Costco appears set to enter the online grocery space in Canada after a successful rollout in the U.S.
According to a report in the National Post, the warehouse retailer is currently looking for Canadian sites from which it can fulfill fresh grocery orders. Costco Canada spokesperson Ron Damiani told Canadian Grocer via email that “no timelines have been set” regarding the rollout of online grocery in Canada. He declined to comment further.
Competitors such as Loblaws and Walmart have invested in online grocery as they look to address the challenge posed by pure-play digital retailers including Amazon, particularly after last year’s Whole Foods acquisition. However, there doesn’t appear to be the same urgency for Costco, whose same-store sales increased 8.7% during the quarter ended Feb. 18.
According to a 2017 report, non-traditional grocers such as Walmart and Costco have steadily gained market share over the past five years, accounting for 20% of all food sales in Canada.
“The dilemma is that everyone’s got to offer an online option, the challenge is doing it profitably – which is one of the reasons we’re seeing the Instacarts of the world,” said Bill Bishop, co-founder of the Chicago-area consultancy Brick Meets Click. “The fulfillment side of it is tricky, and nobody wants to do more business and lose money on every incremental dollar.”
READ: Loblaw partnering with Instacart on home delivery
Costco’s U.S. division introduced online shopping for non-perishable items last year, while also expanding a partnership with online delivery service Instacart – which partnered with Loblaw Companies Ltd. last year to offer home delivery from its Loblaws, Real Canadian Superstore and T&T banners.
Costco currently offers Instacart in 441 of its 519 U.S. warehouses, with CEO Richard Galanti telling analysts last week that it would be offered in most of the company’s remaining stores by the end of the year.
Galanti said Costco’s e-commerce sales in the U.S., Canada, U.K., Mexico, Korea and Taiwan were US$1.5 billion in the second quarter, a 29% increase from the corresponding year-earlier period.
Bishop, of Brick Meets Click, said one of the things that sets Costco apart from its competitors is a distinctive in-store experience, which includes everything from free samples to the chance to stumble across interesting new products.
“At the same time, people are demonstrating that sometimes they don’t want to go to the store, either because they don’t have time or because they don’t want to carry certain products home,” said Bishop. “It’s almost inevitable that any retail store today will extend its reach by virtue of having an online shopping option.”
He predicted online grocery would not only grow Costco’s business, but help cement customer loyalty. “I think it will be an additive benefit,” said Bishop. “There may be occasions where people say ‘We’re not going to get in the car and go shopping, we’re going to order online instead.’”
In last week’s analyst call, Galanti said a Costco member using ecommerce is growing their annual spend with the company by up to 3% a year, despite making between two and four fewer trips to a brick-and-mortar location.