Is omnichannel grocery ripe for the picking?May 13, 2019
Around the world, grocery eCommerce is growing. Why are Canadian grocers still so green?
ASK Deloitte’s Jennifer Lee about the state of omnichannel grocery retail north of the 49th parallel, and her answer is simple.
“Canadian grocery retailers are just dipping their toe into eCommerce,” explains the company’s Retail & Consumer Analytics Practice Leader. “And that’s to varying degrees.”
And Carol Wong-Li, Senior Lifestyle and Leisure Analyst at research firm Mintel, would tend to agree.
“We Canadians are coming around,” she chuckles. “But it’s just been much more slowly. Grocery shopping is something that most consumers do on a weekly basis. And how we go about grocery shopping is still quite habitual.”
Habitual or not, when it comes to unified commerce and the omnichannel experience, IS OMNICHANNEL RIPE FOR THE PICKING? Around the world, grocery eCommerce is growing. Why are Canadian grocers still so green? BY JESSE DONALDSON both agree that Canadian grocers are years behind their counterparts in the US and the UK. Despite encroachment by major players like Amazon, grocery remains largely separate from the digital disruption that has affected retail. However, a recent Food Marketing Institute study predicted that, within the next 5-7 years, 70 per cent of consumers will buy at least some groceries online, which means that now, more than ever, a seamless experience across multiple platforms and consumer touchpoints is crucial. So, when it comes to eCommerce, why are Canadian grocers still so green? The answer, Wong-Li and Lee agree, is complicated—a combination of consumer attitudes, geography, availability, and cost. “It stems from the fact that, in Canada, it’s a different environment,” Wong-Li says. “The lag is due in part to late availability. Free, two-day shipping has been available in the US since 2005. It wasn’t available in Canada until January of 2013. That’s an eight-year lag. So, it’s not necessarily that Canadians are really behind. It’s that we haven’t had the same kind of exposure.”
Part of that lack of exposure is owed to the fact that Canadian companies remain tentative when it comes to online grocery retail. Despite the fact that Google searches for “same-day delivery” in Canada have doubled in the past year, home delivery services amongst the major players are inconsistent, and varies from community to community. However, a more significant hurdle to overcome is the attitude of Canadian consumers. A 2018 TABS Analytics Survey found that only 17 per cent of shoppers currently buy their groceries online but go to a physical store more than six times a month. In 2016, Mintel found that 88 per cent of Canadians had never tried buying online, while 68 per cent said they had no interest. Currently, just 1 per cent of Canada’s grocery sales occur online. In the rest of the world, it’s 5-10 per cent. However, this issue isn’t unique to the grocery sector; within Canada, 90 per cent of all retail sales still take place in-store. Mintel’s research paints a slightly different picture: in 2015, only 12 per cent of Canadians had ever bought groceries online. By 2018, it was 24 per cent. Some growth is occurring, Wong-Li says, but compared to other markets, it’s still relatively minimal.
“There are a lot of physical senses that are missing when we shop online. And there’s also an emotional attachment that’s missing.”CAROL WONG-LI
“If we want to pull back and look at Canadian grocery consumers in context, then we have to look at the adoption of online shopping more generally,” she explains. “Canadian adoption of online shopping lags pretty significantly against the US. So, if you look at the proportion of consumers shopping monthly— which we did—we saw a significant increase between 2015-2018. But, in Canada, we didn’t see anywhere near the same amount of growth as was seen in the US.”
Part of that, she notes, is that concerns about freshness and cost are top-of-mind for Canadian consumers—freshness being the most important purchase driver for millennials.
“People are concerned that what they’re ordering online might not be as fresh,” Wong-Li says. “How we typically determine freshness is very tactile; we touch it, we smell it. There are a lot of physical senses that are missing when we shop online. And there’s also an emotional attachment that’s missing. In the survey process, we realized that there’s a process of discovery that’s missing—whether you’re browsing the aisles for new products, or just to compare prices.”
“You’re letting someone pick your tomatoes or your lettuce,” Lee agrees. “And at the moment, it’s the consumer’s perception that they can find fresh better than anyone else. Although that does seem to be changing.”
Geography and profitability are also hindering the proliferation of omnichannel grocery retail; in a country as spread out as Canada, home delivery has yet to prove profitable (although some, like Loblaw’s, have been running click-andcollect models since 2014), and a concentration of key players means that only a select few have the means to pioneer a new approach.
