Next data giant to watch may be Loblaw
Company expanding by selling digital ads on its websites based on user profiles
Even if you try hard, it’s difficult to avoid being a customer of the Loblaw Cos.
The 102-year-old Canadian retail giant spans more than 50 popular brands such as Loblaws, President’s Choice (PC), Shoppers Drug Mart/Pharmaprix, Life, No Name, Real Canadian Superstore, T&T, Joe Fresh and more.
According to the firm’s website, 90 per cent of Canadians are living within 10 kilometres of one of its locations — a vast network of more than 2,500 stores and complementary e-commerce sites.
But Loblaw, which is controlled by the Weston family — the country’s fifth wealthiest with an estimated net worth of $8.6 billion — is in fact so much more.
Under the PC Financial brand, it’s offering services such as a money (chequing) account and credit cards. Three million customers use its Mastercard. It serves as an insurance broker for home and auto insurance. It has a travel agen- cy.
And its PC Mobile subsidiary will sell you cellphones and SIM cards.
Loblaw’s most recent initiative is PC Health, a personalized digital health app that it developed in collaboration with League, a digital startup (in which it owns a stake). The app provides users easy access to a network of nurses, dietitians, doctors and other health-care providers as well as products. It also rewards customers for making “healthy choices.”
And on top of all of that, one of Loblaw’s most valuable assets is its popular loyalty program, PC Optimum. The program, which has 18 million members, is accepted at 4,500 locations coast to coast, as well as in its network of online stores.
With PC Optimum, Loblaw can connect the dots and draw precise profiles of its customers.
In a business where what you bought yesterday is the best predictor of what you’re going to buy tomorrow, having access to recent, real data of 18 million customers is a data gold mine, and Loblaw is firing on all cylinders to monetize it.
As part of this effort, the company launched Loblaw Media, a full-service digital marketing agency in 2019. The move, which mimics that of U.S. retail giants Amazon, Walmart and Kroger, allows Loblaw to generate revenue by selling advertising space on its platforms, as well as high-resolution data about consumers.
The Wall Street Journal documented recently a dramatic growth in advertising revenue for retailers, who are finally taking some ad market share from Google and Facebook. Amazon, for example pulled in $14 billion (U.S.) in revenue in 2019 in the “other” category, which primarily comprised advertising revenue, compared to only $1.7 billion (U.S.) in the same category in 2015. The numbers for Walmart and Kroger are lower, but growing fast.
For retailers, who operate on thin margins, the advertising and consumer-insights business offers attractive margins with light capital expenditures. Adding to that the fact that the pandemic dramatically increased online traffic and access to consumer data and you have a lucrative advertising market.
Vass Bednar, executive director of the master of public policy in digital society program at McMaster University, analyzed Loblaw in a series of posts on her blog. Some of her insights were recently featured in a Canadaland episode.
“The advertising power that Loblaw has is fascinating” she said in a video interview. “And the fact that they are, for example, teaching their staff to code is another, really interesting dimension. They are building their own talent pipeline to pivot or evolve more in a digital way.”
However, Bednar raises many concerns. One of them is the potential use of dynamic pricing, which lets the company to update prices rapidly in response to changes in demand. Mostly, though, what she is worried about is the accumulation of power that Loblaw is gaining through the collection and management of consumers data.
While Loblaw has already made huge investments in data and technology, it doesn’t seem to be slowing anytime soon. The company is on a hiring spree for data experts in artificial intelligence, machine learning and pretty much anything data-related. It currently has job openings for dozens of positions in these fields.
In addition, following a successful completion of a 10-month pilot in Toronto, it announced a partnership with Gatik, an autonomous vehicles’ technology startup. With a fleet of light to medium-duty trucks, Gatik and Loblaw aim to optimizes middle-mile supply-chain logistics (short haul trips between Loblaw’s distribution centres and its retail locations).
Big players in the marketing industry are impressed with the company’s bold expansion. In an email statement, Brian Cuddy, vice-president of digital activation at Cossette Media (which has a business relationship with Loblaw) said, “We love that (Loblaw) has invested in its data ecosystem with a relevant offering for Canadian brands.”
But Cuddy also raises concerns with respect to data privacy. “Loblaws will need to ensure it has a significant focus on its privacy solutions to appropriately navigate the changing landscape and build trust with its customers in a transparent way while offering its data to advertisers.
This I think will be especially important if it plans to have significant success with its ‘off-site’ media offering,” he added.
Led by “data-obsessed” president Sarah Larkin, who self-describes as “mathy,” and backed by one of Canada’s wealthiest families, Loblaw is making huge investments and powerful partnerships to rapidly become a data-driven giant. It is doing it in a fashion that draws many similarities to the FAANG (Facebook, Amazon, Apple, Netflix and Google) giants.
There is no doubt that the clever data scientists who analyze consumer behaviour can create some real value of it. From helping consumers find better deals for products they like, to nudging them to live a healthier lifestyle.
Loblaw’s sweeping move to become the leading Canadian data-driven powerhouse is impressive. But once it is done positioning itself as such, it’s going to be hard for others to compete in that space.
Should we be worried that the largest grocer in Canada, which operates close to 1,300 pharmacy stores, clothing stores, a bank, an insurance company and more, has access to so much data that it can predict with great accuracy what each one of us would like to purchase tomorrow?
A quick look at the FAANG gang suggests that we probably should.