Michael Medline on the future of e-grocery

COVID-19 may have "supercharged" e-grocery sales in Canada, but it's still a relatively small portion of the total market, says Empire CEO Michael Medline.

Online grocery sales in Canada more than tripled during the pandemic and penetration reached unexpected and unprecedented levels, said Medline, as consumers sought ways to avoid grocery stores or at least limit their visits.

"But let's put this growth into perspective," said Medline during a call with analysts to report Empire's fourth-quarter earnings last week. "It's off such a small base, probably at 1.5% penetration before the pandemic."

E-grocery sales are cooling as restrictions across the country are lifting, but there's an opportunity for long-term growth, said Medline, predicting e-commerce could reach 5% share of the Canadian grocery market over the next five years. It's still a small portion of the market, but an area that can't be ignored. And, if executed well, e-grocery will "put a halo over the bricks-and-mortar brand," he said.

READ: Larger baskets, one-stop shopping fuels sales growth at Empire

Empire has spent the last few years building out what it has said would be the most advanced online shopping service in Canada, in partnership with U.K. company Ocado. Using a fleet of robots, Ocado can select, store, transport and deliver groceries from its customer fulfillment centre (CFC) in as little as an hour.

In April, Empire piloted its Voilà by Sobeys service with family and friends living in the GTA. It officially launched the service in Vaughan, Ont. earlier this week with plans to expand Voilà through the summer months.

While many players in the industry adopted store-pick models to fulfill online grocery orders, Medline believes automated warehouses are the way to go. Store-pick "disrupts the store, isn't easily scalable and is very difficult to be meaningfully profitable," he said.

Some grocery delivery and click-and-collect services struggled during the early days of the pandemic to keep up with demand, which customers won't have patience for moving forward.

"E-commerce has to be really well done, done badly it can cause brand damage and consumers will not put up with a poor e-commerce experience in the future the way they did in the middle of a pandemic," said Medline.