Loblaw gets into micro-fulfillment

After seeing "higher than anticipated" demand for its PC Express click-and-collect service, Loblaw Companies Limited is investing in ways that will allow it to fill more orders, in more places and in a shorter span of time.

"As we near the end of 2019, our digital businesses are growing significantly year over year, we're seeing higher customer satisfaction scores based on speed of service, and we are expanding capacity and service in many stores where e-commerce demand is higher than we anticipated. We are also trying new things," Loblaw president Sarah Davis told analysts and media during the company’s third-quarter earnings call Wednesday morning.

The grocery company, which counts No Frills, Fortinos and pharmacy chain Shoppers Drug Mart among its banners, is in the process of building a 12,000-sq.-ft. automated micro-fulfillment area within a Superstore located at the intersection of Dufferin and Steeles in the Greater Toronto Area.

Housed within a "less productive" section of the store, said Davis, the fulfillment area will help front-line staff fill PC Express orders faster and more efficiently--an area in which the grocer has been trying to improve. (Loblaw has been using a technology to track when a customer arrives at the store and the time it takes to load their car.)

Here's how the automated fulfillment technology works, according to a press release from Takeoff Technologies, the U.S.-based company behind the solution: The in-store facility receives an online order and splits it by automated picking and/or in-store picking, depending on what the customer has purchased.

The automated system brings the items to a Loblaw associate to pack. Another Loblaw associate reviews the order and stores it in an appropriate temperature--frozen, chilled or room temperature--zone. The items picked in store are added to the order right before the customer picks it up. Davis said the automated picking facility should be up and running early next year.

READ: Loblaw’s plan for better data-driven customer experiences

While in-store pickup remains at the heart of PC Express's success, Davis said the company continued to test complementary offerings. Loblaw, for instance, is testing a PC Express pickup point in a Toronto condo building, making it easier for residents to collect their grocery orders on the way home.

"The initial response has been stronger than we expected and we are delighted to see that most of the customers are new to PC Express," said Davis of the urban pickup point. "Ultimately, we know we need to continue to retain and attract customers."

And, Loblaw has renovated and expanded seven of its PC Express locations in Western Canada, where the service has the highest penetration, to accommodate the volume of orders it is seeing in that market, said Davis.

Loblaw Companies Limited reported $331 million in profit for the quarter, compared with a profit of $106 million in the same period last year. Food retail same-store sales growth was approximately 1% after excluding the unfavourable impact of a later Thanksgiving.

Davis also made note of an uptick in competitive intensity during the third quarter, particularly in the discount division. Competitors have added stores, completed renovations and lowered prices, she said. Despite this activity, the company said it's pleased with its performance.