“Here, we have the three big brands,” WongLi explains. “There’s a certain amount of comfort and loyalty to the big brands. But in China, and the US, the market was already really fragmented before, so it didn’t inspire the same kind of dedication, loyalty, or shopping habits. That, in itself, was a factor for Canadians.”
“In Canada, it’s different from the US, in that we don’t have a lot of key players,” Lee adds. “You can count on one hand the number of grocery retailers who are robust enough to compete in eCommerce. That’s the environment right now. Ecommerce is expensive. It’s not necessarily a profitable channel. And although omnichannel customers buy more online, it’s the profitability of shipping direct-to-home that a limited number of retailers are trying to tackle. When you compare us to the US or the UK, we’re not there yet. The UK has density, and the US has scale. Here in Canada, we don’t really have either. Because there are only four major cities—at best.”
But it’s not all doom and gloom. In fact, according to both Wong-Li and Lee, there is plenty of cause for excitement. Within Canada, some grocers are working to pioneer new approaches; Loblaw’s recently joined with Metrolinx to offer its new PC Express service (which allows commuters to pre-order groceries online for pickup during their next day’s commute) in five GO Transit stations in the Greater Toronto Area. And looking further afield, retailers like HEMA in Shanghai and Systeme U in France are leveraging technology to add more transparency and discoverability to their operation than ever before.
“This is one of my favourite examples,” Wong-Li says. “What [Systeme U] did was print Snapcodes, and then use Snapchat to show the freshness of their fish. They printed those codes on the origin labels, and then, because Snaps only last 24 hours, people could follow the fish’s journey from the boat to the store. That way, people knew that what they were buying wasn’t more than a day old.”
HEMA’s groundbreaking technology allows customers to view their entire supply chain, including the business licenses of distributors, information related to food safety, and even the temperatures of their refrigerated trucks.
CANADIAN GROCERY ECOMMERCE IS GROWING
Estimated percentage of global grocery sales occurring online.
Percentage of Canadian retail sales that occur in-store.
In 2015, only 12 per cent of Canadians had ever bought groceries online. By 2018, it was 24 per cent.
“It’s so cool, because it shows all the information,” Wong-Li notes. “Consumers have access to all this really cool info that says: ‘Hey! What you’re getting is fresh, and totally legit’.”
When it comes to the path forward, Wong-Li in particular is full of ideas, among them offering free click-and-collect to spread wordof-mouth, as well as pioneering fully-prepared meals for pickup on weeknights. Deloitte’s Lee points out, however, that the most crucial part of an improved omnichannel presence lies in the acquisition and leveraging of data. In an increasingly digital world, consumers are demanding a smoother cross-platform experience, and more personalization than ever before. And data collection provides an unprecedented opportunity to fulfill those needs.
“I think that data is going to be one of the most important differentiators for grocers,” Lee says. “To be able to integrate all these datasets is going to be critical, so that you can build in AI-driven recommendations, or predict what the customer’s going to buy, and what their basket is going to look like. I think that’s going to be the goal moving forward. Because, right now, your table stakes have already been fulfilled. You have an online channel built. The question is: what’s the next phase? What’s the next wave? It’s going to be making better use of data. And with that, you can personalize the path to purchase better, and properly identify where to make the right investments. Because these are not small investments.”
However, the transition to a full on omnichannel offering isn’t going to happen all at once.
“Baby steps need to be taken,” Wong-Li warns. “Canadians are so tentative with this. Because grocery shopping is so habitual, it’s about adding incremental ways. People don’t always want to change their habits, so it’s about finding ways to get them a little bit out of their comfort zone, or to try something new. Promoting curbside pickup, for example, or semi, or fully-prepared meals. Or taking the baby step of getting people to do online reorders—on staple items, where freshness isn’t so much of a concern. A bag of rice, for example. Also, people tend to be less emotionally engaged with those kind of categories.”
“I think that data is going to be one of the most important differentiators for grocers. To be able to integrate all these datasets is going to be critical…”JENNIFER LEE
And in some ways, she concludes, Canadian grocery retailers’ status as relative laggards could in fact help them in the years to come—but only if they recognize that, as of right now, omnichannel is ripe for the picking.
“I think we are going to catch up, and I think it’s going to happen sooner rather than later,” explains Wong-Li. “The time is now for retailers to get in—especially because Canadians aren’t nearly as dependent on Amazon. It’s really important for retailers across the board to get established, not just grocery retailers—everyone—before that same kind of dependency sets in. It might not if retailers are quick enough to act.”
BY JESSE DONALDSON