LCBO looks to build buzz for delivery, online sales

New CEO expects ‘huge peak’ in lead-up to holiday season

The chief executive of the LCBO has an early Christmas wish: that business on the retailer’s new online ordering service gains strength leading up to the holidays.

The LCBO is also aiming for same-day home delivery to improve on the current two- to three-day wait for alcohol via Canada Post, new CEO George Soleas told the Star in an interview.

In three months since the launch of its new e-commerce site, the liquor agency only gets an average of 80 orders a day, which has translated into $1.7 million in sales so far, he said.

“It’s a very small percentage of (the LCBO’s net) sales,” he said in his first sit-down interview since taking the helm last June. “We’d like to see more.”

He explained that e-commerce is very new to the 90-year-old retailer, and that the LCBO purposely didn’t promote the lcbo.com ordering service initially because “we wanted to make sure it was working smoothly.”

The LCBO hit a record $5.57 billion in net sales for fiscal 2015-16. In fact, online sales to date represent about 10 per cent of what the liquor agency loses annually to theft. With the service, purchases of $50 or more can be delivered by Canada Post within three days for a $12 fee (plus tax), or can be picked up at a liquor store — which takes one to four weeks — at no extra charge for a $50 minimum order.

“We’re learning a lot,” he said. “We’re still working and tweaking the system to ensure that not only do we deliver faster and exceed the expectations of the customer, but at the same time we’re starting to put more products on the menu.”

The order site has about 5,000 items from Canada and 85 countries — some of which are online exclusives — and is expected to expand to 16,000 items in 2017.

“Obviously, I would like to see more than 80 orders a day, but that’s going to come and we’re putting a lot of effort in promoting now,” Soleas said.

He said he expects a “huge peak” in online ordering during November and December in the lead-up to Christmas, the retailer’s busiest season. “We’ve had 10,000 orders so far, which is great,” he said, adding that the average order amount is higher than expected at $210.

“We’d like to see it grow,” he said, noting he thinks that sales will hit about $15 million annually in the next couple of years.

To that end, the LCBO is going to set up an e-commerce distribution centre. At the moment, the Queens Quay flagship is the hub store for online ordering.

Soleas finds it encouraging that, of the three million people who have visited the web site, about 9 per cent have purchased something. The average conversion rate in online retail is 3 to 5 per cent.

Canadian consumers have been slow to warm up to online food and grocery purchases, and liquor falls in the same category, said Suthamie Poologasingham, director of marketing and research for global retail advisers J.C. Williams Group.

“There are so many LCBO locations and grocery stores that it’s just as convenient to pop by quickly and get something right away,” she said.

More than 90 per cent of Canadians with web access shop online, but only 15 per cent of them shop for food and groceries there, Poologasingham said. Overall, only 4 per cent of consumer spending on food and grocery takes place online, compared to 25 per cent for electronics.

She also said the LCBO’s $12 shipping cost is a deterrent when most online retailers offer free delivery for clothing and other goods with a minimum purchase.

Soleas confirmed the $12 fee will remain in place, similar to other alcohol delivery services in Ontario.

“This is a new business. Because our product is different than delivering clothes and food, the social responsibility component was very big,” Soleas noted.

Customers must verify they are of legal drinking age prior to placing an order, and someone with valid ID must be present to accept the package in-store or at home.

The LCBO has undergone several changes recently in an effort to modernize the liquor monopoly.

Last week, wine was introduced for sale in select grocery stores in Ontario, following beer and cider, which were made available in some supermarkets last summer.

Soleas expects that by 2025, when 300 Ontario grocery stores will sell wine and 450 will stock beer, the LCBO will see a 20-per-cent loss of revenue.

“So we need to continue to capture any growth there is in the market to ensure our stores remain viable and operationally efficient,” he said.

“In retail, if you adopt the status quo you’ll be crushed. You need to always innovate,” he added.

Soleas said he’s not worried about competition from supermarkets. He pointed out that the LCBO is still the only retailer that sells spirits — as well as wine at $10.95 a bottle or less, which represents nearly half of wine sales in Ontario. It also has the market cornered on high-end and rare wines through its Vintages section.