Could COVID-19 be the spark that ignites online grocery in Canada?
E-grocery has seen a sharp rise in demand over the last couple months.
Long considered under-developed, compared to the U.S. and the U.K., Canada’s online grocery industry has exploded during the COVID-19 crisis, leaving grocers scrambling to address a sharp increase in orders and forcing them to accelerate their efforts around online initiatives.
Yet, even with all the additional strain on their supply chain, it appears Canada’s grocers have generally been doing a fairly good job of meeting unprecedented consumer demand, at least in terms of product availability. In an early April survey conducted by Field Agent Canada that asked shoppers about online product availability, 21% said all the products they ordered were available, while 38% said just one to three items were unavailable (and only 8% said more than 10 items were unavailable).
Asked what products they wanted to buy but were unavailable, 36% said fresh produce, 28% said fresh meat/seafood, and 11% said frozen meat/seafood. Consumers also indicated shortages of paper products and cleaning supplies.
According to pre-COVID data, only about 1.5% to 1.7.% of groceries in Canada were purchased online (compared with 7% in the United States and 10% in the United Kingdom). But online orders have skyrocketed during the pandemic. Research conducted by Angus Reid for PayPal in early April found nearly one-third (30%) of Canadians are now shopping online for groceries, up from 19% in a survey conducted just four weeks earlier.
More notably, the study suggests online shopping could become a permanently engrained behaviour, with 81% of respondents indicating they expect to continue shopping online either the same amount or more once the immediate crisis is over, and 44% indicating they expect to increase their online shopping activity.
“This situation may last long enough to leave a legacy of changed habits,” explains Sylvain Charlebois, senior director of the Agri-Food Analytics Lab at Halifax’s Dalhousie University. “My guess is that things will loosen up in June, but not before that ... and three months is long enough to change habits.”
Meanwhile, the unrelenting consumer demand for online grocery is leading both pure-play and established brick-and-mortar retailers to adapt their business, from implementing more online capabilities to accelerating existing plans around e-commerce. Metro, for instance, recently added to its online grocery options with a new partnership with Cornershop, an online grocery delivery service where customers can have their grocery orders delivered to their homes in as little as an hour.
Meanwhile Empire, parent to Sobeys, pushed up the launch date of its Voilà online home delivery service in the Greater Toronto Area to April 26. Speaking to analysts last December, Empire president and CEO Michael Medline said Voilà, which operates from an automated distribution facility powered by the U.K.-based Ocado Group’s grocery technology, was on track for a soft launch in late spring 2020. But with demand for home delivery of groceries surging since the start of the COVID-19 pandemic, Empire moved up the launch, announcing a phased rollout to customers across the Toronto area once testing is complete. Empire also noted its e-commerce businesses in Quebec through IGA.net and in British Columbia through Thrifty Foods had seen a significant jump in orders and predicted that demand would remain “elevated” in the long-term as customers become more comfortable with online ordering and fulfillment.
While calling the acceleration of such a major initiative “risky,” Stewart Samuel, program director, Canada with IGD Retail Analysis, notes that increased demand for online represents “an opportunity that is hard to resist” for Sobeys. The benefit of making such a move now, he says, is that Sobeys’ competitors will be too focused on their own business during the COVID-19 crisis to attempt to disrupt Voilà’s launch.
Fresh City CEO and founder Ran Goel offers a different perspective, since his Toronto-based grocery business spent seven years as a strictly online business prior to opening its first brick-and-mortar location in August 2018. Goel says the health crisis has created “unlimited demand” for groceries that even online behemoths such as Amazon have struggled to keep pace with.
Fresh City’s online sales have been three to four times greater than they were prior to the COVID-19 outbreak, and Goel said in mid-April that “several thousand people” were on a wait list for the service. “There’s been some spottiness where we’ve had supplier shortages, but we’ve been able to scale fairly quickly,” he says.
Goel believes the current situation could accelerate the penetration of online by as much as three to five years, although that’s dependent on grocers working through current issues such as a lack of delivery slots and longer wait times—which has been one of the primary complaints of online during the crisis. “The standard that is being provided to customers right now, whether it’s delays in deliveries or product shortages, is not what people are going to stand for,” says Goel, who says Fresh City is currently processing about 1,000 online orders each day. “But if we can get to a place where we’re providing a gold standard—delivery on time, most of your order intact and good quality—you’ll see the penetration increase.”
While Toronto-area grocery chain Organic Garage prides itself on being a brick-and-mortar store first, it did begin offering online grocery through a partnership with Cornershop earlier this year. “It’s really quite advantageous that we had it in place,” says director of marketing Randee Glassman. “If we were starting from zero, I don’t know what we would do. It would be an overwhelming process.”
In response to consumer unease about COVID-19, Organic Garage also began offering curbside pick-up, with orders ready within 48 hours, at its Thornhill store. “Just like everybody, we’re trying to do our best to mitigate the spread, and that’s one of the things we thought would help,” says Glassman.
The situation has also been a major boon for pure-play online grocery delivery services such as Instacart, which reported that its order volume during a single week in early April was up more than 300% over the same period last year. Instacart has responded with a hiring spree, adding to its army of grocery shoppers across North America. Recently, it announced it will add another 250,000 full-service shoppers in key markets, including Toronto, to cater to COVID-19 demand. Instacart had already hired 300,000 workers across the United States and Canada earlier in the crisis, doubling its workforce. “In my 38 years in the customer support industry, I’ve never seen anything quite like this,” said the company’s vice-president, care, Mark Killick.
Charlebois, meanwhile, says one interesting by-product of a rise in e-commerce could be a “democratization” of the food chain, affording even smaller food companies and/or producers the opportunity to sell direct to consumers. “Those are the types of things that people are thinking about,” he says. “There are gaps in the marketplace, and there are companies out there trying to fill them.”