. com Inc.’ s strategic moves with Whole Foods and their implications for traditional grocery retail.

“This shows how Amazon is affecting the entire system, including Costco,” said Sylvain Charlebois, agriculture expert and dean of management at Dalhousie University in Halifax.

“Of all the retailers which have benefited from our car economy, Costco is at the top. But everyone is going online now, even though at the same time they are trying to increase foot traffic.”

Increasing sales and foot traffic hasn’t been a problem for Costco or Walmart in Canada. Same- store sales at Costco Canada in the second quarter ended Feb. 18 were robust, rising 8.7 per cent. Walmart Canada, meanwhile, reported Canadian same- store sales growth of 2.9 per cent in the period ended Jan. 31.

While the retailers do not directly break out their food sales in Canada, their dominance is evident in the shrinking market share of Canada’s traditional grocery retailers — a drop to 75 per cent of retail food sales as of the third quarter of 2017 from 85 per cent in 2007, according to Statistics Canada.

While they debut a range of online pick- up and grocery delivery platforms, the incumbent grocers have been trying to woo more customers back through their doors by improving in- store ambience with hot take- away meals, targeted customer offerings and cooking classes.

Costco, on the other hand, is the very definition of the “pile it high and sell it cheap” maxim used by value-driven retailers.

Online grocery delivery from Costco “is not what we expect, and it is not what the model is,” said analyst Kevin Grier of Kevin Grier Market Analysis & Consulting Inc. in Guelph, Ont.

“We understand why the prices are so low: we expect bulk goods, we don’t expect a lot of choice and part of the bargain is that we do so much of the work. This shows that everybody is experimenting with online grocery. We are in the early days and everybody is trying to see what works.”

In the U.S., Costco has also made it clear that the move is about convenience for customers, not cost: On the area of its website that details online grocery delivery options, it notes that online prices are generally 15- per- cent to 17-per-cent above warehouse walk-in prices.

Galanti said that the online grocery offering seemed to be attracting new members to the warehouse club, which requires an annual subscription to shop at its stores.

Costco currently sells a selection of its general merchandise online in North America, Mexico, South Korea and Taiwan. The retailer’s overall e-commerce sales in the second quarter surged 28.5 per cent year- over- year to US$1.5 billion, while overall sales for the period were US$32.28 billion.

SHOWS HOW AMAZON IS AFFECTING THE ENTIRE SYSTEM.