E-tailing grocers about to eat up more of market

Faster delivery is the future, writes Sylvain Charlebois.

Voilà is the new benchmark in online food retailing in Canada, at least for now. More than 100 delivery vans will roam the streets of the Greater Toronto Area to deliver food to customers who have opted to buy their groceries online from Sobeys, for one reason or another. What is at the centre of the entire fleet is a state-of-the-art distribution centre, the size of 40 Olympic-sized pools in volume. That is 250,000 square feet of space filled with robots. Another facility is being built in Montreal.

At the centre of this rollout is Sobeys’ partnership with major British e-commerce player Ocado. When it was announced about two years ago that Sobeys would partner with Ocado, the Stellarton, N.s.-based grocer was admitting that it just did not have the internal capacity to deploy a high-level e-commerce strategy. The hundreds of robots in the facility can take 10 commands per second via antennae that link them to a system designed by Ocado engineers. The system itself can process a 50-item order in less than five minutes. No human can do that.

Ocado is one of the key players that got

British customers to go online. Almost 10 per cent of all food sales in the U.K. are conducted online. In Canada, it is at barely two per cent right now. According to a report from the Agrifood Analytics Lab at Dalhousie University in Halifax, 22 per cent of Canadians intend to order food online regularly. By 2025, if the effects of COVID-19 are long-lasting, we could easily see online sales exceed six or seven per cent. That is almost $10 billion worth of food sold online, and Sobeys wants most of this.

For customers, there are always three sticking points when it comes to home food deliveries. First off, there’s accuracy. Throughout COVID-19, many Canadians have experienced the frustration of finding items not ordered, replaced without consent, or simply missing from their orders. Voilà, powered by Ocado’s know-how, appears to be addressing these issues. Second, there’s the cost. Food offered online by Voilà is reasonably priced. Many items are offered on promotion as well, not typical in food e-tailing. Delivery fees are also reasonable compared to other delivery programs. Delivery costs as little as $8 in some cases. Only time will tell if the discounting and delivery fees will remain competitive.

The third point is delivery time, which is how Voilà sets itself apart from everyone else. You can get your food delivered within an hour, which is really what most expect these days. During COVID-19, some of us had to wait eight to 10 days for a delivery if we were lucky enough to be able to put in an order. One-hour delivery is what grocers should be aiming for now.

In the Greater Toronto Area, Grocery Gateway pioneered the warehouse-to-home model years ago. Owned by Longo’s, with a modest fleet of trucks, it has been delivering food across the GTA for more than a decade, charging a high fixed fee for every delivery. The store in Vaughn almost looked like a grocery store, without the cosmetics. But on execution, expectations have changed. For many years, customers were reluctant to empower a stranger in some obscure warehouse to pick out their apples and tomatoes. With COVID-19, this is hardly part of the conversation anymore.

Sobeys’ new centre is simply different. It really looks like what a modern distribution centre should look like, to support a highly efficient e-commerce strategy. But it is also the product of something else that has been going on in the industry. Amazon’s acquisition of Whole Foods in 2017 pushed Canadian grocers to think more about convenience and how to offset the looming threat that was Amazon. Amazon is massive and its disruptive force could not be denied.

But that was before COVID-19. Now, it is about convenience and safety. Few saw that coming, and this is why Sobeys expedited its rollout. Sobeys is clearly making a statement with Voilà. Its strategy is fully committed, unlike the click-and-collects we have seen in recent years. Click-and-collect is convenient for retailers, but online delivery is the full package the market is ready for.

Sobeys is being aggressive, and for good reason. Other grocers will respond. In fact, most already have something in the works. COVID-19 propelled the entire sector several years ahead into the future. IGA, Sobeys’ Quebec division, was first to go online in 1998. Things have changed since, however. Voilà’s national rollout must be quick or else other grocers will catch up and set even higher competitive standards.

Sylvain Charlebois is the senior director of the Agrifood Analytics Lab at Dalhousie University.