ONLINE GROCERIES
Seen as way to boost revenue
Online grocery sales remain a minuscule part of the food retail landscape, but they could be a good source of added revenue from customers who are making fewer overall trips to the grocery store.
The number of times timestrapped consumers have gone to buy groceries at a supermarket has declined seven per cent since 2012, according to the market research firm Nielsen — a “trip compression” total of 175 million store visits, Carman Allison, vice-president of consumer insights, said at the Retail Council of Canada’s Store 2017 conference on Wednesday.
Retailers prefer that customers visit stores more frequently, because every trip to the store represents an opportunity for impulse buying, bumping up the total size of the grocery basket beyond planned purchases.
“We are seeing a decline on overall traffic,” Allison said. “But even though you have fewer opportunities to engage in the store, with digital, you have more opportunities (as a retailer) to engage and interact with the consumer.”
Consumer packaged goods bought online currently account for 1.9 per cent of grocery sales in Canada, according to Nielsen, but sales of the goods online are projected to grow at a rate of 20 per cent a year and will account for 5.3 per cent of the market by 2020.
Packaged food accounts for just 0.6 per cent of the market currently, below that of health and beauty items, at 1.8 per cent of sales, while non-grocery staples such as pet foods and household paper products account for 3.2 per cent of sales.
Some categories are particularly robust: while sales of baby care items have fallen three per cent in stores over the last year, according to Nielsen, they were up 59 per cent online. Sales of paper product sales rose two per cent in stores last year, and 32 per cent online.
Erin Young, chief marketing officer at online pharmacy retailer Well.ca, said many consumers first shop at the site for baby care items, but “we then see a real migration into food and then other household categories.” In addition, she said, the site has performed well with niche brands that are too small to be carried at national retailers.
“We give them national distribution,” she said, adding Well.ca sells “ridiculous amounts” of a particular $17 natural charcoal deodorant, “because it is a unique interesting brand that people want to discover and learn about.”
Still, Allison said, when it comes to buying packaged food, three quarters of consumers say that they would rather pick up the merchandise in the store, and 63 per cent say they are concerned with the quality and freshness of goods ordered online, worrying about expiry dates.
“It’s consumer perception that we have to deal with,” said Allison. And half of consumers are concerned about the delivery process, wondering if it will “sit
You have to take some big bets on where this will go. We have to believe as an industry that the (growth) will be exponential.
on the doorstep” if they are away from home.
Steve Quintin, director of digital commerce at Toronto-based online retailer Grocery Gateway, founded in 1998, said the company has seen very little customer cannibalization between its online business and its bricks-and-mortar grocery store owner Longo’s, which bought the e-commerce player in 2004. “We really are fulfilling different shopping needs,” he said, noting the retailer’s online customers “definitely skew a little bit younger and a little bit older” than the typical Longo’s shopper.
While both Well.ca and Grocery Gateway deliver online purchases to people’s homes, not everyone in the industry is convinced that home delivery of items bought online is a compelling business proposition in Canada’s $140-billion grocery market.
“We might experiment (with home delivery), but I don’t think anybody has reached the conclusion that it is the best path forward for grocery,” Loblaw chief executive Galen Weston told analysts on a February conference call with executives of Canada’s largest food and drug retailer.
Loblaw has been sticking with a test market run of “click and collect” online shopping, where customers buy goods online at home and pick them up at stores. Rival Walmart Canada, meanwhile, has expanded into home delivery of food, health and beauty items in markets across Canada.
“You have to take some big bets on where this will go,” Daryl Porter, the retailer’s vice-president of online grocery operations, said Wednesday, given that the future is unknown but the growth rate of online shopping is surging. “We have to believe as an industry that the (growth) will be exponential,” he said.