Expert: growing appetite for online grocery in Canada

Canadians are increasingly purchasing food online, leading many grocers to enhance the experience and service they offer online.

By Shelby Hautala

What is the future of grocery shopping in Canada? Sylvain Charlebois, Senior Director, Agri-Foods Lab, Dalhousie University, shares his views concerning the current state of grocery, new innovations, and how grocers can provide a better shopping experience for their customers.

“Right now, we are slowly seeing the return of normalized food markets in Canada, and I would say the current state of the grocery business in the country is okay - but it is not doing great as food sales have been tight,” says Charlebois.

Online grocery on the rise

As grocery store operations are slowly stabilizing, Charlebois has seen a shift toward, and a rise in the popularity of, online shopping as more Canadians have been purchasing a greater amount of their food items online since the onset of the pandemic. Based on recent estimates, about 3.4 per cent of food sales is conducted online right now, which is double the pre-COVID amount. One province where the percentage goes above 4 per cent, Charlebois points out, is Ontario, where it’s estimated that 4.2 per cent of the province’s population get their groceries online. And, it’s a trend that the grocery expert suggests won’t be going anywhere soon.

“It may not seem like a lot, but it is quite a shift and is a huge change, and the reason I believe it is not going to disappear,” he says. “Going forward, I believe that there is going to be more business done online as more people are working from home. Employers are trying to get people back to the office. But let’s face it - people are more comfortable working from home which makes it more convenient for consumers to grocery shop online and have it delivered.”

Improved systems

At the beginning of COVID, ordering online groceries was a rigid process. Consumers often needed to wait a few days, maybe even a week, to receive their orders. Today, Charlebois says grocery stores have improved their systems to make it easier and faster for consumers. Now, consumers can order their groceries and receive them within an hour, in most parts of the country, saving them time.

One thing that is pushing Canadians to order their groceries online, and will continue to do so, is the rise of gas prices.

“In many parts of the country, there will be a huge bump in July so it is going to cost more to drive,” he says. “So, I suspect that is something that could actually push consumers to consider online delivery just because they do not want to spend more money going to the grocery store. My guess is that people will be a little bit more careful concerning the ways in which they spend their money. And, as a result, I also suspect that the idea of getting someone to deliver your food is actually going to become stronger.”

Lagging behind global performance

Charlebois says that compared to other countries, Canada is “a bit of a laggard” when it comes to food delivery and does not necessarily expect them to catch up with the Americans. Nonetheless, he does expect big improvements all the same. Online shopping saves consumers time and money. As prices go up, Canadians will become more mindful about the ways they’re spending their money. Online shopping will present a way to more easily maintain a budget, removing common shopping habits like impulse purchases.

Online experience

With the possibility of more people shopping online, Charlebois says although some grocers have a good platform, they will only get better and will improve with the use of artificial intelligence. With the use of AI, grocers can have better control over their inventory, manage costs, and can personalize consumers’ shopping experience.

“It is about knowing what the consumers want before they do,” he asserts. “When a retailer can start predicting behaviour, it becomes better at inventory management and begins managing costs much more efficiently. In addition, retailers don’t need to carry as many products, presenting huge advantages that grocers are starting to embrace. They are using AI right now and will continue to do so.”

Technological evolution

Charlebois says that in-store experiences have not changed a lot throughout the years. However, the online experience has changed dramatically, and he says that “people have noticed.” And, the experience is expected to continue improving as technology advances and evolves.

The online experience is also improving as a result of the introduction of a number of new grocery loyalty programs. And, Charlebois suggests that they pose significant factors in motivating more people to shop online.

Improving in-store experience

To bring people back into the stores, Charlebois suggests grocers need to add new experiences to give them a reason to visit the physical brickand-mortar location.

“People are going out a little more now,” he acknowledges. “So maybe the grocery restaurant will make a comeback and return to the way we knew it about a decade ago. Perhaps we will see more grocers looking at getting people to eat in stores, and stay there a while, presenting grocers with the opportunity to get more spend out of the customer. As a result of COVID, people just wanted to come in and out as quickly as possible. The question today is: how do you make the grocery store a safe place again in the minds of consumers and a place where they spend more time and money in order to capitalize on the opportunity?”

Some grocery stores in Canada already provide this experience for consumers, such as Loblaws where many locations have couches, tables, a deli to grab some lunch, and a Starbucks. By bringing these experiences into the grocery store, retailers can increase loyalty among consumers. Another way to enhance the in-store experience, says Charlebois, in addition to the introduction and enhancement of loyalty programs, is to offer discounts to consumers in order to show them tangible benefits that are received for shopping at the store.

Challenges grocers face

Currently, Charlebois says labour is the biggest challenge.

“The current labour situation is really forcing grocers and their manufacturing partners to look more closely at AI and robotics,” he points out. “In fact, they do not have much of a choice. The adoption of technology has really increased as a result of the labour shortage. So, grocers are beginning to think differently about how they are going to move product and how they manage inventories.”

With respect to the consumer, inflation and rising prices are the biggest challenge. Charlebois says that consumers are upset because the prices are not dropping, even though the ingredient costs are lowering. And, he doesn’t see prices coming down. Instead, grocers are increasingly offering discounts to “save here and there,” as costs continue to rise and grocers look for efficiencies across their operation.

“Over the course of the next few months, grocers are going to be focused on building out and enhancing their loyalty programs while finding greater efficiencies within their supply chains. Going forward, it’s basically about recalibrating a little bit and providing consumers with a solid reason to visit the store in order to really reinvigorate traffic and sales.”