Can the food retail industry deliver on delivery?

Delivery driver driving van with parcels on seat outside the warehouse - Image
Delivery driver driving van with parcels on seat outside the warehouse - Image

Consumers are increasingly adamant that convenience can’t come at the cost of the environment or our health

By Sylvain Charlebois
Senior Fellow
Atlantic Institute for Market Studies
Walmart just announced it will offer a next-day delivery service to customers in the U.S. to compete with Amazon.
Walmart will begin by offering service in Phoenix, Las Vegas and southern California, and intends to cover 75 per cent of the United States this year.
Customers need to purchase at least US$35 worth of products to take advantage of the service, which will offer more than 200,000 products, including food items.
Most North American retailers are ramping up their e-commerce strategies, trying to catch up with the modern consumer’s pursuit for higher convenience.
Online food delivery is all about time and precision, and Amazon set the benchmark.
Food deliveries aren’t new in Canada – they’ve been happening for decades. What’s new is the scalability of operations.
Sobeys announced its Voilà service a few days ago. The company is desperately trying to execute an online strategy. That strategy requires intense centralization, so Sobeys is investing close to $100 million on a new distribution centre the size of 15 hockey rinks north of Toronto.
Sobeys hopes to capitalize on its partnership with U.K.-based Ocado, which is known for its artificial intelligence and cybernetics knowledge.
Loblaws, on the other hand, has been working internally on a new online model while expressing that it’s content with its Click and Collect service. That service is offered in over 700 stores across the country. Loblaws and Instacart offer grocery delivery to millions of Canadian homes.
Some movement has been reported at Metro as well.
And Costco is in the middle of a southern Ontario pilot that could prove interesting since its sales now include over $14 billion worth of food in Canada each year.
Having someone else carry all those food items from the store to your home can be a very appealing – and convenient – for an aging population, for people pressed for time, or for people living on the second or third floors of buildings.
Canada’s online food retail shopping represents roughly 1.8 per cent of the total $120-billion food market. But some analysts suggest that with six years, Canada could catch the U.S., where seven per cent of all retail food transactions are done online.
It still may not look like much, but seven per cent would be almost $9 billion worth of food. That’s almost equal to the food sold by Metro, one of the country’s top grocers.
Faced with laser-thin margins, generating more online revenues is key for grocers. They’ve realized for a while that embedded into a successful delivery model is the illusion of a free service to consumers.
Selling food online and increasing profits while customers remain convinced they’re getting deals can only be achieved through algorithms and analytics, an art Amazon has mastered.
But as the industry attempts to make its offerings more convenient, consumers need to recognize that convenience usually trumps two fundamental things: our environment and our health.
The food industry will often go after the mighty dollar without thinking twice about how a newly deployed strategy impacts the environment and our health.
Fast food (with little or no nutritional value), ready-to-eat products and meal kits with excessive packaging all provide convenience. But they also undermine consumers’ ability to serve the planet or safeguard our wellness.
But things are slowly changing, thanks to an ever-empowered, social-network-savvy marketplace.
The sudden, collective backlash against plastics was violent for the industry and seemed to come out of nowhere. But it had to happen. We realize many of our lifestyle choices are no longer sustainable.
It’s more than reasonable for consumers to ask the industry to comply with societal expectations around packaging and waste as soon as possible.
Convenience is key when looking at home delivery service, but it can’t stop there. Grocers need to think about ways to go after our business while keeping us and our planet healthy.
More choice for consumers is desirable, especially when food is involved. But it can’t come at a huge cost for us all.
Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University, and a senior fellow with the Atlantic Institute for Market Studies.
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