Costco pondering new options for delivery in Canada

TORONTO Costco 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 online grocery delivery 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 from which we can fulfil 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 firm’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. warehouses and 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 growth for Costco in Canada, one of its strongest markets, and at a time when Walmart 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.”

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 online pickup and grocery delivery platforms, the incumbent grocers have tried to woo more customers back by improving in-store ambience with hot take-away meals, targeted customer fare and cooking classes.

Costco, meanwhile, is the very definition of the “pile it high and sell it cheap” maxim by value-driven firms. Its online grocery delivery “is not what we expect, and it is not what the model is,” said Kevin Grier, food industry analyst based in Guelph, Ont. Kevin Grier Market Analysis & Consulting Inc.